<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended March 31, 2000.
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition
period__________________to_________________________.
COMMISSION FILE NUMBER: 0-21209
AHT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3893841
(State or other jurisdiction or (IRS Employer
incorporation or organization) Identification No.)
555 WHITE PLAINS ROAD
TARRYTOWN, NEW YORK 10591
(Address of principal executive offices, including zip code)
(914) 524-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes | X | No | |
As of May 3, 2000, there were 11,130,449 shares outstanding of the registrant's
Common Stock, $.01 par value.
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<PAGE> 2
AHT CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
- ---------------------------------------------------------------------------------------------
<S> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets -
March 31, 2000 (unaudited) and December 31, 1999.................................1
Consolidated Statement of Operations-
Three months ended March 31, 2000 and 1999 (unaudited)...........................2
Consolidated Statements of Cash Flows-
Three months ended March 31, 2000 and 1999 (unaudited)...........................3
Notes to Consolidated Financial Statements.......................................4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................................6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................9
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS...............................................................9
SIGNATURES................................................................................10
</TABLE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
AHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
As Of
March 31, December 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 4,356 $ 2,528
Certificates of deposit 15 150
Accounts receivable, net 275 262
Other current assets 1,817 561
-----------------------------
Total current assets 6,463 3,501
PROPERTY AND EQUIPMENT, net 1,873 2,055
GOODWILL, net 2,040 2,227
INVESTMENTS IN AFFILIATES 2,500 2,500
OTHER ASSETS 3,490 3,607
-----------------------------
Total assets $ 16,366 $ 13,890
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,031 $ 2,699
Notes payable 4,046 -
Other current liabilities 92 123
-----------------------------
Total current liabilities 6,169 2,822
DEFERRED REVENUE 553 504
-----------------------------
Total liabilities 6,722 3,326
-----------------------------
COMMITMENTS
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized; 0 shares issued
and outstanding - -
Common stock, $.01 par value; 15,000,000 shares authorized;
11,123,366 and 11,069,549 shares issued and
outstanding, respectively 111 110
Additional paid-in capital 112,181 109,970
Accumulated deficit (102,213) (99,081)
Less: Treasury stock, at cost (166,337 shares) (435) (435)
-----------------------------
Total shareholders' equity 9,644 10,564
-----------------------------
Total liabilities and shareholders' equity $ 16,366 $ 13,890
=============================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
(1)
<PAGE> 4
AHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and per share data)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------------------
March 31, March 31,
2000 1999
---- ----
<S> <C> <C>
REVENUE $ 202 $ 240
COST OF REVENUES 403 220
---------------------------------------
Gross profit (201) 20
OPERATING EXPENSES 2,400 2,512
---------------------------------------
Operating income/(loss) (2,601) (2,492)
OTHER INCOME, Net 105 275
NON-CASH INTEREST EXPENSE (641) --
---------------------------------------
Net income/(loss) before taxes (3,137) (2,217)
INCOME TAX PROVISION (5) 24
---------------------------------------
Net income/(loss) from continuing operations (3,132) (2,241)
DISCONTINUED OPERATION:
Income from discontinued operation, net - 251
---------------------------------------
Net income/(loss) $ (3,132) $ (1,990)
=======================================
PER SHARE INFORMATION
Basic net income/(loss) per share:
Income/(loss) from continuing operations ($ 0.28) ($ 0.21)
Income from discontinued operation $ 0.00 $ 0.02
---------------------------------------
Basic net income/(loss) per share ($ 0.28) ($ 0.19)
=======================================
Diluted net income/(loss) per share:
Income/(loss) from continuing operations ($ 0.28) ($ 0.21)
Income from discontinued operation $ 0.00 $ 0.02
---------------------------------------
Diluted net income/(loss) per share ($ 0.28) ($ 0.19)
=======================================
Common shares used in computing per share amounts:
Basic 11,096 10,452
Diluted 11,096 10,452
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
(2)
<PAGE> 5
AHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------
March 31, March 31,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $(3,132) $(2,241)
Adjustments to reconcile net income to net cash
used in operating activities
Non-cash interest expense (641) --
Depreciation and amortization 449 287
Changes in operating assets and liabilities
Accounts receivable (13) 81
Other current assets 179 (112)
Accounts payable, accrued expenses and other current liabilities (667) (930)
Other current liabilities 15 131
Deferred revenue 49 273
-------------------------------
Net cash (used in) provided by operating activities (2,479) (2,511)
-------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets 57 -
Investment in certificates of deposit, net 135 -
Investment in marketable securities, net - (1,760)
Purchases of property and equipment, net (20) (68)
-------------------------------
Net cash provided by (used in) investing activities 172 (1,828)
-------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of stock options 135 150
Net proceeds from notes payable 4,000 -
-------------------------------
Net cash provided by financing activities 4,135 150
-------------------------------
Net cash flows from discontinued operations - (796)
-------------------------------
Net change in cash and cash equivalents 1,828 (4,985)
CASH AND CASH EQUIVALENTS, beginning of period 2,528 9,269
-------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 4,356 $ 4,284
===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for:
Interest $ 2 $ 38
===============================
Income Taxes $ - $ 5
===============================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Warrants issued in connection with notes payable $ 1,435 $ --
===============================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
(3)
<PAGE> 6
AHT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1. Reference is made to the Notes to Consolidated Financial
Statements contained in the Company's December 31, 1999 audited
consolidated financial statements as filed with the Securities
and Exchange Commission on Form 10-K. In the opinion of
Management, the interim unaudited financial statements included
herein reflect all adjustments necessary, consisting of normal
recurring adjustments, for a fair presentation of such data on a
basis consistent with that of the audited data presented
therein. The Company believes that its historical results of
operations from period to period are not comparable and that
such results are not necessarily indicative of results for any
future periods.
