UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K/A
(Amendment #1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 7, 2003
CRDENTIA CORP.
------------------------------------------------------
(Exact name of Registrant as specified by its charter)
DELAWARE 0-31152 76-0585701
---------------------------- ------------------------ ----------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
455 Market Street, Suite 1220, San Francisco, California 94105
--------------------------------------------------------------
(Address of principal executive offices)
(415) 543-1535
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------------
Former Name or Former Address If Changed Since Last Report
ITEM 2. Acquisition or Disposition of Assets.
On August 7, 2003, we, Crdentia Corp., Baker Anderson Christie, Inc., BAC
Acquisition Corporation, a wholly owned subsidiary of Crdentia, and certain
shareholders of Baker Anderson Christie consummated the merger of BAC
Acquisition Corporation with and into Baker Anderson Christie pursuant to the
terms of the Agreement and Plan of Reorganization dated June 19, 2003, as
amended on July 31, 2003. On our current report filed on Form 8-K filed with
the Securities and Exchange Commission on August 14, 2003, we announced our
consummation of the merger.
We hereby amend Item 7 of our current report on Form 8-K filed on August
14, 2003 to include financial statements of the businesses acquired and pro
forma financial information in accordance with Item 7(a)(4) and Item 7(b)(2)
within 60 days after the due date of the initial filing. Except as set forth
in Item 7 below, no other changes are being made to our current report on
Form 8-K filed on August 14, 2003.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The financial statements of Baker Anderson Christie required to be filed
are attached hereto as Exhibit 99.1.
(b) Pro Forma Financial Statements.
The pro forma financial information required to be filed is attached hereto
as Exhibit 99.2.
The pro forma financial information attached to this report as Exhibit 99.2
also includes the pro forma financial information for New Age Staffing, Inc.
previously included in Exhibit 99.2 to Form 8-K filed on October 20, 2003.
(c) Exhibits.
99.1 Financial Statements of Baker Anderson Christie, Inc.
99.2 Pro Forma Financial Information for Baker Anderson Christie, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has caused this report on Form 8-K/A to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: October 21 , 2003 CRDENTIA CORP.
/S/ LAWRENCE M. DAVIS
--------------------------------------
By: Lawrence M. Davis,
Chief Financial Officer and Secretary
2
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Financial Statements of Baker Anderson Christie, Inc.
99.2 Pro Forma Financial Information for Baker Anderson Christie, Inc.
3
EXHIBIT 99.1
BAKER ANDERSON CHRISTIE, INC.
Independent Auditors' Report
and Financial Statements
For the Years Ended December 31, 2001 and 2002
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Baker Anderson Christie, Inc.
We have audited the accompanying balance sheets of Baker Anderson
Christie, Inc., (the "Company"), as of December 31, 2001 and 2002,
and the related statements of operations, stockholders' equity, and
cash flows for the years then ended. These financial statements are
the responsibility of the management of the Company. 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.
As more fully described in Note 9 to the financial statements, the Company
was acquired by and became a wholly owned subsidiary of Crdentia Corp. on
August 7, 2003.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
2001 and 2002, 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 of America.
/s/MACIAS, GINI & COMPANY LLP
Certified Public Accountants
Sacramento, California
October 10, 2003
F-1
Baker Anderson Christie, Inc..
Balance Sheets
December 31 June 30
------------------------ ----------
2001 2002 2003
------------ ----------- ----------
Assets
Cash $ 91,562 $ 55,138 $ 127,424
Prepaid expenses -
Accounts receivable 156,858 230,677 119,498
------------ ----------- ----------
Total Current Assets 248,420 285,815 246,922
Property and Equipment, net 7,231 5,864 4,878
------------ ----------- ----------
Total Assets $ 255,651 $ 291,679 $ 251,800
============ =========== ==========
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses 158,797 140,258 113,318
Deferred revenue 18,582 15,306 13,644
Stockholder note payable 25,000 12,405 -
------------ ----------- ----------
Total Current Liabilities 202,379 167,969 126,962
------------ ----------- ----------
Stockholders' Equity
Common stock, $10 par value;
100,000 shares authorized,
600issued and outstanding 6,000 6,000 6,000
Retained earnings 47,272 117,710 118,838
------------ ----------- ----------
Total Stockholders Equity 53,272 123,710 124,838
------------ ----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITYty $ 255,651 $ 291,679 $ 251,800
============ =========== ==========
The accompanying notes are an integral part of
these financial statements.
