<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q SB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996
__________
AMERICAN MEDCARE CORPORATION
(Exact name of Small Business Issuer as specified in its charter)
Delaware 59-2248411
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2970 Clairmont Road, Suite 1050, Atlanta Georgia 30329
(Address of principal executive offices) (Zip Code)
404/315-0450 404/320-1080
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.YES X NO
----- -----
42,916,002 shares, $.001 par value as of July 31, 1996
(Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date)
Form 10-Q SB
Page 1 of 11
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AMERICAN MEDCARE CORPORATION
FORM 10-QSB
QUARTER ENDED JULY 31, 1996
TABLE OF CONTENTS
<TABLE>
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Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets
July 31, 1996 (unaudited) and January 31, 1996 3
Consolidated Statements of Operation (unaudited) 4
Three months ended July 31, 1996 and 1995
Consolidated Statements of Cash Flows (unaudited) 5
Three months ended July 31, 1996 and 1995
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and 6
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Default Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
Form 10-Q SB
Page 2 of 11
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Item 1. Financial Statements
<TABLE>
<CAPTION>
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
July 31, January 31,
1996 1996
---------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 16,826 $ 249,698
Accounts and notes receivable, net of allowance of
$26,205 and $90,388. 221,477 158,192
Prepaid expenses and other current assets 22,656 32,620
---------------------------------
Total current assets 260,959 440,510
---------------------------------
Property and equipment, net of depreciation of
$582,987 and $570,445. 50,480 54,372
Other intangible assets 65,304 52,548
Capitalized software development costs, net of
accumulated amortization of $651,530 and
$656,505. 28,992 19,511
---------------------------------
Total assets $ 405,735 $ 566,941
============= =============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
July 31, January 31,
1996 1996
---------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 311,553 $ 374,824
Accrued expenses 400,882 448,627
Deferred revenue 425,407 481,224
Current portion of long-term debt 289,361 335,542
---------------------------------
Total current liabilities 1,427,203 1,640,217
---------------------------------
Long-term debt, less current portion 569,154 544,780
Shareholders' equity (deficit)
Common Stock, $.001 par value - authorized 50,000,000 shares;
43,144,491 and 41,577,788 issued;
42,916,002 and 41,349,299 outstanding 43,144 41,577
Treasury Stock, 228,489 shares at cost (100,000) (100,000)
Stock purchase warrant 500,000 500,000
Additional paid-in capital 1,625,185 1,445,247
Accumulated deficit (3,658,952) (3,504,880)
---------------------------------
Total shareholders' equity (deficit) (1,590,623) (1,618,056)
---------------------------------
Total liabilities and shareholders' equity (deficit) $ 405,735 $ 566,941
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Form 10-Q SB
Page 3 of 11
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Item 1. Financial Statements
<TABLE>
<CAPTION>
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
July 31 July 31
----------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 586,069 $ 563,604 $ 1,185,075 $ 1,383,968
Cost of sales 121,665 98,542 244,025 356,663
-------------- ------------- -------------- --------------
Gross margin 464,404 465,062 941,050 1,027,305
Expenses:
Salaries and operating expenses 548,455 509,209 1,019,382 1,031,901
Depreciation and amortization 19,334 26,551 36,121 53,102
----------------------------- ------------------------------
567,789 535,760 1,055,503 1,085,002
----------------------------- ------------------------------
Loss from operations (103,385) (70,699) (114,452) (57,697)
Interest expense (24,326) (17,337) (43,500) (34,704)
Other income, net 2,212 3,232 2,883 115,673
----------------------------- ------------------------------
Income (loss) before income taxes (125,499) (84,804) (155,070) 23,271
Provision for income taxes 0 0 0 0
----------------------------- ------------------------------
Income (loss) $ (125,499) $ (84,804) $ (155,070) $ 23,271
============= ============ ============= =============
Earnings (loss) per share: $ 0.00 $ 0.00 $ 0.00 $ 0.00
============= ============ ============= =============
Weighted average number of shares 42,499,318 41,349,299 42,499,318 41,349,299
============= ============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Form 10-Q SB
Page 4 of 11
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Item 1. Financial Statements
<TABLE>
<CAPTION>
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
July 31
1996 1995
------------------------
<S> <C> <C>
Cash provided by (used for) operating activities
Net income (loss) $ (155,070) $ 23,271
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 33,189 63,402
