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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K SB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
Commission File Number 2-82208-A
AMERICAN MEDCARE CORPORATION
(Exact name of Small Business Issuer as specified in its charter)
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Delaware 59-2248411
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
2970 Clairmont Road, Suite 950, Atlanta, Georgia 30324
(Address of principal executive offices) (Zip Code)
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404/633-0046
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each Exchange
None on which registered
Securities registered pursuant to Section 12(g) of the Act:
None
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 registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES X NO
---- ----
Check if there is no disclosure of delinquent filers in response to item 405 of
Regulation S/B in this form and no disclosure would be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X ]
Issuer's revenues for its most recent fiscal year were $2,494,563. The
aggregate market value of the voting stock held by non-affiliates of the
Registrant (assuming for these purposes, but without conceding, that all
executive officers and directors and greater than five percent shareholders
are"affiliates" of the Registrant) as of January 31, 1997 was $16,524,162
(based upon the average of its high and low quoted prices obtained from the
dealers as of that date).
As of April 18, 1997, there were 55,536,739 shares of Common Stock, $.001 par
value outstanding.
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ITEM 1: DESCRIPTION OF BUSINESS
(A) GENERAL AND BUSINESS DEVELOPMENT
American Medcare Corporation ("AMC") was incorporated in Delaware in 1983. In
May of 1993, AMC merged with Newport Capital, Inc. ("Newport") in a reverse
acquisition in which Newport's stockholders acquired voting control of the
company. For financial reporting purposes, the acquisition was recorded using
the purchase method of accounting. Since AMC had no significant operations or
assets at the acquisition date, the accounts of AMC were recorded at the
predecessor's cost basis.
AMC was the surviving entity of the merger. Newport, at the time of the
merger, had two subsidiaries, International Computer Solutions, Inc.
("International"), a Georgia corporation, and IBS, Inc., an Arizona
corporation. AMC had no assets or ongoing business at the commencement of the
1994 fiscal year. As a result of AMC's merger with Newport, it acquired all of
the outstanding stock of International and IBS, Inc.
International was organized in 1985 and became a subsidiary of Newport in 1991.
The stock of IBS, Inc.was acquired in 1991 by Newport. IBS was dissolved prior
to the current fiscal year. In addition, the assets of four (4) other small
local practice management companies were acquired in 1991 and 1992.
On December 3, 1996, Health Care Division, Inc. ("HCD"), a wholly-owned
subsidiary of AMC acquired the assets, subject to the assumption of certain
liabilities of the healthcare division of Info Systems of North Carolina Inc.,
headquartered in Charlotte, North Carolina.
AMC signed a letter of intent on January 2, 1997 to merge with and into
InfoCure Corporation. The completion of the merger was subject to various
conditions, including the execution of a definitive merger agreement, the
registration of the shares of InfoCure to be issued upon the merger, the
approval by the shareholders of American Medcare, the completion of InfoCure's
proposed initial public offering (IPO), and the consummation of certain other
acquisitions by InfoCure and American Medcare. In March 1997 a definitive
merger agreement was entered into pursuant to which the shareholders of AMC
would receive common stock of InfoCure Corporation. In April 1997, the
completion of the merger of AMC with InfoCure was delayed due to market
conditions. While management expects the merger and IPO to occur in the second
quarter of the Company's fiscal year, there can be no assurance that either the
IPO or merger will be completed.
AMC and its operating subsidiaries, International and HCD, are sometimes
collectively or individually referred to hereinafter as "Company"). AMC has
no direct operations, or relationships with the clients or customers of its
subsidiaries.
On December 3, 1996 HCD purchased the assets of the health care division of
Info Systems of North Carolina, Inc., using the purchase method of accounting
at their estimated fair market values. This acquisition provided an additional
practice management systems product and customer installation base to the
Company's existing product and customer base.