F-2
New Age Staffing, Inc.
Statements of Operations
Year Ended December 31, Six Months Enses June 30,
------------------------ --------------------------
2001 2002 2002 2003
------------ ----------- ------------ -------------
(Unaudited)
REVENUES
Income from services $ 2,186,512 $ 2,353,371 $ 1,212,978 $ 966,614
Reimbursed expenses 59,777 75,837 35,418 37,505
------------ ----------- ------------- -------------
Total revenues 2,246,289 2,429,208 1,248,396 1,004,119
------------ ----------- ------------- -------------
COST OF REVENUES 1,862,712 1,911,077 941,256 751,754
------------ ----------- ------------- -------------
GROSS PROFIT 383,577 518,131 307,140 252,365
------------ ----------- ------------- -------------
SELLING GENERAL AND
ADMINISTRATIVE EXPENSES 395,388 408,082 240,927 240,775
------------ ----------- ------------- -------------
Income (Loss) from
Operations (11,811) 110,049 66,213 11,590
------------ ----------- ------------- -------------
INTEREST EXPENSE (4,032) (1,766) (981) (537)
------------ ----------- ------------- -------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (15,843) 108,283 65,232 11,053
PROVISION FOR INCOME TAXES (936) (800) (800) (663)
------------ ----------- ------------- -------------
NET INCOME (LOSS) $ (16,779) $ 107,483 $ 64,432 $ 10,390
============ =========== ============= =============
The accompanying notes are an integral part of
these financial statements.
F-3
Baker Anderson Christie, Inc.
Statements of Stockholders' Equity
Years Ended December 31, 2001 and 2002
--------------------------------------------------------------------------------
Common Stock
----------------- Retained
Shares Amount Earnings Total
--------------------------------------------------------------------------------
Balance, December 31, 2000 600 $ 6,000 $ 64,051 $ 70,051
Net loss - (16,779) (16,779)
--------------------------------------------------------------------------------
Balance, December 31, 2001 600 6,000 47,272 53,272
Net income - 107,483 107,483
Stockholder dividends - (37,045) (37,045)
--------------------------------------------------------------------------------
Balance, December 31, 2002 600 6,000 117,710 123,710
Net income - 10,390 10,390
Stockholder dividends - (9,262) (9,262)
--------------------------------------------------------------------------------
Balance, June 30, 2003
(Unaudited) 600 $ 6,000 $ 118,838 $ 124,838
================================================================================
The accompanying notes are an integral part of
these financial statements.
F-4
Baker Anderson Christie, Inc.
Statements of Cash Flows
Years Ended December 31, Six Months Ended June 30,
------------------------ --------------------------
2001 2002 2002 2003
---------- ----------- ---------- ---------
Cash Flows from Operating Activities
Net income (loss) $ (16,779) $ 107,483 $ 64,432 $ 10,390
Adjustment to reconcile net income
to net cash from operating activities:
Depreciation and amortization 2,134 1,935 948 984
(Increase) decrease in:
Accounts receivable 57,884 (73,820) (73,358) 111,180
Accounts payable and
accrued expenses 10,062 (18,539) (19,110) (26,940)
Deferred revenue 445 (3,276) (1,508) (1,662)
---------- ----------- ----------- ----------
Net cash provided (used) by
operating activities 53,746 13,783 (28,596) 93,952
---------- ----------- ----------- ----------
Cash flows from investing activities:
Acquistion of property and equipment (2,046) (568) (568) -
---------- ----------- ----------- ----------
Cash Flows From Financing Activities:
Repayments on line of credit (30,000) - - -
Proceeds from stockholder note payable 25,000 - - -
Principal payments on stockholder
note payable - (12,595) (8,429) (12,405)
Payment of stockholder dividends - (37,044) (18,522) (9,261)
---------- ----------- ----------- ----------
Net cash used by financing activities (5,000) (49,639) (26,951) (21,666)
---------- ----------- ----------- ----------
Net increase (decrease)in cash and
cash equivalents 46,700 (36,424) (56,115) 72,286
Cash and cash equivalents at
beginning of period 44,862 91,562 91,562 55,138
---------- ----------- ----------- ----------
Cash and cash equivalents at
end of period $ 91,562 $ 55,138 $ 35,447 $ 127,424
========== =========== =========== ==========
Supplemental Disclosure of Cash
Flow Information
Cash paid for interest $ 4,032 $ 1,766 $ 981 $ 537
========== =========== =========== ==========
Cash paid for income taxes $ 800 $ 1,208 $ 1,072 $ 663
========== =========== =========== ==========
The accompanying notes are an integral part of
these financial statements.
