-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ImOjvXqLIgvHDYFLFblyRNkBqDooJ64svuiO/bwH++VLaM1dGrvDLbzDyLK3Qwbb nHQFqOTypiW4FmX9PLkoqQ== 0000950147-97-000210.txt : 19970402 0000950147-97-000210.hdr.sgml : 19970402 ACCESSION NUMBER: 0000950147-97-000210 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970114 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970401 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHAMPION FINANCIAL CORP /MD/ CENTRAL INDEX KEY: 0000877050 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 521949024 STATE OF INCORPORATION: UT FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-19499 FILM NUMBER: 97572642 BUSINESS ADDRESS: STREET 1: 19 HILLSYDE COURT STREET 2: STE 1820 CITY: COCKEYSVILLE STATE: MD ZIP: 21030 BUSINESS PHONE: 4106280050 MAIL ADDRESS: STREET 1: 19 HILLSYDE COURT CITY: COCKEYSVILLE STATE: MD ZIP: 21030 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 8-K/A AMMENDMENT NO. 1 TO FORM 8-K 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 14, 1997 ------------------------- Champion Financial Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) UTAH 0-19499 88-0169547 (State of other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 9495 East San Salvador Drive, Scottsdale, Arizona 85258 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (602) 614-4285 ----------------------- This document is a copy of the form 8-K/A amendment No. 1 filed on April 1, 1997 pursuant to rule 201 temporary hardship exemption. Champion Financial Corporation, a Utah Corporation, hereby amends Item 7 of its report on Form 8-K dated January 14, 1997. Item 7. Financial Statements (a) Financial Statements Report of Independent Auditors Audited Financial Statements National Property Casualty Corporation December 31, 1996 National Property Casualty Corporation Financial Statements Year ended December 31, 1996 Contents Report of Independent Auditors ................................................1 Audited Financial Statements Balance Sheets ................................................................2 Statements of Operations and Changes in Retained Earnings .....................3 Statements of Cash Flows ......................................................4 Notes to Financial Statements .................................................5 Report of Independent Auditors The Board of Directors National Property Casualty Corporation We have audited the accompanying balance sheets of National Property Casualty Corporation as of December 31, 1996 and 1995 and the related statements of operations and changes in retained earnings, 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 generally accepted auditing standards. 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 National Property Casualty Corporation at December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Phoenix, Arizona March 6, 1997 1 National Property Casualty Corporation Balance Sheets
December 31 1996 1995 ------------------------------------ Assets Current assets: Cash $ 4,164 $ 1,462 Accounts receivable, less allowance for doubtful accounts of $15,000 in 1996 and $-0- in 1995 (Note 4) 218,370 96,686 ------------------------------------ Total current assets 222,534 98,148 Equipment, net (Note 3) 39,639 19,756 Other 10,157 5,539 ------------------------------------ Total assets $272,330 $123,443 ==================================== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 97,138 $ 73,768 Line of credit (Note 4) 60,000 10,000 Accrued expenses (Note 5) 73,797 15,087 Deferred revenue (Note 6) 58,909 - ------------------------------------ Total current liabilities 289,844 98,855 Shareholders' equity: Common stock, no par value 1,000,000 shares authorized, 10,000 shares issued and outstanding 10,000 10,000 Retained earnings (deficit) (27,514) 14,588 ------------------------------------ Total shareholders' equity (deficit) (17,514) 24,588 ------------------------------------ Total liabilities and shareholders' equity $272,330 $123,443 ====================================
See accompanying notes. 2 National Property Casualty Corporation Statements of Operations and Changes in Retained Earnings
