FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2000
Commission File Number 1-8635
AMERICAN MEDICAL ALERT CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
New York 11-2571221
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3265 Lawson Boulevard, Oceanside, New York 11572
(Address of principal executive offices)
(Zip Code)
(516) 536-5850
(Issuer's telephone number, including area code)
Check whether the issuer (1) 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 6,414,111 shares of $.01 par
value common stock as of Nov 13, 2000.
<PAGE>
AMERICAN MEDICAL ALERT CORP.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Financial Statements.
Report of Independent Accountants 1
Condensed Consolidated Balance Sheets for September 30, 2000 3
and December 31, 1999
Condensed Consolidated Statements of Income for the 4
Nine Months Ended September 30, 2000 and 1999
Condensed Consolidated Statements of Income for the 5
Three Months Ended September 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows for 6
the Nine Months Ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 15
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
American Medical Alert Corp. and Subsidiary
Oceanside, New York
We have reviewed the condensed consolidated balance sheet of American Medical
Alert Corp. and Subsidiary as of September 30, 2000 and the related condensed
consolidated statements of income for the three-month and nine-month periods
then ended and cash flows for the nine- month period then ended. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended (not presented herein); and in our report dated February
17, 2000 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
The accompanying condensed consolidated statements of income for the three-month
and nine-month periods ended September 30, 1999 and cash flows for the
nine-month period ended September 30, 1999 of American Medical Alert Corp. and
Subsidiary were not audited or reviewed by us, and accordingly, we do not
express an opinion or any other form of assurance on them.
November 13, 2000 /s/Margolin, Winer & Evens LLP
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERICAN MEDICAL ALERT CORP.
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AMERICAN MEDICAL ALERT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September December 31,1999*
30, 2000 -----------------
(Unaudited)
-----------
CURRENT ASSETS:
<S> <C> <C>
Cash $176,367 $ 953,734
Accounts and notes receivable
(net of allowance for doubtful accounts of $225,000 and $75,000) 2,686,824 2,255,640
Inventory 729,560 791,572
Prepaid expenses and other current assets 652,441 342,548
Deferred income tax benefit 156,000 156,000
----------- -----------
Total Current Assets 4,401,192 $4,499,494
INVENTORY OF MEDICAL DEVICES HELD FOR LEASE-AT COST 1,498,000 988,000
FIXED ASSETS:
(Net of accumulated depreciation and amortization) 6,658,881 5,503,347
OTHER ASSETS 925,826 393,680
----------- -----------
TOTAL ASSETS $13,483,899 $11,384,521
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $814,780 $ 305,320
Accrued expenses 209,595 242,373
Current portion of long-term debt 313,190 98,801
----------- -----------
Total Current Liabilities 1,337,565 646,494
DEFERRED INCOME TAX LIABILITY 436,000 423,000
DEFERRED INCOME 11,766 17,166
LONG-TERM DEBT - LESS CURRENT MATURITIES 1,681,256 282,686
----------- -----------
Total Liabilities 3,466,587 1,369,346
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Preferred stock, $ .01 par value - authorized, 1,000,000 shares; none
issued and outstanding
Common stock - $.01 par value; authorized - 20,000,000 shares in 64,580 64,468
2000 and 10,000,000 shares in 1999; issued 6,458,021 shares in
2000 and 6,446,832 shares in 1999.
