On August 9, 2004, through our wholly-owned subsidiary, Chronimed Acquisition Corp., a Minnesota corporation (“Merger Sub”), we entered into the Merger Agreement with Chronimed pursuant to which MIM will acquire Chronimed in a stock-for-stock transaction. On January 3, 2005 we entered into Amendment No. 1 to the Merger Agreement. Subject to the terms and conditions of the Merger Agreement, as amended, at the effective time of the Merger , Merger Sub will be merged with and into Chronimed, the separate corporate existence of Merger Sub will cease, and Chronimed will continue as a wholly-owned subsidiary of MIM. Pursuant to the Merger Agreement, as amended, we would issue 1.12 shares of our common stock in exchange for each outstanding share of common stock of Chronimed (the “Exchange Ratio”). In addition, each outstanding option to purchase Chronimed common stock will be assumed by us and the exercise price and number of shares for which each such option is (or will become) exercisable will be adjusted based on the Exchange Ratio.
We evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of long lived assets, including intangible assets, may warrant revision or that the remaining balance of an asset may not be recoverable. The measurement of possible impairment is based on the ability to recover the balance of assets from expected future operating cash flows on an undiscounted basis. Impairment losses, if any, would be determined based on the present value of the cash flows using discount rates that reflect the inherent risk of the underlying business. It is management’s belief that no such impairment existed as of December 31, 2004.
Under the provisions of SFAS No. 142 we are required to perform an annual impairment analysis for our indefinite-lived intangible (i.e., Tradename) which has a book value of $4.7 million at December 31, 2004. The analysis compares the fair value of an intangible asset to the carrying value of that asset at least annually. If the estimated fair value of an intangible asset is determined to be lower than its carrying value, an impairment charge is recorded for the difference.
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123. SFAS No. 123(R) supersedes APB 25, and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach to estimating the fair value of options in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS No. 123(R) must be adopted no later than July 1, 2005.
Total revenue for the year ended December 31, 2003 increased 2% to $588.8 million from $576.6 million for the same period in 2002. In 2003, our PBM relationship with the TennCare® program ended. In addition we ceased distributing Synagis® in the third quarter of 2003.
income tax liability. Certain of the NOLs are subject to limitation and may be utilized in a future year upon release of the limitation. If the NOLs are not utilized in the year they are available they may be utilized in a future year to the extent they have not expired.
The preparation of financial statements in conformity with U.S. generally accepted accounting procedures (“GAAP”) requires management to make certain estimates and assumptions. These estimates and assumptions 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.
The Merger is intended to constitute a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended. The consummation of the Merger is subject to the approval and adoption of the Merger and Merger Agreement by the shareholders of Chronimed, the approval by our stockholders of the issuance of shares of common stock of MIM to be issued in the Merger and other customary closing conditions.
The following unaudited consolidated pro forma financial information for the years ended December 31, 2004 and 2003 has been prepared assuming Fair Pharmacy was acquired as of the beginning of each period, utilizing the purchase method of accounting, with certain pro forma adjustments for amortization of intangibles, interest expense, and income taxes. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the actual results had the acquisition occurred at the beginning of each period. This pro forma financial information is not intended to be a projection of future operating results.
Under the Plans, the Company’s Board of Directors may grant performance units to key employees. The Company’s Board of Directors establishes the terms and conditions of the performance units including the performance goals, the performance period and the value for each performance unit. If the performance goals are satisfied, the Company shall pay the key employee an amount in cash equal to the value of each performance unit at the time of payment. In no event shall a key employee receive an amount in excess of $1,000,000 in respect of performance units for any given year. There were no performance units granted, for any period presented, thus there were no amounts paid nor owed to employees related to performance units. As of December 31, 2004, there were no performance units outstanding.
Plan Sponsors (A), (C) and (D) are in the PBM Services segment