UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 1997
Commission file number 333-05826-A
[ ] TRANSITION REPORT UNDER SECTION 13 OR 16(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period From ___________ To _______________.
ATLANTIC INTEGRATED HEALTH INCORPORATED
(Exact name of small business issuer as specified in its charter)
North Carolina 56-1966823
- ------------------------ ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
825 Kennedy Avenue
New Bern, North Carolina 28560
----------------------------------------
(Address of principal executive offices)
(919) 514-0057
--------------
(Registrant's telephone number)
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 past 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](1)
(1) The Registrant has not been subject to filing requirements under
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, for the
past 90 days.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding as of October 6, 1997
----- ---------------------------------
Primary Class, $1.00 par value 272,500
Referral Class, $1.00 par value 242,000
Nonprofit Class, nonvoting, $1.00 par value 2,500
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ATLANTIC INTEGRATED HEALTH INCORPORATED
Balance Sheets
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1997 1996
--------- ---------
(Unaudited) (Note)
<S> <C> <C>
Cash ...................................................... $ 107,037 $ 51,208
Accounts receivable ....................................... 43,190 0
Prepaid expenses .......................................... 8,183 0
--------- ---------
Total current assets ..................... 158,410 51,208
Investment ................................................ 1,000 0
Office equipment, net ..................................... 10,576 3,001
Deferred costs ............................................ 18,247 21,669
--------- ---------
Total Assets .............................................. $ 188,233 $ 75,878
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities - Accounts payable .................... $ 28,435 $ 78,253
--------- ---------
Stockholders' equity:
Common stock - $1 par value-
Primary class, authorized 1,000,000 shares; 272,500
and 140,000 shares issued and outstanding in
1997 and 1996, respectively .................... 272,500 162,500
Referral class, authorized 1,800,000 shares; 242,000
and 26,000 shares issued and outstanding in
1997 and 1996, respectively .................... 242,000 26,000
Nonprofit class, nonvoting, authorized 200,000
shares; 2,500 shares issued and outstanding in
1997 and 1996, respectively .................... 2,500 2,500
Additional paid-in capital ............................ 74,000 74,000
Syndication costs ..................................... (95,000) (75,000)
Stock subscription and shareholder notes receivable ... (70,590) (18,375)
Accumulated deficit ................................... (265,622) (174,000)
--------- ---------
Total stockholders' equity (deficit) ...................... 159,788 (2,375)
--------- ---------
Total liabilities and stockholders' equity (deficit) ...... 188,223 $ 75,878
========= =========
</TABLE>
Note: The balance sheet as of December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles.
See notes to financial statements.
<PAGE>
ATLANTIC INTEGRATED HEALTH INCORPORATED
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue ..................................... $ 43,856 $ 16,500 $ 245,480 $ 16,500
--------- --------- --------- ---------
Expenses:
Consulting fees ......................... 25,444 0 98,826 34,821
Salaries and wages ...................... 62,587 0 192,191 22,000
Relocation expenses ..................... 0 0 0 8,013
Recruiting and education ................ 380 0 5,009 7,346
Office expense and other ................ 11,355 1,650 32,113 16,298
Rent .................................... 1,441 1,200 3,900 2,800
Depreciation and amortization ........... 1,756 167 5,063 167
--------- --------- --------- ---------
Total expenses ............. 102,963 3,017 337,102 91,445
--------- --------- --------- ---------
Net income (loss) ........................... $ (59,107) 13,483 (91,622) (74,945)
========= ========= ========= =========
Net income (loss) per share ................. (.11) .09 (.24) (.78)
Weighted average number of shares outstanding 517,000 143,500 375,694 95,500
</TABLE>
See notes to financial statements.