Additional paid-in capital 6,227,255 6,200,701
Retained earnings 3,831,509 3,856,038
----------- -----------
10,123,344 10,121,207
Less 43,910 shares of treasury stock, at cost (106,032) (106,032)
----------- -----------
Total Shareholders' Equity 10,017,312 10,015,175
----------- -----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $13,483,899 $11,384,521
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
* Derived from audited financial statements
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AMERICAN MEDICAL ALERT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
<S> <C> <C>
Revenues:
Services $7,432,917 $6,505,990
Product Sales 243,245 259,283
---------- ----------
7,676,162. 6,765,273
Cost and Expenses:
Costs related to services 3,364,427 2,408,436
Costs of products sold 172,999 249,130
Selling, general and administrative expenses 3,799,757 2,786,343
Write off of deferred costs (Note 4) 329,009 0
Interest expense 85,377 19,283
Other (income) expense (21,878) 98,365
---------- ----------
7,729,691 5,561,557
---------- ----------
Income (Loss) before Provision for Income Taxes (53,529) 1,203,716
(Credit) Provision for Income Taxes (29,000) 521,000
---------- ----------
NET INCOME (LOSS) $(24,529) $682,716
========= =========
Net Income (Loss) per Share:
Basic $ .00 $ .11
---------- ----------
Diluted $ .00 $ .11
---------- ----------
Weighted average number of common shares outstanding (Note 3):
Basic 6,411,760 6,373,708
========= =========
Diluted 6,411,760 6,471,171
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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AMERICAN MEDICAL ALERT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months Ended September 30,
2000 1999
---- ----
Revenues:
<S> <C> <C>
Services $2,515,844 $ 2,209,199
Product Sales 55,081 100,392
---------- -----------
2,570,925 2,309,591
Cost and Expenses:
Costs related to service 1,253,507 797,876
Costs of products sold 27,165 97,537
Selling, general and administrative expenses 1,360,516 950,530
Write off of deferred costs (Note 4) 329,009 0
Interest expense 47,302 9,382
Other (income) expense (5,391) 111,623
---------- -----------
3,012,108 1,966,948
---------- -----------
Income (Loss) before Provision for Income Taxes (441,183) 342,643
( Credit) Provision for Income Taxes (191,000) 150,000
---------- -----------
NET INCOME (LOSS) $ (250,183) $192,643
=========== ========
Net Income (Loss) per Share
Basic $ (.04) $ .03
---------- -----------
Diluted $ (.04) $ .03
---------- -----------
Weighted average number of common shares outstanding (Note 3):
Basic 6,411,111 6,377,922
---------- -----------
Diluted 6,411,111 6,391,691
---------- -----------
</TABLE>
See accompanying notes to condensed financial statements.
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AMERICAN MEDICAL ALERT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30,
2000 1999
---- ----
Cash Flows from Operating Activities:
<S> <C> <C>
Net income (loss) $(24,529) $ 682,715
Adjustments to reconcile net income to
Net cash provided by operating activities
Depreciation and amortization 1,277,444 923,790
Loss on unrecovered leased medical equipment 88,928 68,202
Change in Assets and Liabilities:
(Increase) in receivables (431,184) (25,868)
(Increase) Decrease in inventory 62,012 (753,105)
(Increase) in prepaid expenses, deferred taxes and other assets (157,392) (258,221)
Decrease in accounts payable, accrued
Expenses, taxes payable and deferred income 484,282 198,067
---------- ----------
Net Cash Provided by Operating Activities 1,299,561 835,580
---------- ----------
Cash Flows from Investing Activities:
Net expenditures for fixed assets (2,950,892) (1,605,540)
Proceeds from sale and leaseback of equipment 250,179 250,000
Payment for account acquisitions (376,779) -
Increase in notes receivable (219,582) (65,000)
---------- ----------
Net Cash Used In Investing Activities (3,297,074) (1,420,540)
---------- ----------
Cash Flows from Financing Activities:
Increase in notes payable - bank 1,300,000 19,825
Net proceeds from loans payable and capital lease
Obligations (106,520) -
Proceeds upon exercise of stock options 26,666 62,143
---------- ----------
Net Cash Provided by Financing Activities 1,220,146 81,968
Net Decrease in Cash (777,367) (502,992)
Cash, Beginning of Period 953,734 1,419,842
---------- ----------
Cash, End of Period $176,367 $ 916,850
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 85,377 $ 9,901
---------- ----------
Income Taxes $231,646 $ 319,780
---------- ----------
See accompanying notes to condensed financial statements.
</TABLE>
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AMERICAN MEDICAL ALERT CORP.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. General:
These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1999
included in the Company's Annual Report on Form 10-KSB.
2. Results of Operations:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all (consisting only of normal recurring accruals)
adjustments necessary to present fairly the financial position as of September
30, 2000, and the results of operations and cash flows for the nine and three
months ended September 30, 2000 and 1999.
The accounting policies used in preparing these financial statements
are the same as those described in the December 31, 1999 financial statements.
The results of operations for the nine and three months ended September
30, 2000 are not necessarily indicative of the results to be expected for any
other interim period or for the full year.
3. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share" which changes the methodology of calculating
earnings per share. SFAS No. 128 requires the disclosure of diluted earnings per
share regardless of its difference from basic earnings per share. The Company
adopted SFAS No. 128 in December 1997. Earnings per share data for the nine and
three months ended September 30, 2000 and 1999 is presented in conformity with
this pronouncement.
The following table is a reconciliation of the numerators and
denominators in computing earnings per share:
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<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000 Income (Loss) Shares Per-Share
------------------------------------ (Numerator) (Denominator) Amounts
----------- ------------- -------
<S> <C> <C> <C>
Basic EPS -
(Loss) available to common stockholders
Effect of dilutive securities - $ (24,529) 6,411,760 $.00
Options and warrants ====
Diluted EPS - -0- -0-
---------- ---------
(Loss) available to common
Stockholders and assumed conversions $ (24,529) 6,411,760 $.00
========== ========= ====
Three Months Ended September 30, 2000
-------------------------------------
Basic EPS - (Loss) available to
Common stockholders $ (250,183) 6,414,111 $.(04)
Effect of dilutive securities - ====
Options and warrants -0- -0-
Diluted EPS - (Loss) available to ---------- ---------
Common stockholders and assumed
Conversions $ (250,183) 6,414,111 $.(04)
========== ========= ====
Nine months Ended September 30, 1999
------------------------------------
Basic EPS -Income available to common
Stockholders $682,715 6,373,708 $.11
Effect of dilutive securities - ====
Options and warrants -0- 97,463
Diluted EPS -Income available to -------- ---------
Common stockholders and
assumed conversions $682,715 6,471,171 $.11
======== ========= ====
Three Months Ended September 30, 1999
-------------------------------------
Basic EPS - Income available to
Common stockholders $192,643 6,377,922 $.03
Effect of dilutive securities - ====
Options and warrants -0- 13,769
Diluted EPS -Income available to --------- ---------
Common stockholders and assumed
Conversions $192,643 6,931,691 $.03
======== ========= ====
</TABLE>
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<PAGE>
4. Major Customers:
The Company provides services to Medicaid home care programs in over
ten states. During the three and nine months ended Sept. 30, 2000 and 1999, the
Company had revenue from a contract with the City of New York, Human Resources
Administration, Home Care Services Program (HCSP) which represented,
respectively, 37% of total revenue in the 2000 periods and 41% of total revenue
in the 1999 periods. The contract was effective through June 30, 1999. In
January 1999, the Company submitted its proposal to HCSP to renew and extend the
contract. Since June 30, 1999, the Company has continued to provide service
while awaiting HCSP's selection of a provider under the new contract. On July
14, 2000, in keeping with similar extensions, the City of New York executed a
contract extension extending the HCSP contract for the period from July 1, 1999
through June 30, 2000. As of November 14, 2000, the City of New York is still
evaluating the subject award. If the Company is chosen to continue to provide
the services and is awarded a new contract, there can be no assurance that the
same level of revenues will be sustained due to a variety of factors including
pricing, number of subscribers to be serviced, and the amount of time that
passes before the renewal agreement is acted upon by the municipality. Depending
on how HCSP may award the HCSP contract, pricing on an individual subscriber
basis may be lower than current levels. If HCSP does not renew the contract, a
significant amount of the Company's revenue would be lost, which would have a
material adverse effect on operating results, and in addition, there most likely
would be a write-down of the Company's leased medical devices. The extent and
significance of the write down will be dependent upon the length of the
transition period to the new provider and subject to management's ability to
place these devices with other providers. As of Sept. 30, 2000 and December 31,
1999 accounts receivable from the contract represented 58% and 62% of accounts
receivable, and leased medical devices in service under the contract represented
29% and 38%, respectively, of leased medical devices. At September 30, 2000 the
Company has incurred legal and other fees of approximately $329,009 relating to
the contract extension. As a result of the protracted length of time associated
with a decision in this matter, the Company has determined it is appropriate to
write off these deferred expenses during the current period. Future cost
relating to the contract will be expensed as incurred.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. The discussion should be read in
conjunction with the consolidated financial statements contained in the latest
Annual Report dated December 31, 1999.
This discussion contains forward-looking statements which, in addition to
assuming a continuation of the degree and timing of customer utilization and
rate of renewals of contracts with the Company at historical levels, are subject
to a number of known and unknown risks that, in addition to general economic,
competitive and other business conditions, could cause actual results,
performance and achievements to differ materially from those described or
implied in the forward-looking statements.
