SEC Filing | AMN Healthcare Services Inc.

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AMN Healthcare Services, Inc.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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) April 23, 2002

Commission File No.: 001-16753

AMN HEALTHCARE SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)	06-1500476 (I.R.S. Employer Identification No.)

12235 El Camino Real, Suite 200 San Diego, California (Address of principal executive offices)	92130 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (858) 792-0711

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

On April 23, 2002, AMN Healthcare, Inc., our wholly-owned subsidiary (“AMN”), completed the acquisition of all of the outstanding stock of Healthcare Resource Management Corporation (“HRMC”) for $9.3 million in cash. The definitive purchase agreement, dated April 17, 2002, by and among AMN and HRMC’s former stockholders (the “Purchase Agreement”) is attached as Exhibit 10.1 hereto. The purchase of HRMC further strengthened our multi-brand recruitment strategy and increased our presence in the Eastern and Southern regions of the United States. The assets of HRMC consisted primarily of accounts receivable and goodwill. AMN funded the acquisition from cash generated from our initial public offering in November 2001.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

(a)		Financial Statements of Businesses Acquired: The consolidated balance sheets of Healthcare Resource Management Corporation (HRMC) as of December 31, 2000 and 2001 and March 31, 2002 (unaudited), consolidated statements of income for each of the years in the two-year period ended December 31, 2001 and for the three months ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited), consolidated statements of stockholders’ equity for each of the years in the two-year period ended December 31, 2001 and for the three months ended March 31, 2002, consolidated statements of cash flows for each of the years in the two-year period ended December 31, 2001 and for the three months ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited), and the notes related thereto, and the Report of Independent Auditors thereon, are attached hereto as Exhibit 99.1.

(b)		Pro Forma Financial Information: The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2001 gives effect to each of the acquisition of O’Grady-Peyton International (USA), Inc. (O’Grady-Peyton), which we acquired on May 1, 2001, the acquisition of HRMC, our initial public offering in November 2001 and the proposed and recently announced underwritten secondary offering by certain selling stockholders, as if these events had occurred on January 1, 2001. The unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 2002 gives effect to the acquisition of HRMC, our initial public offering in November 2001 and the proposed common stock offering by certain selling stockholders, as if these events had occurred on January 1, 2001. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2002 gives effect to the acquisition of HRMC and the proposed common stock offering by certain selling stockholders as of such date. These unaudited pro forma statements and the notes related thereto are attached hereto as Exhibit 99.2 hereto.

(c)		Exhibits


Exhibit		Description

10.1		Stock Purchase Agreement, dated as of April 17, 2002, by and among AMN Healthcare, Inc., Sandra Gilbert, Robert Gilbert, Jr., Suzette Marek, Robert Gilbert III and Benjamin Gilbert.**

23.1		Consent of KPMG LLP with respect to Healthcare Resource Management Corporation.*

99.1		The consolidated balance sheets of Healthcare Resource Management Corporation (HRMC) as of December 31, 2000 and 2001 and March 31, 2002 (unaudited), consolidated statements of income for each of the years in the two-year period ended December 31, 2001 and for the three months ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited), consolidated statements of stockholders’ equity for each of the years in the two-year period ended December 31, 2001 and for the three months ended March 31, 2002, consolidated statements of cash flows for each of the years in the two-year period ended December 31, 2001 and for the three months ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited), and the notes related thereto, and the Report of Independent Auditors thereon.*

99.2		The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2001 and for the three months ended March 31, 2002 and the unaudited pro forma condensed consolidated balance sheet as of March 31, 2002.*



*	Filed herewith.


**	Incorporated by reference to Exhibit 10.46 filed with the Registrant’s Registration Statement on Form S-1 (File No. 333-86952).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Dated: May 2, 2002	AMN HEALTHCARE SERVICES, INC

	/s/ DONALD MYLL
	Name:	Donald Myll
	Title:	Chief Accounting Officer and Chief Financial Officer

EXHIBIT INDEX


Exhibit
Number		Description

	10.1	Stock Purchase Agreement, dated as of April 17, 2002, by and among AMN Healthcare, Inc., Sandra Gilbert, Robert Gilbert, Jr., Suzette Marek, Robert Gilbert III and Benjamin Gilbert.**

	23.1	Consent of KPMG LLP with respect to Healthcare Resource Management Corporation.*

	99.1	The consolidated balance sheets of Healthcare Resource Management Corporation (HRMC) as of December 31, 2000 and 2001 and March 31, 2002 (unaudited), consolidated statements of income for each of the two years in the period ended December 31, 2001 and for the three months ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited), consolidated statements of stockholders’ equity for each of the two years in the period ended December 31, 2001 and for the three months ended March 31, 2002, consolidated statements of cash flows for each of the two years in the period ended December 31, 2001 and for the three months ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited), and the notes related thereto, and the Report of Independent Auditors thereon.*

	99.2	The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2001 and for the three months ended March 31, 2002 and the unaudited pro forma condensed consolidated balance sheet as of March 31, 2002.*



*	Filed herewith.


