<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-21343
MEDICAL ALLIANCE, INC.
(Exact name of registrant as specified in its charter)
TEXAS 73-1347577
(State or other jurisdiction of) (I.R.S. Employer
incorporation or organization) Identification No.)
2445 GATEWAY DRIVE, SUITE 150
IRVING, TEXAS 75063
(Address of principal executive offices)
(Zip Code)
(972) 580-8999
(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 No X
--- ---
As of November 22, 1996, there were 5,925,158 shares outstanding of the
registrant's common stock, $0.02 par value.
<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets -
December 31, 1995 and September 30, 1996 (Unaudited) .............. 3
Consolidated Statements of Operations -
Three and Nine months ended September 30, 1995 and 1996 (Unaudited) 4
Consolidated Statements of Cash Flows
Nine months ended September 30, 1995 and 1996 (Unaudited) ......... 5
Consolidated Statement of Stockholders Equity (Deficit) .................. 6
Nine months ended September 30, 1996 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited) ................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ......................................... 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ........................................... 14
Signatures ............................................................... 17
</TABLE>
<PAGE> 3
MEDICAL ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, SEPTEMBER 30,
1995 1996
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents .............................................. $ 1,385,654 $ 841,641
Restricted cash ........................................................ 22,854 29,800
Accounts receivable, less allowance for doubtful accounts of
$1,113,314 and $1,377,602 respectively ............................. 2,568,686 4,147,935
Prepaid expenses and other current assets .............................. 230,322 1,010,461
----------- -----------
Total current assets .......................................... 4,207,516 6,029,837
----------- -----------
Property and equipment, net ................................................. 2,192,791 3,248,364
----------- -----------
Other assets:
Intangible assets, net of amortization of approximately
$3,000 and $38,930 respectively .................................... 43,056 174,301
Total assets .................................................. $ 6,443,363 $ 9,452,501
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................... $ 316,367 $ 535,939
Accrued expenses ....................................................... 801,555 1,322,263
Current maturities of:
Long-term debt ..................................................... 366,667 1,148,156
Capital lease obligations .......................................... 284,633 338,970
Deferred income taxes .................................................. 365,616 527,856
Deferred revenue ....................................................... 159,337 185,216
----------- -----------
Total current liabilities ..................................... 2,294,175 4,058,400
=========== ===========
Long-term debt, net of current maturities ................................... 1,443,819 2,365,964
Capital lease obligations, net of current maturities ........................ 258,296 101,111
Deferred income taxes ....................................................... 16,547 96,017
----------- -----------
Total liabilities .................................................. 4,012,837 6,621,492
=========== ===========
Stockholders' equity:
Series A convertible preferred stock, $0.002 par value, 2,000,000 shares
authorized; 435,000 shares issued and outstanding; aggregate
liquidation preferences of $893,500 and
$893,500 respectively, ............................................. 870 870
Series B convertible preferred stock, $0.002 par value, 362,500
shares authorized, issued and outstanding; aggregate
liquidation preferences of $1,450,000 and $1,450,000,
respectively, ...................................................... 725 725
Common stock, $0.002 par value, 10,000,000 shares authorized;
2,339,421 and 2,378,699 shares issued and
outstanding, respectively, ......................................... 4,678 4,774
Capital in excess of par value ......................................... 2,959,586 2,918,032
Accumulated deficit .................................................... (526,383) (27,448)
Treasury stock at cost, 17,230 and 25,703 shares, respectively ......... (8,950) (65,944)
----------- -----------
Total stockholders' equity .................................... 2,430,526 2,831,009
----------- -----------
Total liabilities and stockholders' equity .................... $ 6,443,363 $ 9,452,501
=========== ===========
</TABLE>
See Notes to the Consolidated Financial Statements.
3
<PAGE> 4
MEDICAL ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(UNAUDITED) (UNAUDITED)
1995 1996 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenue ............................ $ 2,853,494 $ 4,454,296 $ 7,707,603 $ 12,849,776
------------ ------------ ------------ ------------
Costs and expenses:
Salaries and benefits ............. 966,889 1,405,757 2,653,142 4,154,565
Selling, general and
administrative ................ 973,169 1,450,565 2,512,391 4,251,405
Depreciation and
amortization .................. 180,881 436,531 445,454 1,089,241
Provision for uncollectible
accounts ...................... 532,848 802,746 1,276,044 2,225,484
------------ ------------ ------------ ------------
Total costs and expenses.. 2,653,787 4,095,599 6,887,031 11,720,695
------------ ------------ ------------ ------------
Operating income ......... 199,707 358,697 820,572 1,129,081
------------ ------------ ------------ ------------
Other (income) expense:
Interest income and other,
net ........................... (292) 24,853 9,351 12,741
Interest expense .................. 56,003 94,847 186,739 245,505
------------ ------------ ------------ ------------
Total other expense ........... 55,711 119,700 196,090 258,246
------------ ------------ ------------ ------------
Income before income
taxes ............................. 143,996 238,997 624,482 870,835
Provision for income
taxes ............................. 58,607 109,208 253,736 371,900
------------ ------------ ------------ ------------
Net income ............................. 85,389 129,789 370,746 498,935
Less preferred stock dividend .......... -0- -0- (87,000) (87,000)
Less charge for cancellation of put
feature described in Note 7 ....... -- -- (180,000) --
------------ ------------ ------------ ------------
Net income applicable to
common stock ...................... $ 85,389 $ 129,789 $ 103,746 $ 411,935
============ ============ ============ ============
Net income per share .................. $ .02 $ .03 $ .04 $ .11
============ ============ ============ ============
Weighted average number of
common shares and common share
equivalents (in thousands) ........ 3,729 4,349 2,840 3,644
============ ============ ============ ============
</TABLE>
See Notes to the Consolidated Financial Statements
4
<PAGE> 5
MEDICAL ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ...................................................... $ 370,746 $ 498,935
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Loss on joint venture ......................................... - 0- 31,543
Provision for uncollectible accounts .......................... 1,276,044 2,225,484
Depreciation and amortization ................................. 445,454 1,089,241