2. The Company accounts for earnings per share under the provision
of SFAS No. 128, "Earnings Per Share." Basic net income per
common share ("Basic EPS") is computed by dividing net income by
the weighted average number of common shares outstanding.
Diluted net income per common share ("Diluted EPS") is computed
by dividing net income by the weighted average number of common
shares and dilutive potential common shares then outstanding.
SFAS No. 128 requires the presentation of both Basic EPS and
Diluted EPS on the face of the consolidated statements of
operations. Diluted EPS for all periods presented does not
include the impact of stock options and warrants then
outstanding as the effect of their inclusion would be
anti-dilutive.
3. The components of comprehensive income as defined under SFAS No.
130 "Reporting Comprehensive Income", are as follows:
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
2000 1999
---- ----
<S> <C> <C>
Net income/(loss) ($3,132) ($1,990)
Unrealized gains on marketable
securities, net of $0 and $0
income tax 0 2
------- -
Comprehensive Income ($3,132) ($1,988)
======== ========
</TABLE>
(4)
<PAGE> 7
4. In April 1998, the American Institute of Certified Public
Accountants issued Statement. of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), which provides guidance for
determining whether computer software is internal-use software
and on accounting for the proceeds of computer software
originally developed or obtained for internal use and then
subsequently sold to the public. It also provides guidance on
capitalization of the costs incurred for computer software
developed or obtained for internal use. The Company adopted
SOP-98-1 in the first quarter of 1999 and it did not have a
material effect on its financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivatives Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 is effective
for all fiscal quarters of fiscal years beginning after June 15,
1999. This statement is not expected to affect the Company since
it does not currently engage in derivative instruments or
hedging activities.
5. In July 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133, which amends SFAS No.
133 to be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000.
6. In March 2000, Cybear purchased from the Company for $4 million
in cash a 10% Senior Convertible Note due March 31, 2001 (the
"Cybear Loan") secured by the Company's assets, including its
intellectual property, and which is convertible at Cybear's
option at any time after the date of the agreement, into shares
of the Company's common stock at a conversion price per share
equal to the lower of $4.34 or 80% of the average market price
prior to the conversion date, provided that Cybear cannot
acquire upon conversion approximately more than 1.9 million of
the Company's shares. As the conversion price was below the
fair market value of the Company's common stock on the date of
the Cybear Loan, the Company has recorded approximately $6
million of non-cash interest expense, which represents the
intrinsic value of the beneficial conversion feature. In
addition, Cybear has received from the Company a five year
warrant to purchase up to 300,000 shares of the Company's
common stock at an exercise price per share of $4.34. The
warrant is exercisable one year from the date of the agreement.
The Company has recorded the fair value of the warrant totaling
approximately $1.2 million and is included in other current
assets. This amount will be amortized ratably over the term of
the Cybear Loan which expires March 31, 2001. The Company does
not have a sufficient number of shares available for issue to
cover both the conversion of the debt and the exercise of the
warrant. The Cybear Loan agreement provides for the Company to
request an increase in the number of authorized shares from its
shareholders by July 14, 2000. If the shareholders do not
approve such increase, the Company may not have enough common
shares available to issue upon the exercise of such warrant.
In the event that the Company materially defaults under its
agreements with Cybear, then Cybear could take title to some or
all of the Company's assets. The agreements include a
co-marketing and distribution agreement for the Company's
Web-based @RxTM electronic prescribing service and Dr. Chart(R)
clinical laboratory transaction management product and Cybear's
Internet portal. dr.cybear.com. In a related agreement, the
Company granted Cybear the exclusive right to migrate the @RxTM
prescription system to a hand held computer that will be
marketed exclusively by the Company and Cybear.