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LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company has amended, subject to formal documentation, its Revolving Credit
Facility (the "Facility"). The Facility, which will expire on May 31, 2002, was
increased to $2,500,000 (based upon 75% of eligible accounts receivable and 50%
of inventory, as defined in the agreement with respect to the Facility).
Borrowings under the Facility bear interest at the prime rate or the LIBOR Rate
plus 2.50%, at the Company's option, and are collateralized by the Company's
assets. There is $1,300,000 outstanding under the Facility as of September 30,
2000. The agreement with respect to the Facility provides for negative and
affirmative covenants including those related to tangible net worth, working
capital and other borrowings. At December 31, 1999, there were no amounts
outstanding under the Facility.
The Company's working capital on September 30, 2000 was $3,063,627 as compared
to $3,853,000 on December 31, 1999. During 2000, the Company anticipates that it
will make capital investments of approximately $4,000,000, of which
approximately $2,950,000 was expended during the nine months ended September 30,
2000. Of the amount expended in the first nine months, approximately $2,000,000
was used for the research and development, design, production and purchase of
additional systems that the Company is prepared to lease and/or sell to
customers. The balance of $950,000 has been used primarily for the enhancement
of management information systems.
During the nine months ended September 30, 2000, the Company made a secured loan
of $300,000 to a provider agency to assist that agency with the expansion of its
personal emergency response system ("PERS") business. In addition, as part of
the Company's sales strategy, the Company paid $376,779 during the nine months
ended September 30, 2000 to purchase and/or convert to its systems, various
local and national provider agencies. The Company believes that its present cash
and working capital position, its borrowing availability and future anticipated
revenue will be sufficient to meet its cash and working capital needs for the
next twelve months.
The Company derives a significant portion of its revenue from one contract with
the City of New York's Human Resources Administration (HRA), Homecare Services
Program (HCSP). During the three and nine months ended September 30, 2000 and
1999, the Company had revenue from this contract, which represented 37% of total
revenue in the 2000 periods and 41% of total revenue in the 1999 periods. As of
September 30, 2000 and December 31, 1999, accounts receivable from the contract
represented, respectively, 58% and 61% of accounts receivable. Management has
recently met with representatives of HRA to develop a means of streamlining the
payment process. Leased medical devices in services relating to this contract
represented 29% and 38% of total leased medical devices at September 30, 2000
and December 31, 1999, respectively. The contract with HCSP expired on June 30,
1999 and the Company continues to service this contract.
As previously reported, in January 1999, the Company and several other companies
submitted proposals to provide the PERS services on behalf of the City of New
York through June 30, 2003. On October 22, 1999, the Company was advised by HCSP
that another vendor had been preliminarily recommended. The Company's management
reviewed HCSP's preliminary
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<PAGE>
recommendation and assessed alternative options and courses of action. On
November 1, 1999, the Company submitted a formal protest pursuant to paragraph
4-04 of the Rules of the Procurement Policy Board of the City of New York to
contest the preliminary award. In July 2000, the Agency's Chief Contracting
Officer advised the Company that the award had not yet been made. It was further
stated that this protest had not persuaded the Agency to not award the contract
to the other vendor. The Company, believing in the merit of its protest,
appealed this determination in accordance with the procurement rules relating to
the contract to the Commissioner of HRA. On August 9, 2000, the Company received
notification from the Commissioner of HRA that the appeal of the determination
of the Agency's Chief Contracting Officer was denied. The Company continues to
believe in the merit of its protest and is evaluating all possible options in
connection with this matter. On July 14, 2000, in keeping with similar
extensions, the City of New York executed a contract extension extending the
agreement for the period from July 1, 1999 through June 30, 2000. As of November
14, 2000, the City of New York is still evaluating the subject award. The
Company continues to serve as the current HCSP vendor. The Company's current
revenues and the current subscriber base relating to this agreement have
increased slightly since the levels achieved in the 3rd quarter of 1999.