F-5
BAKER ANDERSON CHRISTIE, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
Baker Anderson Christie, Inc. (the "Company") is a home health
care agency operating primarily in San Francisco, California.
Substantially all of the Company's revenues are derived from
providing clinical staffing to residential care facilities and
hospices. Services provided by the Company include assistance
with daily living activities, short or long term post-operative
care, corporate wellness consultations, and geriatric care
management.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant 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 certain reported amounts and disclosures.
Actual results could materially differ from those estimates under
different assumptions or conditions.
Interim Financial Information - The Company's financial statements
as of June 30, 2003 and for the six months ended June 30, 2002 and
2003 are unaudited and, in the opinion of management, contain all
adjustments that are of a normal and recurring nature necessary to
present fairly the financial position at such date and results of
operations for such periods then ended.
Financial Instruments and Risk Concentration - Financial instruments
which potentially subject the Company to concentrations of credit
risk consist primarily of its accounts receivable. The risk related
to accounts receivable is mitigated by performing on-going credit
evaluations. Historically, the Company has not incurred any significant
credit related losses and has collected substantially all of its receivables.
The Company believes its credit policies do not result in significant
adverse risk.
For the years ended December 31, 2001 and 2002, the Company had one
customer which accounted for approximately 39% and 44% of its revenues,
respectively. As of December 31, 2001 and 2002, that same customer
accounted for approximately 51% and 72% of the Compan's accounts
receivable, respectively.
Fair Value of Financial Instruments - The carrying amounts of cash,
accounts receivable, accounts payable, accrued expenses, and borrowings
under the Company's line of credit approximate fair values because of
the short-term nature of these instruments. The fair value of the
Company's note payable is based upon current interest rates for debt
instruments with comparable maturities and characteristics. The
recorded values of these obligations approximated fair value at the
end of the year.
F-6
BAKER ANDERSON CHRISTIE, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents - The Company considers all highly liquid
securities purchased with original purchase maturities of three months
or less to be cash equivalents.
Accounts Receivable - Accounts receivable consist primarily of billed
invoices for services provided by the Company. The Company routinely
evaluates the collectability of its receivables. At December 31, 2001
and 2002, the allowance for doubtful accounts was $0.
Property and Equipment - Property and equipment are recorded at cost,
less accumulated depreciation and amortization. The provision for
depreciation and amortization is computed using the straight-line method,
or methods which approximate the straight-line method, over the estimated
useful lives of the assets, which ranges from three to five years.
Maintenance and repairs are charged to expense in the year incurred.
Revenue Recognition - Revenue is recognized when services are rendered
and billings for such services are processed. Certain of the Company's
billing arrangements provide for the reimbursement of out-of-pocket
expenses incurred by the Company in performing services. The Company
records amounts billed for the reimbursement of expenses as revenues.
Deferred Revenue - Deferred revenue represents client payments received
in advance of the performance of services by the Company.
Income Taxes - The Company has elected to be taxed under the subchapter
S provisions of the Internal Revenue Code for federal and state purposes.
Under these provisions, the Company does not pay federal corporate income
taxes on its taxable income, but is subject to a 1.5% California franchise
tax. The Company's stockholders are liable for individual federal and state
income taxes on the Company's taxable income.