Deferred income taxes ......................................... 253,736 371,900
Changes in assets and liabilities net of effects
from acquisitions:
Accounts receivable ......................................... (2,066,185) (3,804,732)
Prepaid expenses and other current assets ................... (55,606) (780,139)
Accounts payable and accrued expenses ....................... 412,054 591,624
Deferred revenue ............................................ (5,188) 25,879
Other ....................................................... -0- -0-
----------- -----------
Net cash provided by operating activities ................. 631,055 249,735
Cash flows from investing activities:
Capital expenditures ............................................ (1,088,847) (1,611,773)
Payment for acquisitions ........................................ -0- (518,840)
Change in restricted cash ...................................... (5,965) (6,946)
----------- -----------
Net cash used in investing activities ........................... (1,094,812) (2,137,559)
----------- -----------
Cash flow from financing activities:
Payment of dividends on preferred stock ......................... (35,000) (87,000)
Repayment of capital lease obligations .......................... (171,513) (233,402)
Repayment of long-term debt ..................................... (1,150,607) (275,000)
Purchase of treasury shares ..................................... -0- (56,994)
Proceeds from issuance of common stock .......................... 2,000 34,542
Proceeds from issuance of long-term debt ........................ 1,865,792 1,978,634
Other ........................................................... -0- (16,969)
----------- -----------
Net cash provided by financing activities ................. 510,672 1,343,811
----------- -----------
Net increase (decrease) in cash and cash
equivalents ..................................................... 46,915 (544,013)
Cash and cash equivalents at beginning of period ................... 93,656 1,385,654
----------- -----------
Cash and cash equivalents at end of period ......................... $ 140,571 $ 841,641
----------- -----------
Supplemental disclosures of cash flow information:
Interest paid ................................................... $ 175,418 $ 235,138
Income taxes paid ............................................... -0- 135,708
Supplemental schedule of noncash investing and financing
activities:
Preferred stock dividend declared ............................... 87,000 --
Capital lease obligations incurred .............................. 145,446 130,554
Exercise of warrant in exchange for outstanding debt and
cancellation of put feature described in Note 7:
Common stock and capital in excess of par value ............... 480,000 --
Debt .......................................................... 300,000 --
The Company has acquired businesses, as follows:
Fair value of assets acquired ................................... -- 351,198
Goodwill recorded ............................................... -- 167,642
-----------
Cash paid ................................................... -- $ 518,840
===========
</TABLE>
See notes to the Consolidated Financial Statements.
5
<PAGE> 6
MEDICAL ALLIANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Series A Preferred Series B Preferred
Stock Stock Common Stock
--------------------- ----------------------- ------------------------
Shares Amount Shares Amount Shares Amount
------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ...................... 435,000 $ 870 362,500 $ 725 2,339,421 $ 4,678
Issuance of common stock (unaudited) ........... 4,293 9
Options exercised (unaudited) ................. 43,458 87
Series A preferred stock dividend (unaudited)...
Treasury stock purchases (unaudited) ...........
Net income (unaudited) ............................
------- ---------- ---------- ---------- ---------- ----------
Balance at September 30, 1996 (unaudited) ......... 435,000 $ 870 362,500 $ 725 2,378,699 $ 4,774
------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
Total
Capital In Stockholders'
Excess of Accumulated Treasury Equity
Par Value Deficit Stock (Deficit)
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 ...................... $2,959,586 $ (526,383) $ (8,950) $2,430,526
Issuance of common stock (unaudited) ........... 10,991 11,000
Options exercised (unaudited) ................. 34,455 34,542
Series A preferred stock dividend (unaudited)... (87,000) (87,000)
Treasury stock purchases (unaudited) ........... (56,994) (56,994)
Net income (unaudited) ............................
498,935 498,935
---------- ---------- ---------- ----------
Balance at September 30, 1996 (unaudited) ......... $2,918,032 $ (27,448) $ (65,944) $2,831,009
========== ========== ========== ==========
</TABLE>
6
<PAGE> 7
MEDICAL ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION OF AND FOR THE THREE AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1995 AND 1995 IS UNAUDITED)
1. UNAUDITED INTERIM FINANCIAL INFORMATION
The consolidated balance sheets as of December 31, 1995, and September 30,
1996, the consolidated statements of stockholders' equity for the nine months
then ended, and the consolidated statements of operations for the three months
ended September 30, 1995 and 1996, and the consolidated statements of
operations and cash flows for the nine months ended September 30, 1995 and
1996, have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal, recurring adjustments)
necessary to present fairly the financial position at September 30, 1996, and
the results of operations and cash flows for all periods presented have been
made. The results of operations for the interim periods are not necessarily
indicative of the operating results for the full year. The December 31, 1995
consolidated, condensed balance sheet is derived from the audited consolidated
balance sheet as of that date.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets, particularly accounts
receivable, 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 may, in some
instances, differ from previously estimated amounts.
This report on Form 10-Q for the quarter ended September 30, 1996 should
be read in conjunction with the Company's S-1 filing dated October 11, 1996 and
the Notes to Consolidated Financial Statements contained therein.
2. COMPANY'S BUSINESS
Medical Alliance, Inc. ("Medical Alliance") provides mobile surgical
services which allow certain minimally invasive operative procedures to be
performed in the physician's office. Medical Alliance was incorporated in Texas
in 1989 and is headquartered in Irving, Texas. Medical Alliance provides its
services in 40 states.
3. EARNINGS PER SHARE
Net income (loss) per common share is based on reported net income (loss)
less the Series A Preferred Stock dividend and the charge for cancellation of
the put feature. The resulting amount is presented as income applicable to
common stock. Such income applicable to common stock in each period presented
is divided by the weighted average number of outstanding common and common
equivalent shares using the treasury stock method adjusted for the stock split
effected through a stock dividend of .561 shares for each share outstanding
effective September 9, 1996. Earnings per share for all common stock and common
stock warrants, options and other potentially dilutive instruments issued one
year before the initial public offering have been computed in accordance with
Securities and Exchange Commission Staff Accounting Bulletin ("SAB") Topic 4-D.