If the HCSP awards the contract to another vendor, approximately 37% of the
Company's revenues would be lost, having a material adverse effect on operating
results and cash flows. In addition, it is possible that significant adjustments
to inventory and fixed assets associated with the contract would occur. The
Company believes, however, that based upon a transition method implemented by
HCSP, the Company could expect that revenues from HCSP would continue on a
diminishing scale until all units are removed from clients' homes. At this time,
no determination can be made on how the transition to another vendor would be
accomplished, and in what time frame the transition would be made, and thus the
full financial impact cannot be assessed at this time. If the Company does
receive the renewal of the contract, there can be no assurance that the same
level of revenues will be sustained due to a variety of factors including
pricing, number of subscribers to be serviced, and the amount of time that
passes before the renewal agreement is acted upon by HCSP. Depending on how HCSP
may award the new contract, pricing on an individual subscriber basis may be
lower than the current levels.
In light of the possibility that the Company's contract with HCSP may not be
renewed, the Company's management has developed and is implementing an expanded
business plan to minimize the potential loss through a reduction in HCSP's
related overhead and the re-deployment of assets to other programs. In addition,
the Company focused on, and intends to continue to build its subscriber base
through consumers, healthcare agencies, health maintenance organizations,
durable medical equipment providers, retirement communities, hospitals and other
governmental agencies. In addition, the Company is continuing to invest in new
products, services, and initiatives.
CURRENT BUSINESS DEVELOPMENTS
-----------------------------
For the purpose of revenue stream diversification, the Company has successfully
entered into contractual relationships with a variety of significant healthcare
entities ranging from large integrated hospital networks to home care agencies
and state Medicaid reimbursed programs. As
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a result of these new strategic alliances, as well as support among its
distributor and referral networks, the Company has already achieved an 18% net
new subscriber growth in the first nine months of 2000, as compared to the
entire year of 1999. In addition to focusing on the Company's core business, the
Company added the following two new complementary product lines that reinforce
its unique position in the PERS marketplace and leverage its 24-hour monitoring
platform.
The Med-Time medication reminder and dispensing system is a unique product
designed to assist individuals with management of complex medication regimens.
The product has given AMAC a competitive advantage in the market space.
SafeCom,Inc. ("SafeCom"), a wholly owned subsidiary of the Company, is the
Company's commercial security division, which leverages the Company's
twenty-four hour monitoring capabilities to provide interactive security
monitoring services and security related applications to large and small retail
establishments. The Company is concluding a successful one-year pilot program
with a key strategic customer. Significant benefits and cost savings have been
realized during the trial. The Company is now ready to introduce a national
sales and marketing program for its SafeCom products in response to the
successful pilot program. The Company anticipates that the SafeCom marketing
initiative will further add to its revenue diversification efforts.
As stated in the Company's Annual Report, the Company's management has developed
and is implementing a business plan to enhance shareholder value by expanding
upon the Company's core competency, products and services within the 24 hour
healthcare monitoring platform. After extensive research of current trends and
forecasted needs within the healthcare industry and the needs of the Company's
existing clients, the Company has developed a new service umbrella, H-Link,
through which the Company anticipates expanded visibility, increased revenue and
penetration of new markets. Under the H-Link strategy, the Company's flagship
VoiceCare personal emergency response system and the Med-Time medication
reminder and dispensing system are being repositioned as products which are part
of a wider array of healthcare communication and monitoring services. The
Company is currently developing other components of the H-Link platform
including disease management services via home-care monitoring and on-call
telecommunications services. The H-Link brand was officially introduced at the
2000 National Association of Homecare Conference. The Company experienced a
positive reception by conference participants.
RESULTS OF OPERATIONS
---------------------
Revenue from services (recurring monthly revenues, RMR) increased $926,927 for
the nine months ended September 30, 2000 as compared to the same period in 1999,
an increase of 14%, and increased $306,645 for the three months ended September
30, 2000 as compared to the same period in 1999, an increase of 14%. The HCSP
revenue has remained virtually unchanged while the Company's realized revenue
increases have been derived virtually exclusively from other program endeavors.