<PAGE>
ATLANTIC INTEGRATED HEALTH INCORPORATED
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (74,945) $ (91,622)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation and amortization ....................................... 167 5,063
Increase in accounts receivable ..................................... (54,638) (43,190)
Increase in prepaid expenses ........................................ 0 (8,183)
Increase in other assets ............................................ (2,282) 0
Noncash contributions of capital .................................... 24,800 0
Increase (decrease) in accounts payable ............................. 17,784 (69,818)
--------- ---------
Net cash used in operating activities ........................ (89,114) (207,750)
--------- ---------
Cash flows from investing activities:
Purchase of office equipment .............................................. (3,334) (9,206)
Purchase of investment .................................................... 0 (1,000)
Payment of organization costs ............................................. (5,045) 0
--------- ---------
Net cash used in investing activities ........................ (8,380) (10,206)
--------- ---------
Cash flows provided by financing activities: .................................. 126,500 261,410
Proceeds from issuance of common stock
Collection of stock subscription receivable ............................... 0 12,375
--------- ---------
Net cash provided by financing activities .................... 126,500 273,785
--------- ---------
Net increase in cash .......................................................... 29,006 55,829
Cash, beginning of period ..................................................... 3,786 51,208
--------- ---------
Cash, end of period ........................................................... $ 32,792 $ 107,037
========= =========
Supplemental disclosure:
Syndication costs financed through accounts payable ....................... $ 0 $ 20,000
Write-off of subscriptions receivable ..................................... 0 6,000
Common stock issued in exchange for notes ................................. 0 70,590
========= =========
</TABLE>
See notes to financial statements.
<PAGE>
ATLANTIC INTEGRATED HEALTH INCORPORATED
FORM 10-QSB
SEPTEMBER 30, 1997
Notes to Financial Statements (Unaudited)
1. INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited financial
statements contain all necessary adjustments, which are of a normal recurring
nature, to present fairly the financial position of Atlantic Integrated Health
Incorporated as of September 30, 1997 and 1996, the results of operations for
the three and nine months ended September 30, 1997 and 1996, and the cash flows
for the nine months ended September 30, 1997 and 1996, in conformity with
generally accepted accounting principles. Operating results for the three and
nine month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1997.
These unaudited interim financial statements should be read in
conjunction with the financial statements and related notes contained in the
Company's Annual Report on Form 10-KSB dated December 31, 1996.
2. INVESTMENT
In January 1997, the Company, in conjunction with Kanawha Insurance
Company ("Kanawha"), formed The Beacon Company ("Beacon"). The Company and
Kanawha each contributed $1,000 of capital to Beacon; and as a result, each owns
50% of Beacon. The Company anticipates that Beacon will market and sell health
care services and related employee benefit products, primarily in eastern North
Carolina. Management expects that this company will begin operations in 1998.
3. STATEMENT OF OPERATIONS
On May 23, 1996, the Company entered into a Memorandum of Understanding
("MOU") with several other eastern North Carolina based providers. The purpose
of the MOU was to develop a business plan for the development and operation of a
management services organization. Pursuant to the provisions of the MOU, the
Company performed extensive services and incurred other direct costs during the
third quarter of 1996. As a result, the statement of operations for the three
months ended September 30, 1996 and 1997 are not comparable because the
Company's expenditures during this time period were reimbursed by the project.
4. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing the net income
(loss) for the period by the weighted average number of shares of common stock
outstanding during the period.
5. EXTENSION OF STOCK OFFERING
On September 22, 1997, the Company filed a Post Effective Amendment No.
2 to its Registration Statement on Form SB-2 to extend its stock offering which
terminated on July 28, 1997. The Securities and Exchange Commission declared the
Post Effective Amendment No. 2 effective on September 30, 1997. During the
initial offering period from December 30, 1996 through July 28, 1997, the
Company sold an aggregate of 116,000 Primary Class Common Shares and 216,000
Referral Class Common Shares. The minimum number of shares was sold by May 29,
1997 and, therefore, all proceeds
<PAGE>
from such shares were released from an escrow account at Centura Bank and
distributed to the Company. The Company anticipates that it will continue to
offer shares of its capital stock under the Post Effective Amendment No. 2 until
April 28, 1998.
ITEM 2. PLAN OF OPERATION
THIS FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED IN THIS FORM 10-QSB THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," BELIEVE," "ANTICIPATE,"
"ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR
COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES,
AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF FACTORS,
INCLUDING THOSE DESCRIBED UNDER THE CAPTION "RISK FACTORS" CONTAINED IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996.
The following discussion of the results of the operations and financial
condition of the Company should be read in conjunction with the Company's
Financial Statements and the related notes thereto.