AMC, through its subsidiaries, provides to physicians and others, software
systems and information services designed primarily to contain and reduce the
administrative and paperwork costs associated with delivering healthcare
services. The AMC subsidiaries have approximately 1,800 clients, including
physician practices, physician billing operations and and resellers, in 50
states throughout the United States. The software products are designed to
operate in any size medical practice - from a sole practitioner to a
multi-specialty clinic - in order to take advantage of the many geographic and
demographic differences in private healthcare practices.
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AMC had 55,536,739 shares of common stock, $.001 par value, ("Common Stock"),
outstanding at April 18, 1997. The Common Stock is traded on a limited basis
under the symbol AMMC. The headquarters of AMC is located in leased facilities
at 2970 Clairmont Road, Suite 950, Atlanta, GA 30329. AMC's subsidiaries
maintain offices in Atlanta, Georgia.
(B) PRODUCTS AND SERVICES
AMC has two subsidiaries which design, develop, market and support several
practice management systems. International provides the Practice Manager
Systems product line,and the Small Systems product line. HCD provides the
Info/Cure product line.
The Medical Practice Manager, Dental Practice Manager, and Oral and
Maxillofacial Surgeon Practice Manager, which constitute the Practice Manager
Systems, are comprehensive, Unix-based administrative software applications
targeted to large multi-physicians and clinics as well as smaller practices.
The offerings typically involve computer hardware, proprietary software, data
conversion, client training and implementation. Installations can range from
$15,000 to $100,000 for new systems. Upgrades of existing customers may range
from $5,000 to $35,000 per system.
The Small Systems product line is a suite of PC, DOS-based products which are
directed at the more than 180,000 single and two physician/dentist practitioner
marketplace. The products are easy to use, inexpensive and cost effective for
the smaller-sized professional. The Small Systems are priced starting at $995
and range upward to as much as $4,750. Distribution of the DOS-based products
and services is done by International directly, and through dealer and billing
center networks.
The Info/Cure product provides a comprehensive, IBM AS/400-based software
application targeted to large multi-physician groups and clinics. The
Info/Cure product is priced from $25,000 to $500,000. Sales and distribution
of the product are done by HCD directly.
Apart from software product and installation costs, the Company also provides
training services, software support services and electronic filing, and
electronic patient statement services to its user base. Software support fees
vary from less than $60 to $700 or more per month, depending upon the specific
product installed, the services provided, the customer's needs, and facility
being supported. Training is priced individually, taking into consideration
the needs of each practice.
The Company also provides electronic transaction services to customers, which
provides an electronic means of sending data to and from payors, particularly
billing information, payment information, eligibility transactions, and other
electronic transactions. The Company makes a transaction fee on each
electronic claims processing transaction, which is used, in part, to cover
customer service costs associated with electronic claims.
Electronic filing can cut the doctor's reimbursement time by as much as thirty
days, and improve both cash flow and profitability. The claims transmitter is
charged on a per claim basis and the claim is routed through a clearinghouse
facility. The Company receives a certain portion of the per claim charge for
its services in connection with processing the claim. Currently, the Company
uses three third-party clearinghouses to actually handle the electronic
submissions to commercial insurance carriers, Medicare or Medicaid.
The Company provides customers with a solution for outsourcing patient
statements in an electronic format. Management believes this service line will
be a significant growth area in the coming years as customer office managers
move towards a reduction of internal paperwork and the related staffing
requirements.
(C) PRODUCT RESEARCH AND DEVELOPMENT
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The Company, through the International and HCD subsidiaries, maintains a staff
of eight technical professionals to design, program, maintain and enhance its
software products, and from time to time engages contract programmers to assist
in new product development.
Current development projects include additional modules for the Small Systems
suite of software offerings and the addition of a Windows-based Practice
Manager system program to further assist larger practices in managing the
business aspects of their operations. No software development costs were
capitalized in fiscal 1996; approximately $32,000 was capitalized during
fiscal 1997.
(D) SALES AND MARKETING
The Company's products are installed in all 50 states. None of the Company's
customers accounted for more than five percent of total revenues in fiscal 1995
or 1996.
