Exemplar International Announces Acquisition, Convertible Debt Offering, Financial Results
SARASOTA, Fla.--(BUSINESS WIRE)--Aug. 21, 2002--Exemplar International, Inc. (OTC:HCEV) (the "Company"), a national provider of occupational health screening and compliance services, today announced that the Company has reached an agreement in principle to acquire certain assets of ClinNet Solutions, LLC, Parsippany, New Jersey, a wholly owned subsidiary of Diligenti Limited ("Diligenti"). Diligenti currently owns approximately 59% of Exemplar's outstanding common stock. This agreement is part of Diligenti's plan to close its operating activities in the United Kingdom, France and the United States.
On Friday, August 16, the Company made a filing with the Securities and Exchange Commission ("SEC") which terminates its future obligations to file periodic and annual reports with the SEC. This filing does not prevent the existing shares of the Company's common stock from continuing to be quoted on the Pink Sheets, because SEC registration and reporting are not required for quotation through this service. This action will enable management to complete the reorganization of its capital structure through the conversion of certain debt obligations to equity, thereby strengthening the Company's balance sheet. The Company will continue to evaluate strategic options including, but not limited to, filing a new Form 10SB with the SEC and complying with the reporting requirements of the SEC, the potential for an initial public offering, and possible mergers with, or acquisitions of, other health related service organizations.
In its August 2002 letter to shareholders, the Company also announced that it is continuing to identify qualified investors in the U.S. and the U.K. to conclude the $4.7 million balance of a $7.5 million private offering of convertible notes initiated during fourth quarter 2001. Proceeds from the offering will be used for working capital required to fund business development activities and complete development of information systems projects in support of the Company's product offerings and operations. Subject to approval by the Company's shareholders of an increase in the Company's authorized capital stock, the noteholders may exchange their notes for shares of the Company's common stock. Despite current economic conditions, the Company indicated it was confident of being successful in completing this round of financing, but was not yet able to report the valuation that investors will require to complete this transaction, the potential dilution to existing shareholders, or whether specific milestones will be required to be established and met in order to ensure that committed funds can be fully drawn over the coming months. Furthermore, the Company anticipates that it will restructure a substantial portion of its outstanding debt in conjunction with this round of financing. The full text of the shareholder letter is available on the Company's web site, http://www.exintl.com.
Martin Clegg, the Company's Chief Executive Officer, said, "This new capital will enable us to accelerate expansion of our service delivery and customer reporting capabilities and facilitate initiation of service on many of the Company's new contracts. We expect our customers will benefit significantly from software enhancements through expanded access to more comprehensive and timely information."
In the shareholder letter, the Company included its unaudited financial results for the fiscal years ended December 31, 2000 and 2001. The Company's independent auditors, Deloitte & Touche, LLP are currently working to complete their field audit work for the fiscal years ended December 31, 2000 and 2001. Accordingly, they have not yet issued their audit reports for the financial statements for the fiscal years ended December 31, 2000 and 2001. As a result, the Company's financial statements for the fiscal years ended December 31, 2000 and 2001 are still officially designated as "unaudited." The Company is of the opinion that these results will be materially consistent with the audited results for these periods, which will be published as soon as possible.
Complete financial results for the fiscal years ended December 31, 2000 and 2001 are shown below; the key results for 2001 include the following:
-- Sales were $20.8 million, an increase of 35% (2000: $15.4 million); -- Gross profit was $6.4 million, an increase of 59% (2000: $4.0 million); -- EBITDA loss was $5.5 million, a decrease of 50% (2000: $11.0 million loss); -- Net loss was $8.4 million, a decrease of 36% (2000: $13.1 million loss); -- Cash flow from operations improved by $1.8 million.
In announcing these results, Mr. Clegg commented, "These results reflect the changes to our business that have been pursued over the prior two-year period and include the benefit to revenue of the 2000 acquisition of U.S. HealthWorks' Preventive Services Division; the lowering of our cost of sales ratio relative to revenues as a result of initial restructuring activities; and the improvement in EBITDA as a result of the operating leverage we are obtaining from the core (fixed cost) infrastructure."
About Exemplar International
The Company markets occupational health and medical assessment products and services nationally, including data management, substance abuse, on-site medical evaluation, wellness and related health management services and programs. The Company operates a fleet of vehicles that are fully equipped with a variety of medical examination equipment and offers Clinic Network Management services that administer all aspects of its customers' clinic-based testing programs, thus allowing integration of traditional fixed-site screening programs with the Company's mobile testing services using state-of-the-art technology and clinic review protocols.
These services are supported by the Company's sophisticated, proprietary software that is used to gather, maintain, analyze and report data concerning a customer's employees covered by some or all of the Company's health screening programs. These systems are designed to interface with some of the most sophisticated health-care reporting systems in the nation.
This release contains forward-looking statements including statements regarding, among other items, the Company's growth strategies, and anticipated trends in its business and demographics. These forward-looking statements are based largely on Management's expectations and are subject to a number of risks and uncertainties, certain of which are beyond Management's control. Actual results could differ materially from these forward-looking statements as a result of a number of factors, including, among others, regulatory or economic influences.