(5)
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
AHT Corporation (the "Company") is a national provider of Internet-based
clinical e-commerce among physicians, other healthcare providers, and healthcare
organizations. The Company is focused on automating laboratory and prescription
transactions, the two most frequent clinical transactions initiated by
physicians today. In October 1999, the Company launched its @Rx(TM) prescription
product which is the nation's first comprehensive internet tool to manage all
phases of the prescription writing process from the physicians office. The
Company generates revenues from fees for the use and support of its clinical
information systems, including transaction, license, software installation,
software integration, system support, training and data conversion fees.
The Company's actual results could differ materially from its historical results
or from any forward looking statements made, referenced or incorporated into
this report. Factors that may cause such differences include, but are not
limited to, failure of the clinical e-commerce industry to develop at
anticipated rates, failure of the Company's clinical information technology
products and services to gain significant market acceptance, failure to meet
operating objectives or to execute the operating plan, competition and other
economic factors.
In May 1999, the Company sold its physician practice management division and is
now devoting its full resources to expanding its Internet-based laboratory and
prescription transaction management business. The restructuring action described
below contains forward-looking statements that may be significantly impacted by
certain risks and uncertainties, including failure to meet operating objectives
or to execute the operating plan and failure to successfully restructure the
Company's business.
In March 2000, Cybear purchased from the Company for $4 million in cash a 10%
Senior Convertible Note due March 31, 2001 (the "Cybear Loan") secured by the
Company's assets, including its intellectual property, and which is convertible
at Cybear's option into shares of the Company's common stock at a conversion
price per share equal to the lower of $4.34 or 80% of the average market price
prior to the conversion date, provided that Cybear cannot acquire upon
conversion approximately more than 1.9 million of the Company's shares. In
addition, Cybear has received from the Company a five year warrant to purchase
up to 300,000 shares of the Company's common stock at an exercise price per
share of $4.34.
(6)
<PAGE> 9
The Company's restructuring of its information technology unit includes placing
increased emphasis on product development and sales in areas such as electronic
laboratory and prescription management. The Company intends to limit product
development efforts that do not benefit its work on electronic laboratory and
prescription management. Further, the Company has redirected its sales efforts
to develop distribution channels including Internet portals and increase sales
for its products lines that offer laboratory and prescription functionality.
Sales efforts will be focused on strategic sales initiatives that emphasize
long-term, recurring revenue streams rather than large, one-time revenue events
so as to better position the Company to benefit from what it believes is the
rapidly gaining importance of clinical e-commerce. Currently, the Company has a
contract backlog of approximately $2.2 million of revenue that it expects to
recognize in 2000 and $.6 million of deferred revenue that represents cash
received from customers who are in the process of installing the Company's
proprietary software based on specific milestones.
RESULTS FROM CONTINUING OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Net revenue from continuing operations for the three months ended March 31, 2000
and the comparable period ending March 31, 1999 was $.2 million. The Company
earned these fees for the use and support of its clinical information systems,
including the recognition of software license, system support and implementation
revenues.
Cost of revenues for the three months ended March 31, 2000 increased to $.4
million from $.2 million for the comparable period ended March 31, 1999. The
increase in cost of revenues was due to the addition of professional staffing to
meet the anticipated and actual increased number of customer installations. Cost
of revenues includes direct costs associated with core product installation
efforts incurred and amortization expense relating to previously capitalized
software development costs.
Operating expenses for the three months ended March 31, 2000 decreased to $2.4
million from $2.5 million for the comparable period ended March 31, 1999 and
included non-capitalized software development costs of approximately $.4 million
and depreciation and amortization expense of approximately $.4 million. Since
the quarter ended March 31, 1998, the Company has not incurred any software
development costs that could be capitalized. These costs are being treated as
period costs which are included in operating expenses in the Company's
consolidated financial statements.
Other income net, for the three months ended March 31, 2000 was $.1 million as
compared to $.3 million for the comparable period ending March 31, 1999 and
related primarily to amounts received from a prior year settlement of a dispute
under a physician practice management services agreement and interest earned
from investments in marketable securities as a result of the investment of
proceeds from the Company's 1997 follow-on offering and operating cash.
Non-cash interest expense for the three months ended March 31, 2000 was $.6
million and was recorded in connection with the convertible feature of the
Cybear note. The Company will be amortizing a non-cash charge of $.4 million per
quarter through March 31, 2001 representing the fair value of the warrants
granted under the note.
Provision for income taxes for the three months ended March 31, 2000 and March
31, 1999 includes payments made for state and local income taxes based on
amounts other than taxable income.
Net (loss) for the three months ended March 31, 2000 was ($3.1) million compared
to a net (loss) of ($2.0) million for the three months ended March 31, 1999 due
to the factors described above.