At December 31, 2002, the Company had net operating loss carryforwards of
approximately $6,600 available to offset future California franchise tax
liabilities and which expire in 2012. The Company has not recorded a
deferred tax asset related to these net operating loss carryfowards as
such amount is insignificant. The provision for income tax in the current
period consists entirely of the California minimum franchise tax.
F-7
BAKER ANDERSON CHRISTIE, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income - There were no items of comprehensive income (loss)
and therefore comprehensive income was the same as net income for the year
presented.
Recent Accounting Pronouncements - Effective January 1, 2002, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. This
statement addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. SFAS No. 144 requires an impairment
loss to be recognized only if the carrying amounts of long-lived assets
to be held and used are not recoverable from their expected undiscounted
future cash flows. Adoption of SFAS No. 144 had no effect on the Company's
financial position, results of operations, or liquidity.
In April 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 145, Rescission of
FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. SFAS No. 145 rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt and an amendment
of that statement, FASB Statement No. 64, Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements and eliminates extraordinary gain and
loss treatment for the early extinguishment of debt. This statement also
rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor
Carriers and amends FASB Statement No. 13, Accounting for Leases, to
eliminate an inconsistency between the required accounting for sale-
leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-
leaseback transactions. The statement also amends other existing
authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under changed
conditions. The Company has adopted SFAS No. 145 for the year ended
December 31, 2002. The application of this statement did not have a
material impact on the Company's financial position, results of
operations or liquidity.
In November 2002, FASB issued FASB Interpretation No. ("FIN") 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, I
ncluding Indirect Guarantees of Indebtedness of Others, an interpretation
of FASB Statements Nos. 5, 57, and 107 and rescission of FIN No. 34.
FIN No. 45 details the disclosures that should be made by a guarantor
in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. This interpretation also
requires a company to record, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing
certain guarantees. The disclosure provisions are effective for
interim or annual periods ending after December 15, 2002. The
recognition requirements of this interpretation are effective for
all guarantees issued or modified subsequent to December 31, 2002.
The adoption of this interpretation did not have a material impact
on the Company' s financial position or results of operations.
F-8
BAKER ANDERSON CHRISTIE, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
2001 2002
------------- -----------
Furniture and fixtures $ 13,015 $ 13,015
Office equipment 4,210 4,778
------------- -----------
Total property and equipment 17,225 17,793
Accumulated depreciation (9,994) (11,929)
------------- -----------
$ 7,231 $ 5,864
NOTE 4 - LINE OF CREDIT
The Company's stockholders entered into a line of credit agreement
on behalf of the Company providing for borrowings up to $150,000.
Borrowings under the line bear interest at prime plus 2.5% (6.75% at
December 31, 2002). The interest rate on the line is variable and
may change on a monthly basis. Borrowings and repayments under the
line of credit were made by the Company. At December 31, 2001 and
2002, there were no amounts outstanding under the line of credit.
In August 2003, in conjunction with the Company's acquisition (see
Note 9), the line of credit was terminated.
NOTE 5 - STOCKHOLDER NOTE PAYABLE
In October 2001, the Company's stockholders entered into a $25,000
note payable with a bank on behalf of the Company. The note is payable
in 36 monthly installments unless an earlier demand payment request is
made. The note has a variable interest rate of prime plus 2.25% (6.5%
at December 31, 2002). At December 31, 2001 and 2002, the balance on
the note was $25,000 and $12,405, respectively. In May 2003, the
outstanding balance on the note was paid in full.
As of December 31, 2002, future scheduled principal payments for the
note payable are as follows for the years ending December 31:
2003 $ 8,333
2004 4,072
--------
Total $ 12,405
========
F-9
BAKER ANDERSON CHRISTIE, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company leases an automobile under a non-cancelable operating
lease expiring in May 13, 2005. Under the terms of the lease, the
Company pays $413 a month. Total rent expense was $0 and $2,480 for
the years ended December 31, 2001 and 2002, respectively.