EXEMPLAR INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
ASSETS
2001 2000
------------ ------------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,450,000 $ 13,000
Accounts receivable, net of allowance
for doubtful accounts of $201,000 and
$358,000 in 2000 and 2000,
respectively 2,757,000 4,387,000
Prepaid expenses and other current assets 447,000 316,000
------------ ------------
Total current assets 4,654,000 4,716,000
PROPERTY AND EQUIPMENT, net 1,493,000 1,515,000
INTANGIBLES, net 2,489,000 2,637,000
OTHER ASSETS 44,000 71,000
------------ ------------
Total assets $ 8,680,000 $ 8,939,000
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LIABILITIES AND SHAREHOLDERS' DEFICIT
2001 2000
------------ ------------
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Short-term debt $ 14,522,000 $ 6,979,000
Accounts payable 1,400,000 3,028,000
Accrued liabilities 2,664,000 2,159,000
Interest payable 1,191,000 145,000
Other 278,000 0
------------ ------------
Total current liabilities 20,055,000 12,311,000
LONG-TERM DEBT, less current portion 380,000 568,000
------------ ------------
Total liabilities 20,435,000 12,879,000
SHAREHOLDERS' DEFICIT:
Common stock, $0.001 par value,
50,000,000 shares authorized,
42,450,000 and 42,205,000 shares
issued and outstanding in
2001 and 2000, respectively 43,000 42,000
Additional paid-in capital 19,950,000 19,407,000
Accumulated deficit (31,748,000) (23,389,000)
------------ ------------
Total shareholders' deficit (11,755,000) (3,940,000)
------------ ------------
Total liabilities and shareholders'
deficit $ 8,680,000 $ 8,939,000
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EXEMPLAR INTERNATIONAL
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
------------ ------------
(Unaudited) (Unaudited)
NET SALES $ 20,754,000 $ 15,374,000
COST OF SALES 14,334,000 11,335,000
------------ ------------
Gross profit 6,420,000 4,039,000
------------ ------------
Selling, general, and administrative
expenses 11,050,000 9,669,000
Asset impairment and restructuring
charges 842,000 5,393,000
Depreciation and amortization expense 821,000 927,000
------------ ------------
Total operating expenses 12,713,000 15,989,000
------------ ------------
OPERATING LOSS (6,293,000) (11,950,000)
INTEREST EXPENSE 2,066,000 1,100,000
------------ ------------
LOSS BEFORE INCOME TAX PROVISION (8,359,000) (13,050,000)
INCOME TAX PROVISION 0 0
NET LOSS $ (8,359,000) $(13,050,000)
============ ============
BASIC AND DILUTED LOSS PER SHARE $ (0.20) $ (0.69)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 42,373,000 18,792,000
============ ============
In September 2000, the Company recorded a goodwill impairment of $4.9 million. This impairment eliminated all of the goodwill on acquisitions completed by the Company prior to September 2000. Goodwill was determined to have been impaired because of the financial condition of the Company and the Company's inability to generate sufficient future operating income on those businesses related to the goodwill without substantial sales volume increases that were uncertain at that time. Moreover, anticipated future cash flows of the Company indicated that the recoverability of goodwill could not be reasonably assured.
EXEMPLAR INTERNATIONAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
------------ ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,359,000) $(13,050,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Changes in net assets and liabilities:
Depreciation and amortization 821,000 927,000
Noncash compensation and consulting
expenses 85,000 178,000
Amortization of debt issuance costs 190,000 49,000
Impairment of long-term assets 0 4,912,000
Loss on disposal of assets 46,000 410,000
Changes in assets and liabilities,
net of acquisitions:
Accounts receivable, net 1,630,000 (2,726,000)
Prepaid expenses and other
current assets (73,000) (241,000)
Accounts payable and accrued
expenses 201,000 2,279,000
------------ ------------
Net cash used in operating
activities (5,459,000) (7,262,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (697,000) (188,000)
Net cash paid in acquisitions 0 (2,073,000)
------------ ------------
Net cash used in investing
activities (697,000) (2,261,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 10,765,000 9,299,000
Repayment of long-term debt (2,214,000) (768,000)
Change in working capital line (923,000) 668,000
Proceeds from the issuance of common stock 0 278,000
Repurchase of common stock (62,000) 0
Proceeds from exercise of warrants and
stock options 27,000 2
------------ ------------
Net cash provided by financing
activities 7,593,000 9,479,000
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,437,000 (44,000)
CASH AND CASH EQUIVALENTS, beginning
of year 13,000 57,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of year 1,450,000 13,000
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SUPPLEMENTAL DISCLOSURE:
Interest paid $ 836,000 $ 1,021,000
============ ============
NONCASH TRANSACTIONS:
Debt and accrued interest converted to
common stock $ 0 $ 5,000,000
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