(7)
<PAGE> 10
RESULTS OF DISCONTINUED OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
In January 1999, the Company's Board of Directors approved a plan to divest its
practice management services unit and sold the unit in May 1999. For the 2000
year and three months March 31, 2000, the Company will not report any income or
loss from discontinued operations. For the three months ended March 31, 1999 the
Company reported income net of taxes of $.3 million.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000 the Company had aggregate cash, cash equivalents, certificates
of deposit and marketable securities of $4.4 million, compared to $2.7 million
at December 31, 1999.
For the three months ended March 31, 2000 and March 31, 1999, the Company had
negative cash flow from its operating activities of ($2.5 million). Net cash
provided by/(used in) investing activities was $.2 million for the three months
ended March 31, 2000, principally as a result of the investment in certificates
of deposit. Net cash provided by/(used in) investing activities was ($1.8
million) for the comparable period ended March 31, 1999, relating primarily to
proceeds received from investments in marketable securities. Net cash provided
by financing activities was $4.1 million for the three months ended March 31,
2000 primarily as a result of the purchase by Cybear for $4.0 million in cash,
of a 10% Senior Convertible Note due March 31, 2001 and $.2 million for the
three months ended March 31, 1999 attributable to net proceeds from the exercise
of incentive stock options.
The Company's operating plan for the remainder of 2000 includes the continuing
support and maintenance of the Company's electronic laboratory and prescription
management products described above, and developing strategic customers,
such as Merck Medco, Planet Rx, and Drugstore.com and new proprietary
distribution channels including Internet portals such as Cybear. The principal
categories of expenditures include research and development of the Company's
electronic laboratory and prescription management products as well as ongoing
business development and marketing. The Company believes that based on its cash
and investments on hand, interest income, collection of officer loans, other
receivables and revenues from operations, it will generate sufficient cash to
fund planned operations of the Company through at least the end of the first
quarter of 2001. To the extent that the clinical e-commerce industry does not
develop at anticipated rates, or there is a failure of the Company's clinical
information technology products and services to gain significant market
acceptance, or competition or other economic factors impedes the operating
objectives and operating plan, the Company, based on the nature of its business
has significant variable costs that can be effectively and timely reduced to
offset the above mentioned factors. The Company has no other planned material
capital expenditures or capital commitments.
(8)
<PAGE> 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From July 1 through August 17, 1998, eleven putative class
actions were filed in the United States District Court for the
Southern District of New York, all of which have been
consolidated under the caption In re Advanced Health Corporation
Securities Litigation (the "Class Action"). The consolidated
complaint, filed in February 1999, alleged that the Company and
its current or former officers or directors, Jonathan Edelson,
M.D., Steven Hochberg, Alan B. Masarek, Robert Alger and
Michael Rogers are liable for certain misrepresentations and
omissions regarding, among other matters, the Company's
operations, performance, and financial condition. The
consolidated class action complaint sought, among other
remedies, certification as a class action and unspecified
damages.
On January 27, 2000, the Company agreed to a settlement of the
Class Action, pursuant to which the Company has deposited $.3
million in escrow to cover the costs of notice to the class,
administration of the settlement and plaintiff attorneys'
expenses and will, upon final approval of the settlement, issue
886,437 shares of common stock to class members and class
counsel (subject to possible enhancement if the Company's stock
price drops below a certain level or if the Company authorizes
and issues additional stock). The District Court held a hearing
on April 18, 2000 and approved the settlement.
From time to time, the Company is involved in litigation.
Although the actual amount of any liability that could arise
with respect to any such litigation cannot be accurately
predicted, in the opinion of management, the resolution of these
matters is not expected to have material adverse effect on the
Company's business, results of operations or financial
condition.
(9)
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned therewith duly authorized.
May 12,2000 AHT CORPORATION
By: /s/ Jonathan Edelson, M.D.
---------------------------------
Jonathan Edelson, M.D.
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Jeffrey M. Sauerhoff
---------------------------------
Jeffrey M. Sauerhoff
Chief Financial Officer
(Principal Financial and Accounting Officer)
(10)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,356
<SECURITIES> 0
<RECEIVABLES> 275
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,463
<PP&E> 1,873
<DEPRECIATION> 4,388
<TOTAL-ASSETS> 16,366
<CURRENT-LIABILITIES> 6,169
<BONDS> 0
0
0
<COMMON> 111
<OTHER-SE> 9,533
<TOTAL-LIABILITY-AND-EQUITY> 16,366
<SALES> 0
<TOTAL-REVENUES> 202
<CGS> 0
<TOTAL-COSTS> 403
<OTHER-EXPENSES> 2,400
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,137)
<INCOME-TAX> (5)
<INCOME-CONTINUING> (3,132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,132)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