Future minimum lease payments under this lease are as follows:
Year Ending
December 31, Amount
---------------- -----------
2003 $ 4,961
2004 4,961
2005 2,067
===========
Total $ 11,989
The company also leases its office facility under a non-cancelable
operating lease expiring in February 28, 2005. Under the terms of
the lease, the Company pays $2,220 a month, on a triple net basis.
Total rent expense was $20,861 and $23,998 for the years ended
December 31, 2001 and 2002, respectively.
Future minimum payments under this lease are as follows:
2003 $ 27,750
2004 29,132
2005 4,894
----------
Total $ 61,776
==========
The Company is subject to legal and regulatory actions in the
ordinary course of its business and is a defendant or plaintiff
in various actions. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse
effect on the Company's business, financial condition or results
of operations.
F-10
NOTE 7 - RELATED PARTIES
During the years ended December 31, 2001 and 2002, the Company's
shareholders received $249,526 and $125,479, respectively, as
compensation for their services as officers of the Company. In
addition, such officers and shareholders received $37,044 in
shareholder dividends for the year ended December 31, 2002.
NOTE 8 - EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) salary reduction plan which covers
substantially all eligible employees. Under the Plan, the Company
may match its employees' contributions on a discretionary basis.
For the years ended December 31, 2001 and 2002, the Company made
no matching contributions.
NOTE 9 - SUBSEQUENT EVENT
In August 2003, the Company became a wholly owned subsidiary of
Crdentia Corp. (Crdentia). Under the terms of the merger agreement,
the Company's stockholders are to receive shares of Crdentia common
stock equal to six times the sum of the Company's earnings before
interest, taxes, depreciation and amortization for the six
consecutive quarters commencing with the fiscal quarter ending
September 30, 2003. An advance payment of 480,000 shares of
Crdentia common stock was made to the Company's former shareholders
upon completion of the merger.
F-11
EXHIBIT 99.2
CRDENTIA CORP.
Unaudited Pro Forma Combined Condensed Statements of Operations
The following unaudited pro forma combined condensed statements of operations
have been prepared to give effect to the merger of Crdentia Corp., Baker
Anderson Christie, Inc., and New Age Staffing, Inc., ("The Acquired Companies")
using the purchase method of accounting and the assumptions and adjustments
described in the accompanying notes to the unaudited pro forma combined
condensed statements of operations. Management has previously reported the pro
forma combined condensed statements of operations of New Age Staffing, Inc., but
has elected to present them in conjunction with those of Baker Anderson
Christie, Inc. for greater clarity to the reader. These pro forma statements
were prepared as if the transaction had been completed as of January 1, 2002.
The unaudited pro forma combined condensed statements of operations are
presented for illustrative purposes only and are not necessarily indicative of
the results of operations that would have actually been reported had the
transaction occurred on January 1, 2002, nor are they necessarily indicative of
the future results of operations. The pro forma combined condensed statements of
operations include adjustments, which are based upon preliminary estimates, to
reflect the allocation of purchase price to the acquired assets and assumed
liabilities of the Acquired Companies. The preliminary purchase price allocation
is subject to revision as more detailed analysis is completed and additional
information on the fair values of these assets and liabilities becomes
available. Any change in the fair value of the net assets of the Acquired
Companies will change the amount of the purchase price allocable to
goodwill. Final purchase accounting adjustments may differ materially from
the pro forma adjustments presented herein.
These unaudited pro forma combined condensed statements of operations are based
upon the respective historical consolidated statements of operations of Crdentia
Corp. and the Acquired Companies and should be read in conjunction with the
historical consolidated financial statements of these companies and related
notes. Also refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the reports and other
information Crdentia Corp. has on file with the SEC.
The pro forma adjustments described in the accompanying notes are preliminary
and are based on management's assumptions. Management has engaged an
independent third party professional appraisal firm to perform the required
valuation of the fair value of the net assets acquired and of the Company's
restricted common stock issued to the former shareholders of the Acquired
Companies. Based upon the preliminary findings of this independent appraiser,
for pro forma purposes, management has assumed the value of the Company's
common stock to be $0.36 per share. There can be no assurance that the actual
fair value of the Company's common stock will equal $0.36 per share.