The Company has experienced success in growing its customer base outside
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the contract with the City of New York through a variety of marketing efforts
that have continued to contribute to increasing RMR. These efforts include
competitive conversions (i.e. luring potential customers away from competitors
with attractive pricing and services), strategic partnerships with healthcare
provider systems, additional entry into Medicaid reimbursed marketplaces,
increased sales of the Company's proprietary medication compliance device
(MED-TIME) and increased sales from the Company's wholly owned commercial
security services subsidiary (SAFECOM). As a result, the Company has doubled its
net new subscriber growth in the first three (3) quarters of fiscal year 2000 in
comparison to fiscal year 1999. Costs related to services as a percentage of RMR
for the nine months ended September 30, 2000 and 1999 were 45% and 37%, and for
the three months ended September 30, 2000 and 1999 were 50% and 36%,
respectively. The increase in costs are related to services resulted from
increased depreciation of medical devices, additional response center personnel,
enhancement of the Company's information systems and personnel, and increases in
telecommunication costs resulting from the expansion of available services to
subscribers.
Revenue from product sales for the nine months ended September 30, 2000 was
$243,245, a decrease of $16,038 as compared to the same period in 1999. Revenue
from product sales for the three months ended September 30, 2000 was $55,081, a
decrease of $45,311 as compared to the same period in 1999. Gross profit on
product sales for the nine months ended September 30, 2000 and 1999 was 29% and
4%, respectively. Gross profit on product sales for the three months ended
September 30, 2000 and 1999 was 51% and 3%, respectively. The gross profit
percentage increased in 2000 as a result of the sale of the Company's new Model
450 Smart Activator and sales of the Company's products to retirement
facilities, which are at higher profit margins.
Selling, general and administrative expenses increased by $1,013,414 for the
nine months ended September 30, 2000 as compared to the same period in 1999, an
increase of 36%. Selling, general, and administrative expenses as a percentage
of total revenues for the nine months ended June 30, 2000 and 1999 were 49% and
41%, respectively. Selling, general and administrative expenses increased by
$410,166 for the three months ended September 30, 2000 as compared to the same
period in 1999, an increase of 43%. Selling, general, and administrative
expenses as a percentage of total revenues for the three months ended September
30, 2000 and 1999 were 53% and 41% respectively. Additional expenses incurred in
2000 were the result of the hiring of executive and management personnel,
expansion of the sales department, increased sales and marketing expenses, and
start up costs associated with the development of the Company's new subsidiary,
SafeCom. The Company's objective in acquiring the services of senior
healthcare executives was analysis, development, and implementation of a revised
business plan designed to assure acquisition of complementary and synergistic
business opportunities in the healthcare services and telecommunications
industry. A portion of the additional expenses are attributed to legal, travel
and ancillary services incurred in the analysis and development of the Company's
revised business plan. The Company's activities this quarter included
establishing a healthcare advisory board providing management and the Company's
Board of Directors with perspective and direction for the H-Link marketing
initiative. The advisory board is comprised of leading healthcare professionals
with diverse areas of expertise.
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In the third quarter, the total of the current and deferred costs relating to
the Company's protest in connection with the extension of the HCSP contract with
the City of New York have been charged against income, and shown as a period
expense, totaling $329,009.
Interest expense for the nine months ended September 30, 2000 and 1999 was
$85,377 and $9,901, respectively. Interest expense for the three months ended
September 30, 2000 and 1999 was $47,302 and $4,386, respectively. Interest in
2000 increased as a result of additional borrowings needed to fund inventory and
equipment needs for new subscribers, management systems, and the start up of the
Company's new subsidiary, SafeCom.
The Company's loss before provision for income taxes for the nine months ended
September 30, 2000 was $53,529 which represents a decrease of $ 1,257,245 from
the net income reported in the 1999 period. The Company's loss before provision
for income taxes for the three months ended September 30, 2000 was $441,183. The
decrease in income, and resulting loss before provision for income taxes in 2000
resulted from an increase in the Company's operating, selling and administrative
costs resulting from the hiring of executive and management personnel, expansion
of the sales department, increased sales and marketing expenses and the write
off of expenses related to the extension of the HSCP contract, all of which were
offset by an increase in service revenues.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
21. Subsidiaries of the Small Business Issuer
27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN MEDICAL ALERT CORP.
Dated: November 10, 2000 By: /s/ Howard M. Siegel
-----------------------------------------
Howard M. Siegel
President and Chief Operating Officer
By: /s/ Richard A. Bennett
-----------------------------------------
Richard A. Bennett
Chief Financial Officer
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SUBSIDIARY OF THE SMALL BUSINESS ISSUER
SAFECOM, INC., a wholly owned subsidiary of the Company, is a corporation
organized under the laws of the State of New York.
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