Year Ended December 31 1996 1995 ------------------------------------ Revenues: Repricing fees $1,632,903 $ 888,933 Member fees 200,012 44,784 ------------------------------------ 1,832,915 933,717 Cost of sales: PPO network fees 666,305 436,211 Commissions 207,741 51,172 ------------------------------------ Revenues less cost of sales 958,869 446,334 Expenses: Wages and related 536,127 256,891 Other operating 339,719 111,992 Depreciation 22,000 6,000 Interest 3,125 1,614 ------------------------------------ Total expenses 900,971 376,497 Net income 57,898 69,837 Retained earnings (deficit) at beginning of year 14,588 (55,249) Distribution to shareholders (100,000) - ------------------------------------ Retained earnings (deficit) at end of year $ (27,514) $ 14,588 ====================================
See accompanying notes. 3 National Property Casualty Corporation Statement of Cash Flows
Year Ended December 31 1996 1995 ------------------------------------ Operating activities Net income $ 57,898 $ 69,837 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 22,000 6,000 Changes in operating assets and liabilities: Increase in accounts receivable (121,684) (96,686) Increase in accounts payable 23,370 73,768 Increase in accrued expenses 58,710 15,087 Increase in deferred revenue 58,909 - ------------------------------------ Net cash provided by operating activities 99,203 68,006 Investing activities Purchases of equipment (41,883) (21,591) ------------------------------------ Net cash used in investing activities (41,883) (21,591) Financing activities Increase in other assets (4,618) (4,717) Increase in line of credit 50,000 10,000 Decrease in shareholder note payable - (50,236) Distribution to shareholders (100,000) - ------------------------------------ Net cash used in financing activities (54,618) (44,953) ------------------------------------ Net increase in cash 2,702 1,462 Cash at beginning of year 1,462 - ------------------------------------ Cash at end of year $ 4,164 $ 1,462 ==================================== Supplemental financial disclosure Interest paid $ 3,125 $ 1,614
See accompanying notes. 4 National Property Casualty Corporation Notes to Financial Statements December 31, 1996 1. Description of Business National Property Casualty Corporation (the Company) began operations in September 1994, and provides management of health care services and workers' compensation claims for property and casualty companies. The Company also operates a point of sale vision care program, First American Vision Services (FAVS), which permits members to purchase eye wear at a reduced price from its vision network providers, and a chiropractic network designed to assist property and casualty insurance companies in the reduction of costs associated with soft tissue claims. 2. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Repricing Fees Repricing fees are based on a percentage of the medical savings generated from medical and workers compensation claims managed by the Company. Equipment Equipment is stated at cost. Depreciation is computed using the straight line method over the estimated useful life of the respective assets which approximates three to five years. Revenue Revenue is concentrated from four major customers who contributed the following proportions to repricing fees in 1996: Employers Health Insurance 27% State Farm Insurance 21 Health Claim Services 14 Prudential Property and Casualty 11 5 National Property Casualty Corporation Notes to Financial Statements (continued) 2. Significant Accounting Policies (continued) Income Taxes The Company elected and has been granted S Corporation status under the regulations of the Internal Revenue Service. Consequently, the Company's taxable income is passed through to its shareholders, and the accompanying financial statements do not reflect a provision for income taxes or deferred tax assets or liabilities. 3. Equipment A summary of equipment by major classification, at of December 31, follows: 1996 1995 -------------- -------------- Furniture and fixtures $ 5,973 $ 5,973 Equipment 61,722 19,839 -------------- -------------- 67,695 25,812 Accumulated depreciation (28,056) (6,056) -------------- -------------- $ 39,639 $ 19,756 ============== ============== 4. Line of Credit In 1996, the Company maintained a line of credit with a financial institution of which $60,000 was outstanding as of December 31, 1996. The line of credit bears interest at prime plus 2 percent and matures on May 1, 1997. The line is collateralized by the Company's accounts receivable and is guaranteed by the Company's shareholders. 