Management intends to file an amended 8-K if the valuation results in material
differences from assumed value.
CRDENTIA CORP.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
Historical Pro Forma
--------------------------------------- ---------------------------------
Crdentia(1) BAC New Age Adjustments Combined
----------- ------------ ------------ ------------- ----------------
Revenue $ - $ 2,429,208 $ 5,663,672 $ - $ 8,092,880
Cost of revenue - 1,911,078 4,126,495 - 6,037,572
----------- ------------ ------------ ------------- ----------------
Gross profit - 518,131 1,537,177 - 2,055,308
Selling, general & administrative expenses 433,771 408,082 1,059,119 - 1,900,972
----------- ------------ ------------ ------------- ----------------
(Loss)/income from operations (433,771) 110,049 478,058 - 154,336
Amortization of intangibles - - - 93,000 (a) 93,000
Interest expense - 1,766 80,229 - 81,995
----------- ------------ ------------ ------------- ----------------
(Loss)/income before income taxes (433,771) 108,283 397,829 (93,000) (20,659)
Provision for income taxes - 800 113,000 (113,000)(b) 800
----------- ------------ ------------ ------------- ----------------
Net (loss)/income $ (433,771) $ 107,483 $ 284,829 $ 20,000 $ (21,459)
=========== ============ ============ ============= ================
Basic loss per share $ (0.05) $ (0.00)
=========== ================
Fully diluted loss per share $ (0.05) $ (0.00)
=========== ================
Weighted average number of shares
outstanding (basic) 8,562,822 15,886,920
=========== ================
Weighted average number of shares
outstanding (fully diluted) 8,562,822 17,723,030
=========== ================
(1) On October 22, 2002, Crdentia's board of directors voted to change
the Company's fiscal year end from August 31st to December 31st. As
such, Crdentia's results of operations for the twelve months ended
December 31, 2002 were calculated by adding the results of operations
for the four months ended December 31, 2002 and deducting the results
of operations for the four months ended December 31, 2001 from the
results of operations for the twelve months ended August 31, 2002.
The accompanying notes are an integral part of these unaudited pro forma
combined condensed financial statements.
F-2
CRDENTIA CORP.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
Historical Pro Forma
---------------------------------------- ---------------------------------
Crdentia BAC New Age Adjustments Combined
------------ ------------ ------------ ------------- ----------------
Revenue $ - $ 1,004,119 $ 4,743,392 $ - $ 5,747,511
Cost of revenue - 751,754 3,515,255 - 4,267,009
------------ ------------ ------------ ------------- ----------------
Gross profit - 252,365 1,228,137 - 1,480,502
Selling, general & administrative expenses 560,043 240,775 692,344 - 1,493,162
------------ ------------ ------------ ------------- ----------------
(Loss)/income from operations (560,043) 11,590 535,793 - (12,660)
Amortization of intangibles - - - 46,500 (a) 46,500
Interest expense 4,858 537 58,871 - 64,266
------------ ------------ ------------ ------------- ----------------
(Loss)/income before income taxes (564,901) 11,053 476,922 (46,500) (123,426)
Provision for income taxes - 663 190,388 (190,388)(b) 663
------------ ------------ ------------ ------------- ----------------
Net (loss)/income $ (564,901) $ 10,390 $ 286,534 $ 143,888 $ (124,089)
============ ============ ============ ============= ================
Basic loss per share $ (0.06) $ (0.01)
============ ================
Fully diluted loss per share $ (0.06) $ (0.01)
============ ================
Weighted average number of shares
outstanding (basic) 10,036,728 18,362,781
============ ================
Weighted average number of shares
outstanding (fully diluted) 10,036,728 20,203,935
============ ================
The accompanying notes are an integral part of these unaudited pro forma
combined condensed financial statements.
