2323 PMA Becomes Clinicorp
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Dynamic Chiropractic – February 28, 1992, Vol. 10, Issue 05

PMA Becomes Clinicorp

By Editorial Staff
A recent stock offering for a new corporation named "Clinicorp" has been completed. One million shares of common stock have been offered providing an estimated net proceeds of $5,400,000. The reason for the formation is clear from the prospectus:
"Clinicorp, Inc.( the "Company") was recently organized to own or manage chiropractic clinics and to act as a consulting firm offering comprehensive management services and financing alternatives to doctors of chiropractic. The Company, which has not yet commenced active operations, has entered into an agreement to acquire immediately following the Offering selected assets and the business organization of Practice Management Associates, Inc. ("PMA"), a chiropractic management consulting firm which the Company believes is the largest of its kind in the United States.

"The Company's operating strategy will be to utilize and build upon PMA's existing business and technology by: (i) establishing chiropractic clinics to be owned or managed by the Company, the first of which is anticipated to be open by June 1992; and (ii) introducing a program which combines the consulting services previously offered by PMA with financing to provide a comprehensive program for chiropractors entering practice."

The prospectus also lists certain risk factors:

1. New Business Development 2. PMA's Decline in Business and Financial Condition 3. Possible Impact of Pending Litigation 4. Establishment of Clinics 5. Defaults on Loans and Other Lending Risks 6. Adverse Competitive Conditions 7. Government Regulation 8. Malpractice Insurance 9. Dependence on Key Personnel 10. Control by Present Stockholders 11. Dilution 12. Limitation of Liability of Officers and Directors 13. Experience of Underwriter 14. Lack of Prior Public Market and Potential Volatility of Stock Price

Exactly what the money will be used for is also stated in the prospectus:

"The net proceeds to the Company from the Offering are estimated to be approximately $5,400,000 after deducting the underwriting discounts and estimated Offering expenses. These proceeds will be used (i) to purchase the assets and businesses of PMA (approximately $2,800,000); (ii) to fund the short-term working-capital needs for continued operation of the PMA business (approximately $1,000,000); (iii) for the establishment of clinics owned or managed by the Company (approximately $950,000); and (iv) for the Company's planned Mentor Program (approximately $650,000). Proceeds not used immediately for the above purposes will be invested in short-term, investment-grade, interest-bearing securities."
There has been some concern about the future of the "Practice Starter Program." This is the program that most of the (several hundred) chiropractors that are currently in litigation with PMA were involved in. The prospectus also makes the future of this program clear:
"PMA's Practice Starter Program will continue to be a major element in the Company's continuing operations and will be offered alone or as part of the Mentor Program. In consideration for the services to be provided under the Practice Starter Program, the chiropractor is required to pay the Company a nominal processing fee upon execution of the agreement, a weekly fee for eight weeks and, commencing with the ninth week after the opening of the practice, either a percentage of cash collections or an agreed-upon fixed fee payable weekly for a period of 24 months."
In addition, Clinicorp will be offering PMA clients an additional service entitled the "Mentor Program":
"Under the Mentor Program, the Company will make available to the chiropractor (a) an equipment lease from a third-party lessor covering all major equipment required to commence a practice; (b) a Practice Starter agreement and the services and information made available under that agreement (see "Business Practice-Starter"); (c) access to an accounts receivable funding agreement from a third-party financier enabling the chiropractor to convert his accounts receivable into working capital; and (d) a working capital loan of such additional funds as are needed to open the chiropractor's practice (including an allowance of pre-opening and post-opening living expenses) up to a maximum of $20,000.

"The chiropractor will pay a cash deposit to the Company upon execution of the Mentor Program agreement and approval by all third-party suppliers of credit. The Company will also receive the fees charged in connection with the Practice Starter Program. But such fees will be payable out of excess cash flow and may be paid over a three year period. In addition, the Company may realize fees or commissions from the financing arrangements and product sales.

"Under the Mentor Program, the chiropractor's collections will be managed by the Company and disbursed as follows: (i) chiropractor's allowance for personal living expenses; (ii) expenses of the practice; (iii) payment of sums due under the working capital loan and equipment lease; (iv) establishment of a reserve account; and (v) the balance, if any, to the Company to be applied against fees due in relation to the Practice Starter Program. The order of disbursement may vary as a result of requirements from third parties."

"Upon completion of the Practice Starter program (26 months), the chiropractor will be required to complete an additional program designed to assist the chiropractor during a period of transition from dependency on the Company to operating on an independent basis. This program will be in effect for a period of 18 months, during which time the chiropractor will pay the Company a monthly fee."

Peter Fernandez, D.C., will continue as president, chief operating officer, and director of clinicorp. Xavier Fernandez, his brother, will also be one of the directors.

While there is still some concern whether current PMA clients will want to be converted to Clinicorp clients (or if they indeed have to), the stock offering has added the needed funds to bolster the ailing PMA, while allowing Dr. Fernandez to retain control.

Editor's note: Due to publication deadlines, an interview with Dr. Fernandez was not able to be included. We will ask for Dr. Fernandez's comments in a upcoming issue.


Dynamic Chiropractic editorial staff members research, investigate and write articles for the publication on an ongoing basis. To contact the Editorial Department or submit an article of your own for consideration, email .


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