The SAB requires that such shares issued at a price less than the per share
Offering price be included in the calculation of common stock and common stock
equivalents as if such shares were outstanding for all periods presented, even
when anti-dilutive. With respect to these shares, the Company has also used the
treasury stock method based on the Offering price as the purchase price.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Medical equipment ............................ $ 2,764,090 $ 4,495,112
Furniture and fixtures ....................... 223,356 410,633
Transportation ............................... 7,000 71,760
Leasehold improvements ....................... 11,877 14,324
Equipment under capital leases ............... 886,398 976,033
----------- -----------
3,892,791 5,967,862
Less accumulated depreciation and amortization (1,699,930) (2,719,499)
----------- -----------
Net property and equipment ................... $ 2,192,791 $ 3,248,363
=========== ===========
</TABLE>
Accumulated amortization related to equipment under capital leases was
approximately $363,000 and $572,008 at December 31, 1995 and September 30,
1996, respectively.
7
<PAGE> 8
5. LONG-TERM DEBT:
Long-Term debt consists of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revolving bank credit agreement at prime +1/2 %;
interest payments due monthly; principal due 1997 .... $ 250,000 $ 500,000
Bank term loan at prime plus 1 1/2% with varying monthly
principal and interest payments; final payment due
2000.................................................. 643,819 643,819
Bank term loan at prime plus 1 1/2%; monthly principal
and interest payments; final payment due 1998 ....... 916,667 641,666
Bank term loan at prime plus 3/4%; monthly principal
and interest payments beginning in 1997; final
payment due 2000 ..................................... -0- 1,728,635
----------- -----------
$ 1,810,486 $ 3,514,120
Less current maturities ................................ (366,667) (1,148,156)
----------- -----------
$ 1,443,819 $ 2,365,964
----------- -----------
</TABLE>
Prime rate was 8 1/2% and 8 1/4% at December 31, 1995 and September 30, 1996,
respectively.
The annual principal requirements for the five years subsequent to September
30, 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
<S> <C>
Remaining 1996................... $ 91,667
1997............................. 1,345,860
1998............................. 974,151
1999............................. 790,818
2000............................. 311,624
----------
$3,514,120
</TABLE>
The bank term loans and revolving credit originated in 1995, with varying
principal and interest payments through 2000. Effective March 20, 1996, the
Company and the bank modified the term loans and revolving credit agreement
which increased the term loan agreement from $1,750,000 to $3,750,000 and
increased the revolving credit agreement from $250,000 to $500,000. The loans
and revolving credit are collateralized by Company assets and a personal
guarantee of a major shareholder.
Under the terms of the bank debt, the Company is subject to certain
covenants, including restrictions on dividend payments, the redemption or
repurchase of stock and stock equivalents and limitations on indebtedness. In
addition, the loan agreement contains restrictive which, among other things,
require the Company to obtain directors' and officers' liability insurance.
As noted above, the Company and the bank modified the term loan and
revolving credit agreement. The amended and restated term and revolving credit
agreement requires annual audited financial statements by May 31 for the prior
fiscal year. The Company has not complied with this covenant and has obtained a
waiver from the bank which is effective until January 1, 1997.
In connection with the closing of the Initial Public Offering on October
17, 1996, the Company used $3.5 million of the net proceeds from the Initial
Public Offering to pay off the total amount due to NationsBank for the notes
discussed above.
6. SERIES A PREFERRED STOCK AND PREFERRED STOCK WARRANTS:
On July 10, 1992 the Company entered into a Preferred Stock Purchase
Agreement (the "Series A Agreement") with Mapleleaf Capital, Ltd. The Company
issued an aggregate of 375,000 shares of Series A Convertible Preferred Stock
("Series A Preferred Stock") in exchange for cash of $2.00 per share. In
connection with this transaction, the Company converted subordinated debt of
certain shareholders into shares of common stock at a conversion rate of one
share of common stock for every $2.00 of subordinated debt as described above.
The shares of Series A Preferred Stock were issued with warrants attached
to purchase up to 60,000 shares of Series A Preferred Stock. The warrants were
exercisable at $2.00 per share and expired in 1995. The warrants were exercised
on July 1, 1994 at $1.67 per share, which
8
<PAGE> 9
approximated the fair value for other trades in the Company's common stock. The
Series A Preferred Stock was convertible into common stock at a ratio of 1 to
1. However, upon issuance of common stock equivalents, the conversion ratio was
subject to an anti-dilution adjustment pursuant to the Series A Agreement for
all convertible preferred stock. The Series A Preferred Stock was convertible
at the election of the holder at any time, or automatically with the closing of
an underwritten qualified public offering (as defined in the Series A
Agreement). If the Company had not completed a qualified public offering on or
prior to December 31, 1997, the Company had the right, but not the obligations
to repurchase all remaining shares of Series A Preferred Stock.
The Series A Preferred Stock required a $.20 per share annual dividend
commencing on June 30, 1993 which was cumulative if unpaid. Dividends paid for
the year ended December 31, 1995 and the nine months ended September 30, 1996
were $122,000 and $87,000, respectively. The Company was not in compliance with
certain covenants of the Series A Agreement including the timely issuance of
its year- end audited consolidated financial statements, the timely issuance of
a budgeted operating forecast and a loan to an employee which exceeded the
designated limit. The Company had obtained appropriate waivers from the holders
of Series A Preferred Stock, effective until January 1, 1997.
In connection with the Initial Public Offering on October 11, 1996, the
Series A Preferred Stock was converted into common stock on a one to one basis
and adjusted for a 1.561 stock split which was effected through a stock
dividend declared on September 9, 1996. The Company had reserved 679,035 shares
of common stock for the conversion of all outstanding Series A Preferred Stock.