Compensatory stock options 15,000 15,000
Changes in operating assets and liabilities:
Accounts and notes receivable (63,285) 29,827
Prepaid expenses and other current assets 9,964 932
Accounts payable and accrued expenses (111,016) 5,986
Deferred revenue (55,817) (33,993)
------------------------
(327,035) 104,425
------------------------
Cash provided by (used for) investing activities
Property and equipment expenditures (8,650) (11,977)
Other deferred charges (28,268) 0
Expenditures for software development costs (14,616) (500)
------------------------
(51,534) (12,477)
------------------------
Cash provided by (used for) financing activities
Proceeds from issuance long term debt 0 94,500
Repayment of note payable 0 (73,028)
Treasury stock 0 (100,000)
Issuance of common stock 166,505 0
Principal payments on long term debt (20,808) (18,104)
------------------------
145,697 (96,632)
------------------------
Net (decrease) in cash (232,872) (4,684)
Beginning, cash and cash equivalents 249,698 4,684
------------------------
Ending, cash and cash equivalents $ 16,826 $ 0
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
Form 10-Q SB
Page 5 of 11
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AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996
(UNAUDITED)
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q SB and Article 10
of Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended July 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
January 31, 1997. For further information, refer to the 10-KSB filed by
American Medcare Corporation for the year ended January 31, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
RESULTS OF OPERATIONS
Over the first half of the year, the Company's operational focus and objective
has been to develop balanced revenues between the primary profit centers, based
upon the organizational restructuring done over the past fiscal year. The three
key product lines and profit centers are the Large Systems products (Unix-
based), the low-end suite of Small Systems products (DOS- and Windows-based),
and the Electronic Data Interchange (EDI) products and services.
Quarterly Revenue Analysis
Overall net revenues for the second quarter remained relatively steady, down by
$12,939 or 2% from the first quarter, moving from $599,007 to $586,069. Unix
revenues were off by 1% compared to the first quarter, totalling $284,681 in the
first quarter and $280,840 in the second quarter. The revenues in the Small
Systems division, with the DOS and Windows products remained steady, moving from
$214,822 to $214,844.
The revenues in the EDI division were off by $9,120 or 9% from the first
quarter, moving from $99,504 to $90,384. Overall, the electronic claims volume
decreased from 240,984 claims in the first quarter to 224,116 in the second
quarter. Typically the summer months are the slowest quarter of the year with
lower patient visits to healthcare providers due to vacations, travel, etc.
Quarterly Margin Analysis
Overall gross margins remained steady for the second quarter compared to the
first quarter, moving down by 3% or $12,243, on total gross margins of $476,647
and $464,404, respectively.
Form 10-Q SB
Page 6 of 11
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AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996
(UNAUDITED)
The margins in the Large Systems division and Unix product line decreased for
the quarter by $12,578 or 5%, from $240,326 to $227,748. This decrease was
related to lower revenues and a slight increase in cost of sales. The margins
in the Small Systems division's DOS product line increased in the second quarter
by $10,592 or 7% over the first quarter, moving from $149,125 to $159,717. On a
per-unit basis, the Small Systems division continues to operate with high gross
margins.
Over the next 12 to 18 months, the Small Systems division is expected to be in a
position to increase its operating margins, with growing penetration in managed
care niches, particularly as the Windows-based product suite is fully rolled out
and marketed.
The margins in the EDI division and electronic services decreased in the second
quarter by $10,257 or 12%, moving from $87,196 to $76,939 due to a small,
seasonal drop in electronic claims volume and slightly increased expenses in the
division, and the startup costs relating to additional electronic services.
Electronic data interchange services, including electronic claims and patient
statements continue to increase on a monthly basis, tracking the increased
integration of healthcare service providers with payors.
Management expects future revenue growth in the Small Systems division as market
demand for an easy to use, low-cost product remains strong, targeted at the
significant market of smaller-sized healthcare providers. The Company considers
its multiple products and service lines to be a significant strength and
provides a competitive advantage. Management continues to pursue business
combination opportunities that would increase revenue growth, particularly
through the acquisition of user bases in niche markets.