5. Accrued Expenses A summary of accrued expenses at December 31, follows: 1996 1995 -------------- -------------- Payroll $ 23,163 $ 10,686 Commission 26,227 - Paid time off 10,000 - Other 14,407 4,401 ============== ============== $ 73,797 $ 15,087 ============== ============== 6 National Property Casualty Corporation Notes to Financial Statements (continued) 6. Deferred Revenue The Company receives annual membership fees through contracts entered into with the FAVS program. The membership fees are received at the inception of the annual contracts, and revenue is deferred and recognized over the life of the contracts, on a straight line basis. 7. Related Party Transactions In 1996, the Company made lease payments totaling $14,310 on behalf of a company which is wholly owned by a shareholder of the Company, and $11,133 on behalf of a shareholder of the Company. 8. Commitments and Contingencies Leases Future minimum lease payments at December 31, 1996, by year and in the aggregate, under noncancelable operating lease arrangements with initial or remaining terms of one year or more consist of the following: 1997 $127,884 1998 127,884 1999 42,628 --------------- $298,396 =============== Amounts charged to expense for operating leases totaled $73,252 in 1996 and $13,505 in 1995. 9. Subsequent Event Effective January 1, 1997, the outstanding stock of the Company was merged into National Health Benefits and Casualty Corporation, a Nevada Corporation, owned by the same shareholders of the Company. Effective January 14, 1997, all of the outstanding stock of National Health Benefit and Casualty Corporation was acquired by Champion Financial Corporation. 7 (b) Pro Forma Financial Information Unaudited Pro Forma Condensed Combined Statements of Operations On January 14, 1997, Champion Financial Corporation or the ("Company") acquired 100% of the outstanding common stock of National Health Benefits & Casualty Corporation ("NHBC"). Prior to the acquisition, National Property Casualty Corporation ("NPCC"), a subchapter S. Corporation was merged into NHBC as of January 1, 1997. NHBC was organized as a Delaware Corporation in July 1996. The sole stockholders of NHBC are the sole shareholders of NPCC. There were no operations of NHBC until January 1, 1997, when NPCC was merged into NHBC. The following Unaudited Pro Forma Condensed Combined Statements of Income and Unaudited Pro Forma Condensed Balance Sheet have been prepared as if the Acquisition of NHBC and merger of NPCC had been consummated at the beginning of the period presented. The pro forma information is based on the historical statements of operations of the acquired business giving effect to the transaction under the purchase method of accounting and the assumptions and adjustments described in the accompanying notes. The Unaudited Pro Forma Condensed Combined Financial Statements do not purport to present the financial condition and results of operations of the company had the business combination taken place on the date specified, nor are they necessarily indicative of the results of operations that may be achieved in the future. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET DECEMBER 31, 1996
Unadjusted Combined CFC NPCC NHBC Total Adjustments Total ---------- ---------- --------- ---------- ----------- ---------- Assets Current Assets Cash $ 4,164 $ 4,164 $ 4,164 Prepaid Expenses 0 0 Accounts Receivable 218,370 218,370 218,370 ---------- ---------- --------- ---------- ----------- ---------- Total Current assets 0 222,534 0 222,534 0 222,534 Property and Equipment Office furniture and equipment 80,629 67,695 148,324 148,324 Less: Accumulated depreciation (15,975) (28,056) (44,031) (44,031) ---------- ---------- --------- ---------- ----------- ---------- Net Property and Equipment 64,654 39,639 0 104,293 0 104,293 Other Assets Loan receivable and investments 4,400 4,400 4,400 Security Deposits 10,157 10,157 10,157 Organizational costs 1,100 1,100 1,100 Pre-acquisition costs 113,952 113,952 113,952 Assembled and trained work force B) 100,000 100,000 Goodwill B) 1,400,778 1,400,778 ---------- ---------- --------- ---------- ----------- ---------- Total Other Assets 118,352 10,157 1,100 129,609 1,500,778 1,630,387 Total Assets $ 183,006 $ 272,330 $ 1,100 $ 456,436 $ 1,500,778 $1,957,214 ========== ========== ========= ========== =========== ========== Liabilities and shareholders' equity Current liabilities: Accounts Payable $ 148,230 $ 97,138 245,368 $ 245,368 Due to NPCC 100 100 A) (100) 0 Current portion of note payable- related party 8,709 8,709 8,709 Accrued expenses 31,907 31,907 31,907 Income tax payable D) 54,000 54,000 Payroll taxes payable 23,163 23,163 23,163 Line of credit 