The Company identifies prospective clients through a combination of direct
mail, telemarketing, media advertising, referrals and trade show participation.
As prospects are identified, the Company conducts product sales activities
over the telephone and/or through direct contact by its dealer network or
direct sales force.
The Company uses a small direct sales force to maintain personal contact with
the larger Practice Manager System, Small System (DOS and Windows), and
Info/Cure prospects, and referrals. Trade show participation provides
opportunities for additional face-to-face sales.
The Company also sells directly to certain large prospects for its Unix-based
product and to existing Unix product customers who are candidates for upgrades,
and directly to prospects for the Small Systems product line. Sales in this
market have been adversely affected due, in management's view, to uncertainty
created by the various healthcare proposals emanating from the federal
government. The market is very competitive. The consolidation of practices
which is taking place creates selling opportunities; it also leads to
attrition as the size of the market declines. Healthcare reform remains in a
state of change, with significant and continual focus on physician cost and
efficiency concerns.
The Small Systems line is designed for these smaller clients who can license
the modules they may need at the time of purchase and add additional
capabilities later. The primary emphasis is to the market which permits the
physician to submit medical insurance claims for reimbursement electronically
rather than manually.
(E) CUSTOMER SUPPORT AND SERVICES
Both International and HCD offer software maintenance and support, training and
custom development services to all of its clients. Generally, the Company's
systems include a pass through of the manufacturer's hardware warranty;
thereafter, hardware support is available through subcontractors or third
parties.
Software support is provided by both International and HCD, for their
respective customers. These support services are available for an additional
annually-renewable fee. Software support services include telephone support,
maintenance updates and no charge releases of most new or enhanced versions.
Fourteen full-time employees were engaged in client support, services and
installations as of January 31, 1997.
Support is available to International clients from 8:30 AM to 8:00 PM EST,
which allows International and HCD to service all time zones in the continental
U.S. during regular business hours.
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(F) COMPETITION
The office-based physician software industry is very competitive. In addition
to price, management believes that functionality, performance, ease of use and
client support are the primary competitive factors. Several of the Company's
existing competitors, as well as a number of potential competitors, have larger
technical staffs, larger marketing and sales organizations, and greater
financial resources than does International.
The Company faces competition from a number of companies, many of which are
relatively small and regionally or even locally oriented. There are several
larger firms and other major companies which now or in the future may attempt
to enter the office-based physician marketplace by acquisition of competitors.
International's strongest competition is in the Unix-based practice management
area. The Small Systems group does have significant market competition;
however, many of these competitors have difficulty delivering appropriately
sized products and services which match the needs of the smaller healthcare
marketplace, or have difficulty in economically marketing and distributing to
small-sized, and often remotely located end users.
(G) TRADE SECRETS AND COPYRIGHTS
In August 1987, International purchased its proprietary, copyrighted software
packages, the Medical, Dental and Oral Surgeon Practice Manager, from Moore
Business Forms, Inc., Toronto, Canada. International has modified, enhanced
and upgraded the Practice Manager series. International also developed the
newer Small Systems software inhouse. The Info/Cure product was developed
internally.
International and HCD regards all of its software programs as proprietary. The
software programs are licensed by written license agreements with users using
"shrink wrap" licenses. International relies principally on copyright law and
trade secret protection to protect its proprietary property. The software is
usually furnished in object code only, although source code licenses are
granted in a limited number of situations.
International has not applied for any copyrights or patents for its software
and does not believe that patent laws will be a source of protection of its
software products. Employees of American Medcare and its operating
subsidiaries are required to execute agreements providing for the
non-disclosure of information and the assignment to these entities of any
proprietary property developed on the entities' behalf.
HCD's Info/Cure product names have been registered with the United States
Patent and Trademark Office.
There can be no assurances that the steps taken by American Medcare or its
operating subsidiaries to protect its proprietary property will be adequate to
prevent misappropriation or unlawful copying of its technology or software
programs. Copyright and trade secret laws do not limit the right of others to
independently develop similar technology and software programs.