Margins in the Unix-based, larger system environment remain low in comparison to
the Small Systems division product sets and services. Overall, the market
continues to be very competitive and allows little opportunity for price
increases.
Quarterly Operating Expenses
Overall operating expenses for the second quarter increased by $77,528 or 16%
over the first quarter, moving from $470,927 to $548,455. These operating
expenses were higher due to the following increases in salary and benefits
($29,631), contract labor costs ($11,977), marketing costs ($11,660), office
lease costs ($9,314), travel costs ($5,299), printing costs ($5,155), and
telephone costs ($3,111).
Salaries and benefits increased due to the additional sales staff associated
with the new direct sales group. The additional marketing, telemarketing,
printing and travel costs relate directly to increased sales and marketing
campaigns and increased sales staffs. The additional printing and marketing
costs were related to an increased, focused marketing campaign. The increased
office rent, telephone costs, and office supplies were due to the opening of
second business office in Atlanta during the first quarter.
The Company continues to use third-party vendors for hardware maintenance and
installations, where possible, in the continued trend towards more efficient
company operations.
Form 10-Q SB
Page 7 of 11
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AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996
(UNAUDITED)
Comparison to Prior Year Revenues
In contrast with the second quarter from last year, total net revenues increased
by 4% or $22,464, moving from $563,604 to $586,068.
The Large Systems division and Unix product line revenue decreased by $66,648 or
19%, from $347,488 to $280,840. This drop reflected the change in focus from
new installation sales to recurring revenue services. Compared with the same
quarter from last year, the Small Systems division revenues are up by $81,692 or
61%, moving from $133,152 to $214,844. This was due to an increased sales
staff, and the effectiveness of the division's advertising and marketing
campaigns.
The EDI division revenues have increased over the same quarter in the prior
year, from $82,964 to $90,384, an increase of $7,420 or 9%. This increase is
due to the rollout of additional products and services.
Comparison to Prior Year Margins
Overall gross margins remained steady compared to last year, totalling $465,062
for the second quarter last year, and $464,404 for the second quarter of this
year.
The margins in the Large Systems division and Unix product decreased by $38,378
or 14% from the second quarter of last year, moving from $266,126 to $227,748.
This reflected the change in focus from lower-margin sales and installation of
new systems to higher margins in recurring services and transaction-based
service products.
The margin in the Small Systems division increased by $34,927 or 28% for the
second quarter of the current year from the same quarter last year, moving from
$124,790 to $159,717. This increase was due to increased sales and marketing.
The margins in the EDI division increased by $2,794 or 4% for the second quarter
of the current year from the same quarter last year, moving from $74,145 to
$76,939. This was due to increased rollout and marketing costs.
Comparison to Prior Year Operating Expenses
Operating expenses for the second quarter increased by $39,248 or 8% from
$509,207 to $548,455 compared to the second quarter of last year. This was due
to increased marketing costs ($22,836), contract labor ($10,057), office rent
($8,613), and printing ($4,786). Operating expense decreases included telephone
costs ($8,673), and bad debt expense ($17,112).
Form 10-Q SB
Page 8 of 11
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AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996
(UNAUDITED)
LIQUIDITY AND CAPITAL RESOURCES
The International Computer Solutions (ICS) subsidiary had net income for the
second quarter of $50,719 compared with net income of $103,910 for the first
quarter. However, on a consolidated basis, the Company had a net loss of
$125,499 for the quarter, including a loss from operations of $103,385.
The consolidated loss was due in large part to increased printing and marketing
($16,815), increased sales travel costs ($7,550), sales training and startup
costs ($18,936) and sales expenses that are expected to positively impact future
revenues and earnings, and increased office rent ($9,669). The Company expects
the increased advertising and marketing costs to have a long term positive
impact on sales and earnings.
Cash flows used in operations were $327,035 for the second quarter. This is
attributed primarily to increased accounts receivable ($63,285), depreciation
and amortization ($33,189), decreased accounts payable ($111,016), and a
decrease in deferred revenue ($55,817).