60,000 60,000 60,000 ---------- ---------- --------- ---------- ----------- ---------- Total Current liabilities 156,939 212,208 100 369,247 53,900 423,147 Long Term Debt Long-term portion of note payable-related party 15,631 0 15,631 0 15,631 ---------- ---------- --------- ---------- ----------- ---------- Total Liabilities 172,570 212,208 100 384,878 53,900 438,778 Shareholders' equity: Retained earnings(Deficit) (2,577,742) (85,412) (2,663,154) B) (50,122) (2,713,276) Common stock 2,819 10,000 1,000 13,819 A) (10,000) 5,019 0 B) 1,200 Additional paid-in capital 2,584,450 2,584,450 A) 10,100 4,144,250 0 B) (10,100) 0 B) 1,559,800 Net Income 909 135,534 136,443 D) (54,000) 82,443 ---------- ---------- --------- ---------- ----------- ---------- Total Equity(Deficit) 10,436 60,122 1,000 71,558 1,446,878 1,518,436 Total Liabilities & Equity $ 183,006 $ 272,330 $ 1,100 $ 456,436 $ 1,500,778 $1,957,214 ========== ========== ========= ========== =========== ==========
Page 1 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS DECEMBER 31, 1996
Unadjusted Pro Forma Combined CFC NPCC NHBC Total Adjustments Total ----------- ----------- ----------- ----------- ----------- ----------- Revenues: Repricing fees $ 1,632,903 $ 1,632,903 $ 1,632,903 Member fees 258,921 258,921 258,921 ----------- ----------- ----------- ----------- ----------- ----------- $ 0 1,891,824 $ 0 1,891,824 -- 1,891,824 Cost of sales: PPO network fees 666,305 666,305 666,305 Facility refunds 34,746 34,746 34,746 Contact lense purchases 8,391 8,391 8,391 Commissions 145,877 145,877 145,877 ----------- ----------- ----------- ----------- ----------- ----------- Revenues less cost of sales 0 1,036,505 0 1,036,505 -- 1,036,505 Expenses: Wages and related 570,330 570,330 570,330 Consulting and Professional 46,311 46,311 46,311 Occupancy and office expense 2,328 73,252 75,580 75,580 Other operating 233,579 233,579 233,579 Depreciation 6,847 22,000 28,847 28,847 Amortization C) 82,000 82,000 ----------- ----------- ----------- ----------- ----------- ----------- Total expenses 55,486 899,161 0 954,647 82,000 1,036,647 Other Income (Expense) Forgiveness of debt 58,087 58,087 58,087 Interest income 1,315 1,315 1,315 Interest and other investment expense (1,692) (3,125) (4,817) (4,817) ----------- ----------- ----------- ----------- ----------- ----------- Net other income 56,395 (1,810) 0 54,585 -- 54,585 ----------- ----------- ----------- ----------- ----------- ----------- Income (Loss) Before Income Taxes 909 135,534 0 136,443 (82,000) 54,443 Provision for Income Taxes D) 54,000 54,000 ----------- ----------- ----------- ----------- ----------- ----------- Net Income(Loss) $ 909 $ 135,534 $ 0 $ 136,443 $ (180,078) $ (7,596) =========== =========== =========== =========== =========== =========== Net Income(Loss) Per Share $ (.003) =========== Weighted Average Shares Outstanding 2,819,302
Page 1 Notes to Unaudited Pro Forma Condensed Combined Balance Sheets and Statements of Operations Note 1 Pro Forma Adjustments a) On January 1, 1997, NPCC was merged into NHBC. b) On January 14, 1997, Champion Financial acquired 100% of the capital stock in NHBC through an exchange of 2,200,000 shares, $0.001 par value, of Champion stock. The business combination has been accounted for utilizing the purchase method. The NHBC assets acquired and liabilities assumed were recorded at their estimated fair market values. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill and assembled work force. Goodwill is being amortized over twenty years and the assembled work force is being amortized over five years. c) The excess of $1,500,778 purchase price over the net assets acquired was recorded in the amount of $1,400,778 as goodwill. Such amortization amounts to approximately $70,000 annually, or $67,000 for the nine month period ended December 31, 1996. The remaining excess of $100,000 of the purchase price over the net assets acquired recorded as assembled work force intangible asset being amortized over five years. Such amortization is $20,000 annually, or $15,000 for the nine month period ended December 31, 1996. d) Estimated provision for income taxes related to pro forma adjustments are based on an assumed combined federal and state income tax rate of 40%. 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. CHAMPION FINANCIAL CORPORATION March 28, 1997 By /s/ Paul F. Caliendo ---------------------------------- Paul F. Caliendo President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----