**	Incorporated by reference to Exhibit 10.46 filed with the Registrant’s Registration Statement on Form S-1 (File No. 333-86952).

EXHIBIT 23.1 Independent Auditors' Consent The Board of Directors Healthcare Resource Management Corporation: We consent to the use of our report dated April 5, 2002, except as to Note 7, which is as of April 23, 2002, included herein. /s/ KPMG LLP Charlotte, North Carolina May 1, 2002

EXHIBIT 99.1 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Healthcare Resource Management Corporation: We have audited the accompanying balance sheets of Healthcare Resource Management Corporation, (the Company), as of December 31, 2000 and 2001, and the related statements of income, stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2001. 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 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. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Healthcare Resource Management Corporation as of December 31, 2000 and 2001, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Charlotte, North Carolina April 5, 2002, except as to Note 7, which is as of April 23, 2002 1

HEALTHCARE RESOURCE MANAGEMENT CORPORATION BALANCE SHEETS

See accompanying notes to financial statements. 2

HEALTHCARE RESOURCE MANAGEMENT CORPORATION STATEMENTS OF INCOME

See accompanying notes to financial statements. 3

HEALTHCARE RESOURCE MANAGEMENT CORPORATION STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2000 AND 2001 AND THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)

See accompanying notes to financial statements 4

HEALTHCARE RESOURCE MANAGEMENT CORPORATION STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000 AND 2001 AND THE THREE MONTHS ENDED MARCH 31, 2001 (UNAUDITED) AND MARCH 31, 2002 (UNAUDITED)

See accompanying notes to financial statements. 5

HEALTHCARE RESOURCE MANAGEMENT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 2001 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) General Healthcare Resource Management Corporation (the Company) recruits nurses and places them on temporary assignments at hospitals and other healthcare facilities throughout the United States. The accompanying consolidated interim financial statements (including notes to financial statements) of the Company as of March 31, 2002 and for the three months ended March 31, 2001 and 2002, are unaudited. In the opinion of management, the accompanying unaudited consolidated interim financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company at March 31, 2002, and the results of its operations and its cash flows for the three months ended March 31, 2001 and 2002. (b) Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2000 and 2001, and March 31, 2002, the Company had money market accounts of $100,350, $279,463 and $210,951 (unaudited), respectively, included in cash and cash equivalents. (c) Fixed Assets Furniture and fixtures, equipment, and automobiles are stated at cost. Additions and improvements are capitalized, and maintenance and repairs are expensed when incurred. Depreciation on furniture and fixtures, equipment, and automobiles is calculated using the straight-line method based on the estimated useful lives of the related assets as follows: furniture and fixtures (7 years); equipment (3 to 7 years); and automobiles (5 years). (d) Concentration of Credit Risk The majority of the Company's business activity is with hospitals located throughout the United States. Credit is extended based on the evaluation of each entity's financial condition and credit worthiness. (e) Revenue Recognition Revenue is recognized in the period in which services are provided. (f) Advertising Expenses Advertising costs of $364,211 and $420,500 for the years ended December 31, 2000 and 2001, respectively, and $109,406 (unaudited) and $141,934 (unaudited) for the three months ended March 31, 2001 and 2002, respectively, are expensed as incurred and are included in selling, general, and administrative expenses in the accompanying financial statements. (g) Impairment of Long-Lived Assets Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows, undiscounted and without interest, expected to be generated by the asset. If 6

HEALTHCARE RESOURCE MANAGEMENT CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (h) Income Taxes The Company has elected to file its federal income tax returns under the S Corporation provisions of the Internal Revenue Code and was granted S Corporation status for North Carolina state tax purposes. In accordance with the federal provisions, corporate earnings flow through and are taxed solely at the shareholder level. Under the provisions of the franchise tax laws in certain states the Company conducts business, S Corporation earnings are assessed a surtax at the corporate level and flow through to the shareholders to be taxed at the individual level. Accordingly, income tax expense for the years ended December 31, 2000 and 2001 aggregated $1,740 and $7,056, respectively. (i) Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, receivables from officers, other receivables, accounts payable, accrued expenses, secured borrowing and note payable approximates their respective fair values due to the short-term nature and liquidity of these financial instruments. (j) Derivative Instruments The Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133) on January 1, 2001. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. The Company does not have any derivative instruments to be accounted for under SFAS 133. (k) New Accounting Pronouncements In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires the use of the purchase method for all business combinations initiated after June 30, 2001 and provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Under SFAS No. 142, goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. The Company adopted the provisions of SFAS No. 142 as of January 1, 2002. The adoption of SFAS No. 142 did not have a material impact on the Company's financial statements. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. SFAS No. 144 requires companies to separately report discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 will not have a material impact on the Company's financial statements. 7