7. SERIES B PREFERRED STOCK:
On November 17, 1995, the Company entered into a Preferred Stock Purchase
Agreement (the "Series B Agreement") with various investors. The Company issued
an aggregate of 362,500 shares of Series B Convertible Preferred Stock ("Series
B Preferred Stock") in exchange for cash of $4.00 per share.
The Series B Preferred Stock was initially convertible into common stock
at a ratio of 1 to 1. However, upon issuance of common stock or common stock
equivalents, the conversion ratio was subject to an anti-dilution adjustment
pursuant to the Series B Agreement for all convertible preferred stock. The
conversion ratio for the Series B Preferred Stock was convertible at the
election of the holders at any time, or automatically with the closing of an
underwritten qualified public offering (as defined in the Series B Agreement).
, 1996. There was no annual dividend requirement in the Series B Agreement.
However, the Company was not in compliance with certain covenants of the Series
B Agreement, including the timely issuance of its year-end audited consolidated
financial statements, the timely issuance of a budgeted operating forecast, and
a loan to an employee which exceeded the designated limit. The Company had
obtained appropriate waivers from all Series B Preferred Stock shareholders
effective until January 1, 1997.
In connection with the Initial Public Offering on October 11, 1996, the
Series B Preferred Stock was converted into common stock on a one to one basis
and adjusted for a 1.561 stock split which was effected through a stock
dividend declared on September 9, 1996. The Company had reserved 565,863 shares
of common stock for the conversion of all outstanding Series B Preferred Stock.
8. COMMON STOCK AND COMMON STOCK WARRANTS:
A warrant to purchase up to 374,640 shares of common stock, at $1.28 per
share, was granted to Satana Corporation on January 17, 1991 as part of the
note agreement. This warrant includes a put feature, whereby the holder of the
shares acquired via the exercise of the warrant could require the Company to
redeem the shares based on a formula price. During the year ended December 31,
1995, the holder exercised the warrant to acquire 374,640 shares of common
stock in exchange for outstanding debt owed to Satana Corporation and
cancellation of the put feature. The difference between the carrying value of
the debt instrument, which approximated fair value, and the exercise price of
the warrants has been accounted for as a reduction of capital in excess of par
value and has been deducted from net income for purposes of computing net
income applicable to common stock in the accompanying statement of operations.
9. SALE OF COMMON STOCK
On October 11, 1996 the Company completed the Initial Public Offering of
its common stock in which 2,000,000 shares of common stock were sold raising
net proceeds of approximately $20 million.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET REVENUES. Net revenues increased from $2.9 million for the three
months ended September 30, 1995, to $ 4.5 million for the three months ended
September 30, 1996, an increase of $1.6 million or 56%. This increase was
attributable to the growth in total procedure volume, which increased from
10,211 for the three months ended September 30, 1995, to 17,644 for the three
months ended September 30, 1996, an increase of 7,433 or 73%. Medical surgical
procedures increased from 5,041 for the three months ended September 30, 1995,
to 7,258 for the three months ended September 30, 1996, an increase of 2,217 or
44%, which contributed to 30% of the total increase in procedure volume.
Aesthetic elective procedures increased from 5,170 for the three months ended
September 30, 1995, to 10,386 for the three months ended September 30, 1996, an
increase of 5,216 or 101%, which contributed to 70% of the total increase in
procedure volume.
The average net revenue per case decreased from $279 for the three months
ended September 30, 1995, to $252 for the three months ended September 30,
1996, a decrease of $27 per case or 10%. This decrease was attributable to a
change in case mix with aesthetic elective procedures, which had a lower
average net revenue per case of $184, compared to $339 for the medical surgical
procedures, increasing as a percentage of total procedures from 51% for the
three months ended September 30, 1995, to 59% for the three months ended
September 30, 1996.
SALARIES AND BENEFITS EXPENSE. Salaries and benefits expense increased
from $1.0 million for the three months ended September 30, 1995, to $1.4
million for the three months ended September 30,1996, an increase of $400,000
or 45%. This increase was due to the hiring of additional field and corporate
personnel to support the Company's growth in procedure volume. Total employees
for the Company increased from 85 on September 30, 1995, to 111 on September
30, 1996, an increase of 26 or 31%. Salaries and benefits expense as a
percentage of net revenues decreased from 33.9 % to 31.6%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased from $1.0 million for the three months ended
September 30, 1995, to $1.5 million for the three months ended September 30,
1996, an increase of $500,000 or 49%. This increase was partially due to an
increase in repair and maintenance expense from $40,000 for the three months
ended September 30, 1995, to $170,000 for the three months ended September 30,
1996, an increase of $130,000 or 325%. This increase was primarily due to the
addition of annual maintenance contracts on certain equipment to increase
operational efficiencies. In addition, vehicle expense increased from $177,000
for the three months ended September 30, 1995, to $299,000 for the three months
ended September 30, 1996, an increase of $122,000 or 69%. This increase
resulted from the increase in field personnel from 58 as of September 30, 1995,
to 77 as of September 30, 1996, each of whom is supplied with a van for the
delivery of equipment to physicians' offices. Also, operating lease expense
increased from $166,000 for the three months ended September 30, 1995, to
$279,000 for the three months ended September 30, 1996, an increase of $113,000
or 68%, due to the addition of several pieces of medical equipment through
operating leases.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
from $181,000 for the three months ended September 30, 1995, to $437,000 for
the three months ended September 30, 1996, an increase of $256,000 or 141%.
This increase was due to the addition of $2.7 million in capital equipment
during the twelve months ended September 30, 1996.
PROVISION FOR UNCOLLECTIBLE ACCOUNTs. Provision for uncollectible accounts
increased from $533,000 for the three months ended September 30, 1995, to
$803,000 for the three months ended September 30, 1996, an increase of $270,000
or 51%. This increase was primarily due to the increase in medical surgical
revenues from $1,875,000 to $2,458,000, an increase of $583,000 or 31%. As a
percentage of net revenue, provision for uncollectible accounts decreased from
18.7% to 18.0%.