Furthermore, "shrink wrap" licenses may not be enforceable in all
jurisdictions. Although management of International and HCD believe their
software products do not infringe on any property rights of others, there can
be no assurances that third parties will not assert infringement claims in the
future.
(H) EMPLOYEES
American Medcare had 25 employees, as of January 31, 1996, and 28 as of January
31, 1997. In conjuction with the HCD acquisition in December, 1996, the
Company reached a services agreement with the seller, whereby the seller would
provide services by up to fifteen specified individuals within the seller's
organization for a stated period of time, until the Company's transition plans
have been fully
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defined and executed. These specified individuals are expected to remain
employees of the seller's organization until such time as any other employment
arrangements are made. International believes that its relations with its
employees are good. Its employees are not currently, nor have they ever been,
represented by a union and there have not been any work stoppages, strikes or
organizational attempts. The Company believes that its ability to recruit and
maintain highly skilled management, marketing, sales, technical, collections
and customer service personnel is essential to its future success.
(I) LEGISLATION
There has been, and it is anticipated that there will continue to be, many
proposals by federal and state legislators and regulators to reform the
healthcare delivery system in the United States.
The healthcare proposals introduced in the U.S. Congress during 1994 required
the electronic submission of healthcare claims. It is estimated that less than
30% of all claims are processed electronically today. In addition, some of the
legislative proposals were to expand medical coverage to an estimated 37
million additional people. Currently over 4 billion medical claims are
reimbursed annually, the bulk of which come from private healthcare providers.
Management believes that the number of medical claims will continue to increase
regardless of the form of any subsequent legislation or regulation. Therefore,
claims management will be of increasing importance. The Company's products are
designed to facilitate and electronically transmit claims. The Company
believes that the current legislative proposals and regulations would not have
a material adverse effect on its business and may even accelerate the demand
for some of its products and services.
SECURITIES LITIGATION REFORM ACT
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995. This annual report contains certain forward-looking statements that
involve risk, future events and uncertainties, including but not limited to (i)
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices, (ii) financial
matters, plans and objectives of the Company or management for future
operations, products or services, (iii) future economic performances of the
Company; and (iv) other factors discussed in the Company's filings with the
Securities and Exchange Commission and the assumptions underlying such beliefs,
expectations and intentions. Such statements are not guarantees of future
performance and involve certain risks and uncertainties that could cause the
Company's future results to differ materially from those expressed in any
forward looking statement made by or on behalf of the Company. Many of such
factors are beyond the Company's ability to control or predict. Readers are
accordingly cautioned not to place undue reliance on forward looking
statements. There are many factors that could cause actual results to differ
materially from those in the forward looking statement. Readers are urged to
consider statements labeled with the terms "believes", "belief", "expects",
"intends", "plans", or "anticipates" to be uncertain and forward-looking.
ITEM 2: DESCRIPTION OF PROPERTIES
American Medcare leases approximately 2,100 square feet of office space in
Atlanta, which expires in June, 1998. International leases separate offices in
Atlanta, totalling approximately 8,500 square feet. The lease expires August
31, 1998 with an option to vacate at any time after August 31, 1997 upon the
payment of a specified termination fee. The lease payments for ICS are $8,000
per month, including all services and utilities. The current AMC lease
payments are approximately $3,600 per month, including services and utilities.
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The HCD acquisition agreement included provisions for the reimbursement of
space used by employees of Info Systems of North Carolina, Inc. who provide
services to HCD.
AMC believes that the Company's facilities are well located and are in good
condition. Future office and other facilities requirements will depend upon
expansion of the business. Management believes that its facilities are at
present sufficient in quality and size to meet the Company's needs for the
immediate future.
ITEM 3: LEGAL PROCEEDINGS
As previously reported in the Company's 10-QSB for the period ending October
31, 1996, the suit filed in January 1995 by James H. Potter v. American Medcare
Corporation was dismissed by the Trial Court in July, 1996 with prejudice.