F-3
CRDENTIA CORP.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
June 30, 2003
Historical Pro Forma
------------------------------------- ---------------------------
Crdentia BAC New Age Adjustments Combined
----------- ----------- ----------- ------------- ------------
ASSETS
Current assets
Cash $ 6,215 $ 127,424 $ 60,567 $ 194,206
Accounts receivable, net - 119,498 844,501 963,999
Unbilled revenue - - 254,674 254,674
Prepaid expenses 46,974 - 195,388 242,362
Other receivables 1,750 - - 1,750
----------- ----------- ----------- ------------ ------------
Total current assets 54,939 246,922 1,355,130 - 1,656,991
----------- ----------- ----------- ------------ ------------
Long term assets
Fixed assets, net 5,285 4,878 28,346 38,509
Prepaid rent 4,560 - - 4,560
Website development, net 2,332 - - 2,332
Security deposits 9,119 - 28,581 37,700
Goodwill - - - $ 3,780,171(c) 3,780,171
Other intangible assets, net - - - 465,000(c) 465,000
----------- ----------- ------------- -------------- ------------
21,296 4,878 56,927 4,245,171 4,328,272
----------- ----------- ------------- -------------- ------------
TOTAL ASSETS $ 76,235 $ 251,800 $1,412,057 $ 4,245,171 $ 5,985,263
=========== =========== ============= ============== ============
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities $ 220,220 $ 113,318 414,450 $ 747,988
Current portion of notes payable 180,000 - - 1,290,000(c) 1,470,000
Advances payable to factor - - 585,650 585,650
Deferred revenue - 13,644 - 13,644
----------- ----------- ------------- -------------- ------------
Total current liabilities 400,220 126,962 1,000,100 1,290,000 2,817,282
Long term portion of notes payable - - - 360,000(c) 360,000
----------- ----------- ------------- -------------- ------------
400,220 126,962 1,000,100 1,650,000 3,177,282
----------- ----------- ------------- -------------- ------------
Stockholders' Equity
736 (c)
Common stock 1,100 6,000 50,090 (56,090)(c) 1,836
Additional paid in capital, net of costs
incurred in obtaining financing 902,165 - - 2,650,525 (c) 3,552,690
(Accumulated deficit)/retained earnings (1,227,250) 118,838 361,867 (746,545)
----------- ----------- ------------- -------------- -------------
(323,985) 124,838 411,957 2,595,171 2,807,981
----------- ----------- ------------- -------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 76,235 $ 251,800 $1,412,057 $ 4,245,171 5,985,263
=========== =========== ============= ============== =============
The accompanying notes are an integral part of these unaudited pro
forma combined condensed financial statements.
F-4
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. Basis of Pro Forma Presentation
On August 7, 2003, the Company acquired Baker Anderson Christie, Inc.
("BAC") in exchange for a minimum of 480,000 shares of its common stock
at an appraised value of $0.36 per share. The Company will account for
the merger under the purchase method of accounting.
On September 22, 2003, the Company acquired New Age Staffing, Inc.
("New Age") for a purchase price of $2,050,000 in cash and notes
payable to the former shareholders of New Age. Additionally, these
former shareholders were issued 6,884,614 shares of the Company's
common stock at an appraised value of $0.36 per share. The Company
will account for the merger under the purchase method of accounting.
The unaudited pro forma condensed combined balance sheet at June 30,
2003 is presented to give effect to the merger of Crdentia and the
Acquired companies as if these transactions had been consummated on
January 1, 2002. The unaudited pro forma combined condensed statement
of operations of Crdentia and the Acquired Companies for the year ended
December 31, 2002 is presented as if these transactions had been
consummated on January 1, 2002. The unaudited pro forma combined
statement of operations for the twelve months ended December 31,
2002 combines the results of operations of Crdentia for the twelve
months ended December 31, 2002 and the Acquired Companies' results
of operations for the fiscal year ended December 31, 2002. Crdentia's
results of operations for the twelve months ended December 31, 2002
were calculated by adding the results of operations for the four
months ended December 31, 2002, and deducting the results of
operations or the four months ended December 31, 2001, to the
results of operations for the twelve months ended August 31, 2002.