OPERATING INCOME. Operating income increased from $200,000 for the three
months ended September 30, 1995, to $359,000 for the three months ended
September 30, 1996, an increase of $159,000 or 80%. As a percentage of net
revenues, operating income increased from 7.0% for the three months ended
September 30, 1995, to 8.1% for the three months ended September 30, 1996. This
increase was primarily due to a decrease in selling, general and administrative
expense and provision for uncollectible accounts as a percentage of net
revenues.
INTEREST EXPENSE. Interest expense increased from $56,000 for the three
months ended September 30, 1995, to $95,000 for the three months ended
September 30, 1996, an increase of $39,000 or 69%. The Company's average debt
balance increased from $2.0 million as of ended September 30, 1995 to $4.0
million as of September 30, 1996.
INCOME TAX PROVISION. Income tax provision increased from $59,000 for the
three months ended September 30, 1995, to $109,000 for the three months ended
September 30, 1996, an increase of $50,000 or 86%. The income tax provision
increased primarily as a result of income before taxes increasing from $144,000
for the three months ended September 30,1995, to $239,000 for the three months
ended September 30, 1996. The Company's effective tax rate increased from 40.7%
for the three months ended September 30, 1995, to 45.7% for the three months
ended September 30, 1996. This was primarily due to equity losses of $32,000
from international operations being added back for income tax provision
calculations.
10
<PAGE> 11
NET INCOME. As a result of the items discussed above, the Company's net
income increased from $85,000 for the three months ended September 30, 1995, to
$130,000 for the three months ended September 30, 1996 an increase of $45,000
or 52%.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET REVENUES. Net revenues increased from $7.7 million for the nine months
ended September 30, 1995, to $12.8 million for the nine months ended September
30, 1995, an increase of $5.1 million or 67%. This increase was attributable to
the growth in total procedure volume, which increased from 26,882 for the nine
months ended September 30, 1995, to 50,553 for the nine months ended September
30, 1996, an increase of 23,671 or 88%. Medical surgical procedures increased
from 13,777 for the nine months ended September 30, 1995 to 19,948 for the nine
months ended September 30, 1996, an increase of 6,171 or 45%, which contributed
to 26% of the total increase in procedure volume. Aesthetic elective procedures
increased from 13,105 for the nine months ended September 30, 1995, to 30,605
for the nine months ended September 30, 1996, an increase of 17,500 or 134%,
which contributed to 74% of the total increase in procedure volume.
The average net revenue per case decreased from $287 for the nine months
ended September 30, 1995, to $254 for the nine months ended September 30, 1996,
a decrease of $33 per case or 12%. This decrease was attributable to a change
in case mix with aesthetic elective procedures, which has a lower average net
revenue per case of $186, compared to $344 for the medical surgical procedures,
increasing as a percentage of total procedures from 49% for the nine months
ended September 30, 1995, to 61% for the nine months ended September 30,1996.
SALARIES AND BENEFITS EXPENSE. Salaries and benefits expense increased
from $2.7 million for the nine months ended September 30, 1995, to $4.2 million
for the nine months ended September 30,1996, an increase of $1.5 million or
57%. This increase was due to the hiring of additional field and corporate
personnel to support the Company's growth in procedure volume. Total employees
for the Company increased from 85 on September 30, 1995, to 111 on September
30, 1996, an increase of 26 or 31%. Salaries and benefits expense as a
percentage of net revenues decreased from 34.4 % to 32.3% due to increases in
net revenues exceeding the increases in salaries and benefits expense.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased from $2.5 million for the nine months ended
September 30, 1995, to $4.3 million for the nine months ended September 30,
1996, an increase of $1.8 million or 69%. This increase was primarily due to an
increase in operating lease expense from $340,000 for the nine months ended
September 30, 1995, to $933,000 for the nine months ended September 30, 1996,
an increase of $593,000 or 174% due to the addition of several pieces of
medical equipment through operating leases. In addition, vehicle expense
increased from $423,000 for the nine months ended September 30, 1995 to
$834,000 for the nine months ended September 30, 1996, an increase of $411,000
or 97%. This increase resulted from the increase in field personnel from 58 as
of September 30, 1995, to 77 as of September 30, 1996, each of whom is supplied
with a van for the delivery of equipment to physicians' offices. Repair and
maintenance expense increased from $111,000 for the nine months ended September
30, 1995 to $430,000 for the nine months ended September 30, 1996, an increase
of $319,000 or 286%. This increase was due primarily to the addition of annual
maintenance contracts on certain equipment to enhance operational efficiencies.
Communications expense increased from $296,000 for the nine months ended
September 30, 1995, to $433,000 for the nine months ended September 30, 1996,
an increase of $137,000 or 46%. This increase was related to the hiring of
additional field personnel.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
from $445,000 for the nine months ended September 30, 1995, to $1,089,000 for
the nine months ended September 30, 1996, an increase of $644,000 or 145%. This
increase was due to the addition of $2.7 million in capital equipment during
the twelve months ended September 30, 1996.
PROVISION FOR UNCOLLECTIBLE ACCOUNTs. Provision for uncollectible accounts
increased from $1.3 million for the nine months ended September 30, 1995, to
$2.2 million for the nine months ended September 30, 1996, an increase of
$900,000 or 74%. As a percentage of net revenue, provision for uncollectible
accounts increased from 16.6% to 17.3%. This increase was primarily due to an
increase in provisions relating to medical surgical revenues.
OPERATING INCOME. Operating income increased from $821,000 for the nine
months ended September 30, 1995, to $1.1 million for the nine months ended
September 30, 1996, an increase of $279,000 or 38%. As a percentage of net
revenues, operating income decreased from 10.6% for the nine months ended
September 30, 1995, to 8.8% for the nine months ended September 30, 1996. This
decrease was primarily due to an increase in selling, general and
administrative expense, provision for uncollectible accounts and depreciation
of new capital equipment as a percentage of net revenues.