HEALTHCARE RESOURCE MANAGEMENT CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (l) Sale of Accounts Receivable On January 5, 1999, the Company entered into an agreement to sell, on an ongoing basis with full recourse, its trade accounts receivable. The Company is responsible for repurchasing any receivables at fair value which have not been collected 60 days from the date of the invoice. The buyer is responsible for servicing the receivables. The agreement may be terminated by either party with 90 days notice prior to the end of the term of the agreement or terminated at any other time upon mutual agreement of the parties. Upon termination, the Company is required to repurchase all outstanding receivables and pay certain termination fees. During 2000, the receivables were purchased by the buyer net of a 1.45% non-refundable administrative fee. This fee was decreased to 1.25% in 2001 until October 12, 2001 when the fee was further reduced to .9%. Additionally, the Company is required to pay the purchaser certain finance charge fees based upon the age of outstanding receivables. The Company has accounted for the cash proceeds received from the transfer as a secured borrowing in accordance with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". The secured borrowing is $936,870, $1,176,937, and $1,113,837 (unaudited) at December 31, 2000 and 2001, and March 31, 2002, respectively. The Company incurred fees on these secured borrowings of $203,608 and $265,984 for the years ended December 31, 2000 and 2001, respectively, and $63,981 (unaudited) and $60,163 (unaudited) for the three months ended March 31, 2001 and 2002, respectively, which are included in interest expense in the accompanying financial statements. (m) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (n) Reclassifications Certain amounts in the prior periods financial statements have been reclassified to conform to the current period presentation. (2) FIXED ASSETS, NET Fixed assets, net is comprised of the following at December 31, 2000 and 2001:

(3) NOTE PAYABLE Note payable consists of a five year note on an automobile purchase with monthly payments of $728 through 2004. This note payable is collateralized by an automobile and has a 8.25% interest rate. 8

HEALTHCARE RESOURCE MANAGEMENT CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (4) RELATED PARTY TRANSACTIONS At December 31, 2001 and March 31, 2002, the Company had $6,047 and $203 (unaudited), respectively, due from officers. There were no receivables due from officers at December 31, 2000. For the years ended December 31, 2000 and 2001, and the three months ended March 31, 2001 and 2002, the Company's shareholders received dividend distributions of $457,902, $943,460, $141,680 (unaudited) and $83,720 (unaudited), respectively, principally related to the payments of the shareholders' personal taxes on the Company's earnings. Additionally, the Company paid its directors, who are also shareholders, director fees of $12,000, $15,000, $15,000 (unaudited) and $0 (unaudited) for the years ended December 31, 2000 and 2001, and the three months ended March 31, 2001 and 2002 respectively. (5) LEASES The Company leases certain office facilities and equipment under various operating leases that expire over the next three years. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2001 are as follows:

Years ending December 31: 2002...................................................... $144,848 2003...................................................... 148,837 2004...................................................... 77,669 -------- Total minimum lease payments...................... $371,354 ========

Rent expense was $106,546 and $127,194 for the years ended December 31, 2000 and 2001, respectively. Additionally, the Company leases apartments for nurses on temporary assignments under short-term lease agreements. These lease commitments are not included in the above future minimum lease payments due to their short noncancellable term. The Company is required to pay an up-front deposit on these apartments, which is classified as refundable deposits in the accompanying financial statements. (6) EMPLOYEE BENEFIT PLANS The Company sponsors a 401(k) defined contribution plan for its full-time employees. The Company, at its discretion, matches 25% of the first 6% contributed by each employee. The Company contributed $24,369 and $32,669 to the 401(k) plan for the years ended December 31, 2000 and 2001, respectively. (7) SUBSEQUENT EVENT On April 23, 2002, the Company was acquired by AMN Healthcare, Inc. 9