Potter appealed to the Court of Appeals of the State of Georgia, which in
March, 1997 upheld the dismissal by the Trial Court with prejudice, terminating
Mr. Potter's claims against the Company.
As reported in the Company's 10-QSB for the period ending July 31, 1996, the
Company, its officers and directors, and certain other individuals settled the
claims of the Trustee in bankruptcy for Integrated Computer Systems, Inc. and
Electronic Transmitting Solutions, Inc. The Company had filed suit against the
previous owners of Integrated and Electronic in October 1996. The former
owners, the Trustee in bankruptcy and the Company entered into a settlement
agreement in which the shares of the Company previously paid to the former
owners by the Company, totalling 963,235 each, will be returned to the Company
subject to any interest of the Trustee. The Court has issued notice of a
hearing on proposed settlement to all creditors. If no objections are received
from creditors, the Company believes that the Court will approve the
settlement. Upon delivery of the shares, the Company has agreed to pay the sum
of $65,000 to the Trustee to settle all claims or interest that the Trustee may
have in said shares.
As previously reported, American Medcare and its subsidiary, International
Computer Solutions, Inc. are defendants in a law suit filed in Berkeley County,
South Carolina in November 1994 by a former customer of Integrated Computer
Systems, Inc. seeking to "pierce the corporate veil", unspecified damages and
class action status. American and International continue to vigorously defend
the suit which management believes has no merit. The case is presently in the
discovery phase.
In the opinion of management, none of the above litigation will have a material
or adverse effect on American Medcare.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In November 1996, a majority of the shareholders by written consent, approved
the employee stock option plan and the increase in the number of authorized
shares to 75,000,000.
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
AMC's common stock, $.001 par value, is currently lightly traded on the OTC
Bulletin Board, and on a very limited basis in the over the counter market.
The American Medcare Corporation symbol, AMMC, is listed in the "pink sheets".
The bid and ask prices for over the counter-based stocks are generally
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quoted by brokers, and are based primarily on recent trades. With higher
trading volumes, the range between the high and low price with over the counter
stocks typically decreases.
The following table sets forth representative high and low closing bid
quotations in the most recent years and quarters:
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Fiscal/Calendar Quarter Bid Prices
Ended (see Note below) Low High
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January 31, 1995 .187 .562
April 30, 1995 .12 .375
July 31, 1995 .12 .12
October 31, 1995 .06 .06
January 31, 1996 .25 .25
April 31, 1996 .06 .31
July 31, 1996 .06 .31
October 31, 1996 .12 .45
January 31, 1997 .18 .65
April 24, 1997 .15 .15
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As of April 18, 1997 there were 660 shareholders of record.
American Medcare has paid no dividends since its incorporation in 1983 and does
not anticipate paying any dividends in the foreseeable future, in keeping with
the current policy of retaining earnings for reinvestment. Pursuant to
International's SBA loan agreement of July 30, 1993, no dividends or other
distribution may be made on the capital stock of American Medcare without the
prior written consent of the lender. AMC has not sought and does not
anticipate seeking such consent.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATION
RESULTS OF OPERATIONS
AMC was dormant and had no assets or business when its stock was acquired by
Newport on March 18, 1993. On May 25, 1993, in a reverse merger, Newport was
merged into AMC which was the surviving entity. With the merger, AMC acquired
Newport's subsidiaries, International and IBS, Inc. which became subsidiaries
of AMC. IBS has been dissolved since that time.
For the periods presented herein, AMC functioned with operations exclusively
through a single operating subsidiary, ICS. On December 3, 1996, HCD became a
subsidiary of AMC in an acquisition transaction accounted for as a purchase;
in this acquisition, the Company obtained specified assets comprising HCD's
operations from Info Systems of North Carolina, Inc. As a result, the December
1996 and January 1997 results of operations of HCD are included herein. The
following discussion and analysis should be read in conjunction with the
audited financial statements and notes thereto included elsewhere in this
filing.