INTEREST EXPENSE. Interest expenses increased from $187,000 for the nine
months ended September 30, 1995, to $246,000 for the nine months ended
September 30, 1996, an increase of $59,000 or 32%. The Company's average debt
balance increased from $2.0 million as of September 30, 1995 to $4.0 million as
of September 30, 1996.
INCOME TAX PROVISION. Income tax provision increased from $254,000 for the
nine months ended September 30, 1995, to $372,000 for the nine months ended
September 30, 1996, an increase of $118,000 or 47%. The income tax provision
increased primarily as a result of income before taxes increasing from $624,000
for the nine months ended September 30,1995 to $871,000 for the nine months
ended
11
<PAGE> 12
September 30, 1996. The Company's effective tax rate increased from 40.6% for
the nine months ended September 30, 1995, to 42.7% for the nine months ended
September 30, 1996. This was due primarily to equity losses of $32,000 from
international operations being added back for income tax provision
calculations.
NET INCOME. As a result of the items discussed above, the Company's net
income increased from $371,000 for the nine months ended September 30, 1995, to
$499,000 for the nine months ended September 30, 1996 an increase of $128,000
or 35%.
LIQUIDITY AND CAPITAL RESOURCES
From its inception through 1993, the Company's operating expenses
significantly exceeded its net revenues, resulting in an accumulated retained
deficit. Since 1993, the Company has recorded positive earnings, which have
reduced the accumulated retained deficit to $526,000 as of September 30, 1995,
and $27,000 as of September 30, 1996. Until October 1996, the Company has
funded its operations primarily through the private placement of equity
securities, bank borrowings and cash provided by operation. Prior to its
Initial Public Offering, which was completed on October 11, 1996, the majority
of the equity capital raised by the Company had been raised from the private
placement of $2.2 million of equity securities. In July 1992, the Company
raised $750,000 through the sale of Series A Preferred Stock. The sale of the
Series A Preferred Stock was pursuant to the terms of the Series A Agreement.
The Company, at various times, had not been in compliance with certain
covenants of the Series A Agreement, including the timely issuance of its
year-end audited consolidated financial statements, the timely issuance of a
budgeted operating forecast and a loan to an employee which exceeded the
designated limit. The Company had obtained appropriate waivers from the holders
of Series A Preferred Stock with respect to these matters. On October 17, 1996,
the Company closed the Initial Public Offering for approximately $20.0 million,
with a 300,000 share over-allotment which closed for approximately $3.0 million
on November 5, 1996. The Company obtained a $2.0 million credit facility from
NationsBank of Texas, N.A. ("NationsBank") in June 1995. Such facility is
composed of several tranches which bear interest rates ranging from prime plus
0.5% to prime plus 1.5%. The net proceeds from such facility were used to
retire outstanding debt and to purchase medical equipment. The Company's
facility with NationsBank of Texas, N.A. ("NationsBank") was increased to $4.3
million in March 1996. Under the terms of the credit agreement regarding this
facility, the Company agreed to provide NationsBank with annual audited
financial statements by May 31 for the prior fiscal year. The Company has not
complied with this covenant and has obtained a waiver from NationsBank which is
in effect until January 1, 1997. On October 17, 1996, the Company paid the
balance in full due NationsBank.
The Company generated cash from its operations of $631,000 and $250,000
for the nine months ended September 30, 1995 and 1996, respectively. The
Company's accounts receivable balance increased by $1,579,000 from December 31,
1995 to September 30, 1996. This increase was due primarily to increases in net
revenues during such periods. The Company's days of accounts receivable
outstanding remained fairly consistent for the periods presented. The increase
in accounts receivable has reduced operating cash flow available to the Company
during the reported periods. For its investing activities, the Company consumed
$1,095,000 and $2,138,000 for the nine months ended September 30, 1995 and
1996, respectively, primarily for the purchase of medical equipment and two
regionally based companies. Capital expenditures were $1,089,000 and $1,612,000
for the nine months ended September 30, 1995 and 1996, respectively. Net cash
provided by financing activities were $511,000 and $1,344,000 for the nine
months ended September 30, 1995 and 1996, respectively. The cash provided from
financing activities in such periods were primarily provided by the proceeds
from bank borrowings.
PART II
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
On October 17, 1996, the Company's Articles of Incorporation and Bylaws
were amended and restated. The Company's Restated and Amended Articles of
Incorporation and Restated and Amended Bylaws now provide for the Board of
Directors to be divided into three classes of as equal size as possible, with
the term of each class expiring in consecutive years with approximately
one-third of the Board of Directors being elected each year. Holders of Common
Stock are not entitled to vote cumulatively for directors, but directors are
permitted to be removed with or without cause by the affirmative vote of at
least two-thirds of the outstanding shares of stock of the Company entitled to
vote thereon. The Company's Restated and Amended Articles of Incorporation and
Restated and Amended Bylaws also provide that the Company's Bylaws may be
adopted, amended, or repealed only by the Board of Directors and that the
number of directors shall be fixed from time to time by resolution of the Board
of Directors. In addition, a calling of a special meeting by the shareholders
of the Company requires the written request of holders of at least 50% of all