EXHIBIT 99.2 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS We acquired O'Grady-Peyton International (USA), Inc., and Healthcare Resource Management Corporation (HRMC) on May 1, 2001 and April 23, 2002, respectively. O'Grady-Peyton's results of operations for the eight months ended December 31, 2001 are included in our condensed consolidated statement of operations for the year ended December 31, 2001. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2001 give effect to each of the acquisitions of O'Grady-Peyton and HRMC, our initial public offering in November 2001 and the proposed and recently announced underwritten secondary offering by certain selling stockholders, as if these events had occurred on January 1, 2001. The unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 2002 gives effect to the acquisition of HRMC and the proposed common stock offering by certain selling stockholders, as well as our initial public offering in November 2001, as if these events had occurred on January 1, 2001. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2002 gives effect to the acquisition of HRMC and the proposed common stock offering by certain selling stockholders as of such date. This pro forma financial information does not purport to represent what our actual results of operations or financial position would have been had the acquisitions or the other transactions occurred on the dates indicated or for any future period or date. The pro forma adjustments give effect to available information and assumptions that we believe are reasonable. You should read our pro forma condensed consolidated financial information in conjunction with our financial statements and the related notes, as well as "Selected Consolidated Financial and Operating Data," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing in our Annual Report on Form 10-K for the year ended December 31, 2001, and our consolidated unaudited financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002. 1

AMN HEALTHCARE SERVICES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations. 2

AMN HEALTHCARE SERVICES, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (1) The historical results of operations of AMN includes the results of O'Grady-Peyton commencing May 1, 2001, its date of acquisition by AMN. The historical results of operations of O'Grady-Peyton reflect its results from January 1, 2001 through April 30, 2001. The historical results of operations of HRMC reflect its results for the year ended December 31, 2001. (2) The pro forma amortization expense gives effect to additional goodwill amortization of $278,000 and $293,000 in connection with the O'Grady-Peyton and HRMC acquisitions, respectively. It also gives effect to additional non-compete amortization of $17,000 and $50,000 for O'Grady-Peyton and HRMC, respectively. (3) The pro forma interest expense, net gives effect to the reduction of interest expense in the amount of $13,864,000 related to the repayment of all of the outstanding debt with the proceeds from our initial public offering. (4) The pro forma income tax expense gives effect to the additional tax expense, calculated at our effective tax rate of approximately 58%, related to the pro forma adjustments described above and pre-tax income of O'Grady-Peyton and HRMC. (5) Pro forma basic weighted average shares gives effect to the shares issued in our initial public offering, the shares issued upon exercise of warrants at the time of our initial public offering, and shares issued upon the exercise of outstanding options by certain selling stockholders in conjunction with the proposed common stock offering. (6) Pro forma diluted weighted average shares gives effect to the stock options outstanding under the 1999 and 2001 stock option plans and options exercised by certain selling stockholders in conjunction with the proposed common stock offering. 3

AMN HEALTHCARE SERVICES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations. 4

AMN HEALTHCARE SERVICES, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 (1) The historical results of operations of HRMC reflect its results for the three months ended March 31, 2002. (2) The pro forma amortization expense gives effect to additional non-compete amortization of $13,000 in connection with the HRMC acquisition. (3) The pro forma interest expense, net gives effect to the reduction of interest expense in the amount of $60,000 related to the repayment of all of the outstanding debt of HRMC at the time of its acquisition by AMN as required pursuant to the purchase agreement. (4) The pro forma income tax expense gives effect to the additional tax expense, calculated at AMN's effective tax rate of approximately 40%, related to the pro forma adjustments described above and pre-tax income of HRMC. (5) Pro forma basic weighted average shares gives effect to the shares issued in our initial public offering, the shares issued upon exercise of warrants at the time of our initial public offering, and shares issued upon the exercise of outstanding options by certain selling stockholders in conjunction with the proposed common stock offering. (6) Pro forma diluted weighted average shares gives effect to the stock options outstanding under the 1999 and 2001 stock option plans and options exercised by certain selling stockholders in conjunction with the proposed common stock offering. 5

AMN HEALTHCARE SERVICES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2002 (IN THOUSANDS)

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. 6

AMN HEALTHCARE SERVICES, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2002 (1) The pro forma adjustment gives effect to the cash used to acquire HRMC of $9,513,000, estimated expenses associated with the proposed common stock offering of $1,285,000, and proceeds from the exercise of options by certain selling stockholders in conjunction with the proposed common stock offering of $1,566,000. (2) The pro forma adjustment gives effect to goodwill recorded in connection with the acquisition of HRMC. (3) The pro forma adjustment gives effect to the recording of the non-compete agreement in connection with the HRMC acquisition in the amount of $200,000. (4) The pro forma adjustment gives effect to the repayment of all of the outstanding debt of HRMC at the time of its acquisition by AMN. (5) The pro forma adjustment gives effect to AMN's acquisition of HRMC, the capitalization of the estimated costs associated with the proposed common stock offering and the impact of options exercised in conjunction with the proposed common stock offering. 7