Year Ended January 31, 1997 Compared with Year Ended January 31, 1996
Total revenues increased by $81,829 or 3.4% to $2,494,563 for the year ended
January 31, 1997 from $2,412,734 for the year ended January 31, 1996. These
increases included revenue from HCD, totalling $354,250 for the period
subsequent to the HCD acquisition made on December 3, 1996.
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Maintenance and support revenues increased by $108,499 or 8.3% to $1,418,884
for the year ended January 31, 1997 from $1,310,385 for the year ended January
31, 1996. The maintenance and support revenues associated with the HCD
operations totalled $209,328 for the period December 3, 1996 to January 31,
1997. Maintenance and support revenues within AMC decreased by $100,829 due to
lower registration fees with the Desktop product, lower contract service
revenue, decreased maintenance with the UNIX and DOS products, and natural
attrition within the maintenance revenue streams.
The method by which EDI revenues and costs were recorded was changed from a
gross amount to a net amount during the year ended January 31, 1996. As a
result, EDI revenues decreased by $6,372, although the transaction volume
increased in the comparative periods. EDI revenues are shown at a net amount
of $355,999 for the year ended January 31, 1997 compared to $362,371 for the
year ended January 31, 1996. The overall EDI transaction volume increased by
220,456 transactions, or 24.1% to 1,133,094 transactions for the year ended
January 31, 1997 from 912,638 transactions for the year ended January 31, 1996.
Systems and software sales revenue decreased by $26,670 or 2.4% to $1,075,679
for the year ended January 31, 1997 from $1,102,349 for the year ended January
31, 1996. The HCD acquisition increased systems and software sales by $144,922
for the period December 3, 1996 to January 31, 1997. The overall decrease in
systems and software sales was due to several factors. System sales for the
UNIX product decreased by $107,139 and overall hardware sales decreased by
$36,319. Other decreases totalled $28,134. The decreased sales also reflected
the change in the sales and marketing focus from new customer sales towards a
focus on recurring services, maintenance, and transaction revenue.
Cost of sales decreased by $41,641 or 8.0% to $474,201 for the year ended
January 31, 1997 from $515,842 for the year ended January 31, 1996. As a
percentage of revenue, cost of sales decreased to 19.0% for the year ended
January 31, 1997 from 21.3% for the year ended January 31, 1996. The decrease
in cost of sales as a percentage of total revenues reflects a change in product
mix with the higher margins associated with transaction services.
Salaries and operating expenses increased by $453,602 or 16.9% to $2,469,249
for the year ended January 31, 1997 from $2,015,647 for the year ended January
31, 1996. This was due to increases in compensation expenses associated with
additional personnel and other corporate overhead in opening a second office
for purposes of implementing the acquisition strategy. The increase was also
due to increased use of contract labor, as AMC identified specific tasks to be
performed by outside contractors for training and installation services. In
addition, compensation expenses totalling $110,000 were recognized in
conjunction with the settlement of an option agreement with a previous director
of the Company for services previously rendered.
As a result of the foregoing factors, AMC had a net loss from operations of
$559,522 for the year ended January 31, 1997 as compared to a loss of $232,811
for the year ended January 31, 1996. Through application of the Company's net
operating loss carry-forward, the Company recognized $891,000 in tax benefits,
with a resulting net income of $254,094 for the year ended January 31, 1997,
compared with a loss in the prior year of $180,196.
The recognition of the tax benefit associated with the NOL includes $671,000
representing a decrease in the deferred tax asset valuation allowance. This
adjustment reflects management's assessment that the benefits to be derived
from the pending Offering and Acquisitions and the resolution of the
contingencies associated with previous failed acquisitions makes it more likely
than not that the net operating loss will be utilized.