the outstanding shares of the Company entitled to vote. Shareholders of the
Company entitled to take action at annual or special meetings of the
shareholders may take action by written consent only with the unanimous written
consent of all the shareholders entitled to vote thereon. The Company's
Restated and Amended Articles of Incorporation and Restated and Amended Bylaws
also authorize shares of Preferred Stock with respect to which the Board of
Directors will have the power to fix the rights, preferences, privileges, and
restrictions without any further vote or action by the shareholder. These
provisions of the Company's Restated and Amended Articles of Incorporation and
Restated and Amended Bylaws may have the effect of delaying, deferring or
preventing a change in control of the Company, which could deprive the
Company's shareholders of the opportunity to sell their shares
12
<PAGE> 13
of Common Stock at prices higher than prevailing market prices. Such provisions
could also limit the price that certain investors might be willing to pay in
the future for shares of Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number and Description of Exhibit
Number Exhibit Description
2.1 Asset Purchase Agreement, dated October 30, 1995, between the Company
and Mobile Surgical Services of Central Florida, Inc.(1)
2.2 Asset Purchase Agreement, dated March 18, 1996, between the Company and
Maasai Inc.(1)
2.3 Asset Purchase Agreement, dated June 10, 1996, between the Company and
Mobile Laser Services, Inc.(1)
3.1 Amended and Restated Articles of Incorporation of the Company.(1)
3.2 Amended and Restated Bylaws of the Company.(1)
4.1 Specimen of Common Stock Certificate.(1)
4.2 Series A Convertible Preferred Stock Purchase Agreement, dated July 10,
1992, between the Company and Mapleleaf Capital, Ltd.(1)
4.3 Warrant to Purchase 60,000 shares of Series A Convertible Preferred
Stock of the Company, dated July 10, 1992, between the Company and
Mapleleaf Capital, Ltd.(1)
4.4 Series B Convertible Preferred Stock Purchase Agreement, dated November
17, 1995, by and among the Company and Satana Corporation, Mapleleaf
Capital, Ltd., Sunwestern Investment Fund III, Sunwestern Cayman 1988
Partners, Montgomery Jessup & Company, L.L.P., Morris Moreland, DLJSC
F.B.O. Michael Wallace, IRA, Sid Bonner, Clyde Hutchinson, Marc
Johnson, Thomas A. Montgomery, Hazelle Blair, Lloyd Jones, Bart Tucker,
Jay Farris and Kevin O'Brien.(1)
4.5 Warrant to Purchase 468,300 Shares of Common Stock of the Company,
dated July 10, 1992, between the Company and Satana Corporation.(1)
4.6 Warrant to Purchase 23,415 Shares of Common Stock of the Company, dated
August 15, 1993, between the Company and Columbia General
Corporation.(1)
4.7 Warrant to Purchase 2,810 Shares of Common Stock of the Company, dated
October 17, 1993, between the Company and Robert J. Mathews, M.D.(1)
4.8 Warrant to Purchase 2,342 Shares of Common Stock of the Company, dated
May 31, 1994, between the Company and Shelly Burks.(1)
4.9 Warrant to Purchase 1,873 Shares of Common Stock of the Company, dated
May 31, 1994, between the Company and Thomas A. Montgomery.(1)
4.10 Warrant to Purchase 6,556 Shares of Common Stock of the Company, dated
September 1, 1994, between the Company and Thomas A. Montgomery.(1)
4.11 Warrant to Purchase 15,651 Shares of Common Stock of the Company, dated
July 27, 1995, between the Company and Paul R. Herchman.(1)
10.1 Amended and Restated Revolving Credit and Term Loan Agreement, dated
March 20, 1996, between the Company and NationsBank of Texas, N.A.(1)
13
<PAGE> 14
10.2 Agreement between the Company and Coherent Medical Group.(1)
10.3 Master Lease Agreement, dated July 20, 1995, between the Company and
Cabot Medical Corporation.(1)
10.4 Master Services Agreement, dated June 3, 1996, between the Company and
Cosmetic Technologies International.(1)
10.5 Joint Venture Agreement, dated March 25, 1996, between the Company and
Coherent-AMT Inc.(1)
10.6 Medical Alliance, Inc. 1994 Amended and Restated Long-Term Incentive
Plan.(1)
10.7 Employment Agreement between the Company and Paul Herchman.(1)
10.8 Employment Agreement between the Company and Kevin O'Brien.(1)
10.9 Employment Agreement between the Company and Michael G. Wallace.(1)
10.10 Lease Agreement between the Company and Graymont Partners, Ltd.(1)
11.1 Statement RE Computation of Per Share Earnings
27.1 Financial Data Schedule.*
* Filed herewith
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 333-9815) and incorporated herein by reference.
(b) Reports on Form 8-K
None.
14
<PAGE> 15
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 thereunto duly authorized.
Medical Alliance, Inc.
DATE: November 22, 1996
Signature Title
--------- -----
/s/ PAUL R. HERCHMAN President and
- ----------------------------------------- Chief Executive Officer
Paul R. Herchman
/s/ MICHAEL G. WALLACE Senior Vice President and
- ----------------------------------------- Chief Financial Officer
Michael G. Wallace
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
2.1 Asset Purchase Agreement, dated October 30, 1995, between the Company
and Mobile Surgical Services of Central Florida, Inc.(1)
2.2 Asset Purchase Agreement, dated March 18, 1996, between the Company and
Maasai Inc.(1)
2.3 Asset Purchase Agreement, dated June 10, 1996, between the Company and
Mobile Laser Services, Inc.(1)
3.1 Amended and Restated Articles of Incorporation of the Company.(1)
3.2 Amended and Restated Bylaws of the Company.(1)
4.1 Specimen of Common Stock Certificate.(1)
4.2 Series A Convertible Preferred Stock Purchase Agreement, dated July 10,
1992, between the Company and Mapleleaf Capital, Ltd.(1)
4.3 Warrant to Purchase 60,000 shares of Series A Convertible Preferred
Stock of the Company, dated July 10, 1992, between the Company and
Mapleleaf Capital, Ltd.(1)
4.4 Series B Convertible Preferred Stock Purchase Agreement, dated November
17, 1995, by and among the Company and Satana Corporation, Mapleleaf
Capital, Ltd., Sunwestern Investment Fund III, Sunwestern Cayman 1988
Partners, Montgomery Jessup & Company, L.L.P., Morris Moreland, DLJSC