Under the purchase method of accounting, the total estimated purchase
price is allocated to the Acquired Companies' net tangible and
intangible assets based upon their estimated fair value as of the date
of completion of the merger. Based upon the estimated purchase price
and the preliminary valuation, the preliminary purchase price
allocation, which is subject to change based upon Crdentia's final
analysis, is as follows:
BAC New Age
Cash acquired $ 127,424 $ 60,567
Tangible assets acquired 124,376 1,351,490
Customer related intangible assets 5,000 460,000
Goodwill 161,800 3,618,371
--------- ----------
Total assets acquired 418,600 5,490,428
Liabilities assumed 126,962 1,000,100
--------- ----------
Net assets acquired $ 291,638 $4,490,328
========= ==========
A preliminary estimate of $465,000 has been allocated to amortizable
intangible assets consisting of customer relationships with useful lives
of five years.
A preliminary estimate of $3.7 million has been allocated to goodwill.
Goodwill represents the excess of the purchase price over the fair value
of the net tangible and intangible assets acquired. In accordance with
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets", goodwill will not be amortized and will be tested for
impairment at least annually. The preliminary purchase price allocation
for the acquired companies is subject to revision as more detailed
analysis is completed and additional information on the fair values of
the acquired companies' assets and liabilities becomes available. Any
change in the fair value of the net assets of the acquired companies
will change the amount of the purchase price allocable to goodwill.
Final purchase accounting adjustments may therefore differ materially
from the pro forma adjustments presented here.
F-5
2. Pro Forma Adjustments
The accompanying unaudited pro forma combined condensed financial
statements have been prepared as if the merger was completed on June 30,
2003 for balance sheet purposes and as of January 1, 2002 for statements
of operations purposes and reflects the following pro forma adjustments:
(a) Amortization of intangible assets acquired for the year ended
December 31, 2002 and the six months ended June 30, 2003. The useful
lives of these assets have been assumed to be five years.
(b) Crdentia has net operating loss carryforwards for federal income
tax purposes in excess of the taxable income of New Age and BAC. As
such, there is no income tax expense recognized in these pro forma
financial statements. Prior to the merger, BAC had been organized as
Subchapter S corporation under the Internal Revenue Code and,
accordingly, passed its operating results through to its shareholders
for taxation on their personal income tax returns.
(c) To reflect assets acquired and liabilities assumed in the merger.
As more fully discussed in Item 2, paragraph (a) of our report filed on
Form 8-K on Ocober 26, 2003, the Company is obligated to make periodic
payments to the former shareholders of New Age, $1,290,000 of which are
payable within the next year and $360,000 are payable in the following
year.
3. Pro Forma Combined Net Income (Loss) Per Share
Shares used to calculate unaudited pro forma combined net loss per share
were computed using Crdentia's weighted average shares outstanding during
the respective periods. Additionally, the issuance of 480,000 shares to
the sellers of BAC and 6,884,614 shares to the sellers of New Age were
assumed to have occurred on January 1, 2002.
Pursuant to the Common Stock Purchase Agreement dated May 15, 2002 between
the Company and James D. Durham, the Company's chairman and CEO, Mr. Durham
has the right to acquire 25% of the number of shares of the Company's Common
Stock issued to the sellers of New Age. Accordingly, Mr. Durham may purchase
1,721,154 shares at a purchase price of $.0001 per share. As of the date of
this report, Mr. Durham has not exercised his right under this Agreement.
Accordingly, these shares have been included only in the computation of the
fully diluted pro forma loss per share in these pro forma financial
statements.
In connection with Registrant's acquisition program and on-going financing
efforts, management, in conjunction with several of the Company's largest
shareholders, have determined that it would be in the best interest of the
Company to reduce the number of shares of Common Stock that are issued and
outstanding. In discussions with management these shareholders agreed on
August 6, 2003 to return an aggregate of 3,048,000 shares to the Company
for no consideration. These 3,048,000 shares have been canceled by the
Company and returned to Treasury. As this event occurred subsequent to
the reporting period in this Form 8-K/A, the effect of this transaction
has been excluded from the computation of both basic and fully diluted
pro forma loss per share in these pro forma financial statements.
F-6