CLEARINGHOUSE AGREEMENTS
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The Company currently has arrangements with several electronic claims
clearinghouses. The primary clearinghouse agreement ("MDP Agreement") was
entered into in August 1992 with MDP Corporation ("MDP"). International
agreed to submit all of its eligible electronic claims exclusively to MDP for
processing and pays $0.25 per claim processed.
The MDP Agreement will terminate upon the processing of 11,800,000 claims or
discontinuance of electronic-claims related business activity by MDP. If the
MDP agreement is terminated by other events, five shareholders of the Company
agreed to pay on behalf of the Company a termination fee of $324,000 less the
number of claims processed to date times five cents per claim plus an interest
surcharge based on the prime rate. International has agreed to reimburse the
shareholders for the termination fee.
At the time of execution of the MDP Agreement, the Company entered into a Share
Disposition Agreement ("Share Agreement") with the sole shareholder of MDP
("MDP Shareholder"). The Share Agreement provides that upon the performance by
the Company under the MDP Agreement, the MDP Shareholder will deliver to the
Company 3,521,000 shares of its common stock for cancellation.
In November, 1996 the parties entered into a Termination Agreement
("Termination Agreement") pursuant to which the MDP Agreement and the Share
Agreement were terminated on November 30, 1996. In consideration of the
termination of those agreements, International agreed to pay MDP $263,000 of
which $25,000 was paid on the execution of the agreement and the balance is due
upon the consummation of the public offering by InfoCure Corporation. The
Termination Agreement further provides that the MDP Shareholder shall assign
the 3,521,405 shares of the Company's common stock prior to such public
offering. If the public offering is not consummated on or before June 30,
1997, the Termination Agreement shall be null and void and the amounts paid
shall be applied against amounts due pursuant to the MDP Agreement.
For the current fiscal year, the income recognized from this agreement totalled
$24,735. The deferred revenue associated with this agreement at year-end was
$233,791 and is included in the deferred revenue caption on the financial
statements.
A second local clearinghouse has been used by International for several years,
and processes a significant volume of claims with certain payers. In addition,
ICS also has a clearinghouse agreement with a national claims processor which
was entered into in January 1996. This agreement provides for additional
financing for the Company, and a full, nation-wide claims processing
operations, as well as potential utilization of several additional, marketable
electronic service products.
LEASES
International leases certain office equipment under noncancellable operating
leases with initial or remaining terms of one year or more. At January 31,
1997, the remaining amounts due under such leases totalled approximately
$10,682. In August of 1994, International entered into a new office space
lease which contained a free rent period thru November 1994, and reduced rents
for a number of months. Total future minimum annual rental payments under the
new lease are approximately $91,100 and $56,000 for fiscal 1998 and 1999,
respectively. Rent expense for fiscal 1997 and 1996, which included lease
payments for office space, was approximately $116,000 and $109,000,
respectively.
In April, 1996 American Medcare leased a second office in Atlanta for purposes
of accomodating the Company's growth plans. The rental on this leased space
totalled approximately $28,217 for the fiscal year ended January 31, 1997.
As discussed elsewhere in this filing, the Company purchased the business of
HCD in December, 1996 and agreed to pay for space used by employees of the
seller in rendering services to HCD in accordance with the service agreement,
through June 1997. After that time, the space provided will cost approximately
$6,000 per month, depending upon space requirements.
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PROPOSED ACQUISITION AGREEMENT
The Company has executed a definitive agreement to acquire a privately held
practice management system vendor. The Company is expected to be acquired in
the second quarter of the upcoming fiscal year. The acquisitions would be made
only upon the effecting of a public offering by InfoCure Corporation. After
the acquisition, the Company will merge into InfoCure Corporation. There is no
assurance that the public offering will occur, or that the Company will
complete the acquisition.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended January 31, 1997, cash used for operating activities
totalled $848,776, cash used for investing activities totalled $396,082, and
cash provided by financing activities totalled $1,193,895. Cash used for
investing activities included expenditures made for the acquisition of HCD, and
certain expenses associated with the Offering. Cash provided by financing
activities were generated from the issuance of common stock. As of January 31,
1997, AMC had an accumulated deficit of $3,250,786 and a working capital
deficiency of $1,126,809.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 128, "Earnings Per Share" is effective for periods ending after
December 15, 1997. This statement revises the manner in which earnings per
share is calculated and requires the restatements, when first applied, of prior
period earnings per share data. The Company does not expect the adoption of
this pronouncement to have a material effect on the previously reported
earnings per share data. A more detailed discription is contained within the
footnotes to the financial statements.