Cash flows used by investing activities totalled $51,534 and were used primarily
for equipment purchases, capitalized software development costs, and other
deferred charges. During the second quarter, financing activities provided
$145,697 in cash due to common stock issuance ($166,505), and used cash in
payment of long term debt payments ($20,808). Additional cash will continue to
be required, through either sale of equity or additional loans to meet the cash
flow requirements of the Company for operations. There can be no assurance that
such additional financing can be obtained, or that the terms thereof will be
favorable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
American Medcare was a defendant in a lawsuit filed in the Circuit Court of
Jefferson County, Alabama in June, 1994, i.e. "Winslett et al v. American
Medcare Corporation et al". As reported in the Company's 10K-SB dated January
31, 1996, management believed that the suit was without merit. The suit was
dismissed by the Court with prejudice on June 13, 1996.
As reported in the Company's 10K-SB dated January 31, 1996, the Trustee in the
Integrated and Electronic matter informed counsel for the Company that he
intended to file suit against the Company, certain officers, directors and
others seeking to "pierce the corporate veil", and recover approximately
$514,000 for various matters and $1,276,000 for other unspecified claims. The
Trustee filed the suit on July 17, 1996. The Company, its officers and directors
deny all claims, believe that the claims are without merit and that the parties
have meritorious defenses and intend to vigorously defend all such claims.
As disclosed in the Company's 10K-SB dated January 31, 1996, the Company
reported a suit by James H. Potter against the Company. On July 3, 1996 the
Court dismissed Potter's suit with prejudice. Since the dismissal Potter has
filed a notice of appeal. The dismissal does not affect the Company's counter
claims which it intends to vigorously prosecute.
Form 10-Q SB
Page 9 of 11
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AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996
(UNAUDITED)
ITEM 2. CHANGES IN SECURITIES - NOT APPLICABLE
ITEM 3. DEFAULT UPON SENIOR SECURITIES - NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NOT APPLICABLE
ITEM 5. OTHER INFORMATION
The Company continues to consider acquisitions and has had discussions with
companies marketing software for use in medical or dental practice management
fields. As of July 31, 1996 the Company has executed letters of intent to
purchase 5 separate, privately-held practice management system vendors. The
letters of intent are non-binding, and the companies are expected to be acquired
during the current fiscal year, subject to financing. No definitive contracts
have been executed. There can be no assurance that definitive agreements will
be entered into or that the Company will be able to obtain the required
financing to purchase these businesses.
The acquisitions would be made only upon the conclusion of due diligence by the
Company, and are expected to be made through cash obtained from an equity
offering. There can be no assurances that any such discussions will result in
an acquisition.
In June, 1996 the Company contracted with an investment banking financial
advisor to assist in the financial analysis of the target companies, and
development of a consolidation business plan. The advisors are also assisting
the Company in identifying finance alternatives and finance sources. The
Company has agreed to pay the advisor based on a percentage of funds raised plus
a nominal cash fee. In addition the Company has entered into an agreement with
an investor to provide partial, interim financing of the intended acquisitions
contingent upon obtaining long term financing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - NOT APPLICABLE
Form 10-Q SB
Page 10 of 11
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AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996
(UNAUDITED)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, there unto duly authorized.
AMERICAN MEDCARE CORPORATION
(REGISTRANT)
September 11, 1996 BY: /s/ Robert L. Fine
-----------------------
Robert L. Fine
Chairman, Director
September 11, 1996 BY: /s/ Michael Warren
-----------------------
Michael Warren
Chief Financial Officer, Director
Form 10-Q SB
Page 11 of 11
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SECOND
QUARTER 10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 16,826
<SECURITIES> 0
<RECEIVABLES> 221,477
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 260,959
<PP&E> 633,487
<DEPRECIATION> 582,987
<TOTAL-ASSETS> 405,735
<CURRENT-LIABILITIES> 1,427,203
<BONDS> 569,154
0
0
<COMMON> 43,144
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 405,735
<SALES> 1,185,075
<TOTAL-REVENUES> 1,185,075
<CGS> 244,025
<TOTAL-COSTS> 1,055,503
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,500
<INCOME-PRETAX> (155,070)
<INCOME-TAX> 0
<INCOME-CONTINUING> (155,070)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (155,070)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