The Company is an independent, physician owned and governed, integrated
medical practice group network, organized to provide administrative services to
participating physicians and medical practice groups. The Company was
incorporated on December 5, 1994 and since its inception, has focused its
efforts and expended contributed funds on securing additional capital, expanding
its network of physicians and medical practice groups, exploring integration
models, hiring a Chief Operating Officer and retaining legal counsel and other
consultants. The goal of these efforts is to develop a community-based,
integrated, health care delivery system whose mission is to provide quality,
cost-effective health care.
The Company is in the development stage and is in the process of
integrating, economically and clinically, physicians now practicing primarily in
single specialty practice groups into a larger multi-specialty network of
physicians and medical practice groups. The Company has initiated efforts to
develop with certain hospitals and other health care providers a mutually
acceptable business plan for the joint provision of administrative services and
greater coordination of the delivery of health care services. No such mutually
acceptable business plan has yet been developed, and to date the Company has not
entered into any arrangements for such joint provision of administrative
services or greater coordination of the delivery of health care services.
During the next year, the Company intends to take steps toward
achieving this goal by (i) expanding its existing network of physicians and
medical practice groups; (ii) creating alliances with other strategic providers
and payors; (iii) furnishing medical management and other managed care services
to payors; and (iv) providing integrated administrative services to
participating physicians and medical practice groups. In order to accomplish
these objectives, the Company is using the proceeds from its current offering
and administrative fees received from participating physicians and medical
practice groups to continue development activities, managed care contracting,
and provided administrative services to participating providers. While the
Company does not anticipate any purchase or sale of plant or any significant
equipment, the Company does anticipate the addition of personnel as the business
of the Company develops. The number of new employees added to the Company will
vary with the speed and scope of success in negotiating provider contracts with
buyers of health care services and in recruiting participating providers.
The Company expects to continue to develop its operations during the
remainder of 1997 and 1998. Although management of the Company is confident that
employers, insurance carriers, HMOs
<PAGE>
and other buyers of health care services are interested in accessing the
Company's network and health plan management services, management finds it
difficult to forecast when exactly the Company's operations will become
profitable. Management believes that the Company's profitability is largely
dependent upon several factors, including (i) access to additional capital; (ii)
the number of contracts and long-term relationships with insurance carriers,
managed care health plans and other buyers of health care services the Company
is able to negotiate and enter into; and (iii) changing market conditions.
Throughout 1997, the Company has engaged in negotiations with several
insurance carriers and HMOs seeking to access the Company's network and health
plan management services. In addition, the Company has met directly with the
management of major regional employers and their employee benefits consultants
to discuss the Company's network and health plan management services. Although
no assurance can be given, the Company believes that it will continue to
generate income from access and management fees paid to the Company from
insurance carriers, HMOs and other buyers of health care services.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES
During the nine months ended September 30, 1997, the Company issued an
aggregate of 116,000 Primary Class Common Shares and 216,000 Referral
Class Common Shares. These shares were issued and sold under the
Company's Registration Statement on Form SB-2, as amended.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
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.
--------
Exhibit
Number Description
------ -----------
27.1 Financial Data Schedule (electronic
filing only)
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ending
September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ATLANTIC INTEGRATED
November 11, 1997 HEALTH INCORPORATED
By: /s/ J. Philip Mahaney Jr., M.D.
J. Philip Mahaney, Jr., M.D.
President and Chief Executive Officer
(principal executive officer)
By: /s/ Stephen W. Nuckolls
Stephen W. Nuckolls
Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Location
27.1 Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 107,037
<SECURITIES> 0
<RECEIVABLES> 43,190
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 158,410
<PP&E> 12,550
<DEPRECIATION> 1,974
<TOTAL-ASSETS> 188,233
<CURRENT-LIABILITIES> 28,435
<BONDS> 0
0
0
<COMMON> 517,000
<OTHER-SE> (357,212)
<TOTAL-LIABILITY-AND-EQUITY> 188,233
<SALES> 245,480
<TOTAL-REVENUES> 245,480
<CGS> 0
<TOTAL-COSTS> 337,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (91,622)
<INCOME-TAX> 0
<INCOME-CONTINUING> (91,622)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (91,622)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