F.B.O. Michael Wallace, IRA, Sid Bonner, Clyde Hutchinson, Marc
Johnson, Thomas A. Montgomery, Hazelle Blair, Lloyd Jones, Bart Tucker,
Jay Farris and Kevin O'Brien.(1)
4.5 Warrant to Purchase 468,300 Shares of Common Stock of the Company,
dated July 10, 1992, between the Company and Satana Corporation.(1)
4.6 Warrant to Purchase 23,415 Shares of Common Stock of the Company, dated
August 15, 1993, between the Company and Columbia General
Corporation.(1)
4.7 Warrant to Purchase 2,810 Shares of Common Stock of the Company, dated
October 17, 1993, between the Company and Robert J. Mathews, M.D.(1)
4.8 Warrant to Purchase 2,342 Shares of Common Stock of the Company, dated
May 31, 1994, between the Company and Shelly Burks.(1)
4.9 Warrant to Purchase 1,873 Shares of Common Stock of the Company, dated
May 31, 1994, between the Company and Thomas A. Montgomery.(1)
4.10 Warrant to Purchase 6,556 Shares of Common Stock of the Company, dated
September 1, 1994, between the Company and Thomas A. Montgomery.(1)
4.11 Warrant to Purchase 15,651 Shares of Common Stock of the Company, dated
July 27, 1995, between the Company and Paul R. Herchman.(1)
10.1 Amended and Restated Revolving Credit and Term Loan Agreement, dated
March 20, 1996, between the Company and NationsBank of Texas, N.A.(1)
</TABLE>
<PAGE> 17
<TABLE>
<S> <C>
10.2 Agreement between the Company and Coherent Medical Group.(1)
10.3 Master Lease Agreement, dated July 20, 1995, between the Company and
Cabot Medical Corporation.(1)
10.4 Master Services Agreement, dated June 3, 1996, between the Company and
Cosmetic Technologies International.(1)
10.5 Joint Venture Agreement, dated March 25, 1996, between the Company and
Coherent-AMT Inc.(1)
10.6 Medical Alliance, Inc. 1994 Amended and Restated Long-Term Incentive
Plan.(1)
10.7 Employment Agreement between the Company and Paul Herchman.(1)
10.8 Employment Agreement between the Company and Kevin O'Brien.(1)
10.9 Employment Agreement between the Company and Michael G. Wallace.(1)
10.10 Lease Agreement between the Company and Graymont Partners, Ltd.(1)
11.1 Statement RE Computation of Per Share Earnings
27.1 Financial Data Schedule.*
</TABLE>
* Filed herewith
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (No. 333-9815) and incorporated herein by reference.
<PAGE> 1
EXHIBIT 11.1
MEDICAL ALLIANCE, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1996 1995 1996
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Income ............................................ $ 85,389 $ 129,789 $ 370,746 $ 498,935
Less Series A Preferred dividends .................... -0- -0- 87,000 87,000
Less charge for cancellation of put feature ........... -0- -0 180,000 -0-
---------- ---------- ---------- ----------
Net income applicable to common stock ................. $ 85,389 $ 129,789 $ 103,746 $ 411,935
========== ========== ========== ==========
Weighted average common shares outstanding before SAB
Topic 4-D shares .................................... 2,271,369 2,375,149 2,061,675 2,349,158
SAB Topic 4-D computation: (1)
Incremental common shares outstanding applicable to
options issued within one year of the
offering (2) ...................................... 174,380 169,424 174,380 169,424
Incremental common shares outstanding applicable to
the Series B Preferred Stock issued within one year
of the Offering (3) ............................... 565,863 565,863 565,863 565,863
Common Stock outstanding including all SAB Topic 4-D
Shares .............................................. 3,011,612 3,110,436 2,801,918 3,084,445
---------- ---------- ---------- ----------
Computation of primary shares outstanding:
Incremental common shares outstanding applicable to
"In the money" options and warrants based on the
estimated average fair market value of the stock
during the year (2) ............................... 37,962 559,854 37,962 559,854
---------- ---------- ---------- ----------
Primary shares outstanding ............................ 3,049,574 3,670,290 2,839,880 3,644,299
---------- ---------- ---------- ----------
Computation of fully diluted shares outstanding;
Incremental common shares outstanding applicable to
Series A Preferred Stock (3) ...................... 679,035 679,035 679,035 679,035
Fully diluted shares outstanding ...................... 3,728,609 4,349,325 3,518,915 4,323,334
---------- ---------- ---------- ----------
Computation of earning per common share:
Primary earnings per common share (4) ............... $ 0.03 $ 0.04 $ 0.04 $ 0.11
---------- ---------- ---------- ----------
Fully diluted earnings per common share (5) ......... $ 0.02 $ 0.03 $ 0.04 $ 0.11
---------- ---------- ---------- ----------
</TABLE>
(1) SAB Topic 4-D requires Registrants to report common stock, convertible
preferred stock, options, warrants and other common stock equivalents
issued within one year of an offering as issued and outstanding for all
periods reported.
(2) Determined using the Treasury Stock Method.
(3) Determined using the "If Converted" Method.
(4) Computed as net income applicable to common shares divided by primary
shares outstanding..
(5) Computed as the more dilutive of either primary earning per share or net
income divided by fully diluted shares outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 SEP-30-1996
<CASH> 1,408,508 871,441
<SECURITIES> 0 0
<RECEIVABLES> 3,682,000 5,525,537
<ALLOWANCES> 1,113,314 1,377,602
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,207,516 6,029,837
<PP&E> 3,892,721 5,967,862
<DEPRECIATION> 1,699,930 2,719,499
<TOTAL-ASSETS> 6,443,363 9,452,501
<CURRENT-LIABILITIES> 2,294,175 4,058,400
<BONDS> 2,353,415 3,954,201
0 0
1,595 1,595
<COMMON> 4,678 4,774
<OTHER-SE> 2,424,253 2,824,640
<TOTAL-LIABILITY-AND-EQUITY> 6,443,363 9,452,501
<SALES> 0 0
<TOTAL-REVENUES> 11,177,138 12,849,776
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 1,884,709 2,225,484
<INTEREST-EXPENSE> 246,655 245,505
<INCOME-PRETAX> 973,491 870,835
<INCOME-TAX> 395,342 371,900
<INCOME-CONTINUING> 578,149 498,935
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 578,149 498,935
<EPS-PRIMARY> .10 .11
<EPS-DILUTED> .10 .11
</TABLE>