ITEM 7: FINANCIAL STATEMENTS - FOLLOWING PAGES
<PAGE> 12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of
American Medcare Corporation
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of American
Medcare Corporation and subsidiaries as of January 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity (capital
deficit) and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American Medcare Corporation and subsidiaries at January 31, 1996 and 1997, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
April 15, 1997
F-1
<PAGE> 13
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................................. $ 249,698 $ 198,735
Accounts and notes receivable, net of allowance of $90,000
and $35,000............................................ 156,936 318,405
Prepaid expenses and other current assets................. 32,620 62,364
----------- -----------
Total current assets.............................. 439,254 579,504
Property and equipment, net................................. 54,372 94,157
Miscellaneous............................................... 73,315 100,389
Goodwill, net of accumulated amortization of $21,408........ -- 2,015,309
Deferred acquisition costs.................................. -- 521,871
Deferred tax asset.......................................... -- 871,000
----------- -----------
$ 566,941 $ 4,182,230
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT):
Current liabilities:
Accounts payable.......................................... $ 374,824 $ 483,730
Accrued expenses.......................................... 448,627 358,671
Deferred revenue.......................................... 481,224 814,383
Current portion of long-term debt......................... 335,542 49,529
----------- -----------
Total current liabilities......................... 1,640,217 1,706,313
Long-term debt, less current portion........................ 450,280 698,252
Note payable to stockholder................................. 94,500 94,500
Note payable -- other....................................... -- 1,511,533
----------- -----------
Total liabilities................................. 2,184,997 4,010,598
----------- -----------
Commitments and contingencies
Stockholders' equity (capital deficit):
Common stock.............................................. 41,577 54,965
Stock purchase warrant.................................... 500,000 80,000
Additional paid-in capital................................ 1,445,247 3,452,453
Deficit................................................... (3,504,880) (3,250,786)
Treasury stock and accrued stock repurchase, at cost...... (100,000) (165,000)
----------- -----------
Total stockholders' equity (capital deficit)...... (1,618,056) 171,632
----------- -----------
$ 566,941 $ 4,182,230
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 14
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Revenues:
Maintenance and support................................... $ 1,310,385 $ 1,418,884
Systems and software sales................................ 1,102,349 1,075,679
----------- -----------
Total revenues............................................ 2,412,734 2,494,563
Cost of revenues............................................ 515,842 474,201
----------- -----------
Gross margin................................................ 1,896,892 2,020,362
----------- -----------
Operating expenses:
Salaries and operating expenses........................... 2,015,647 2,469,249
Depreciation and amortization............................. 114,056 110,635
----------- -----------
Total operating expenses.................................. 2,129,703 2,579,884
----------- -----------
Loss from operations........................................ (232,811) (559,522)
Other income (expense):
Interest expense.......................................... (68,609) (82,900)
Other income, net......................................... 121,224 5,516
----------- -----------
Loss before taxes........................................... (180,196) (636,906)
Income tax (benefit)........................................ -- (891,000)
----------- -----------
Net income (loss)........................................... $ (180,196) $ 254,094
=========== ===========
Net income (loss) per common share.......................... $ (0.00) $ 0.01
=========== ===========
Weighted average common shares outstanding.................. 41,387,381 43,185,916
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 15
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
<TABLE>
<CAPTION>
NUMBER OF SHARES DOLLAR VALUE
--------------------- ------------------- ACCRUED STOCK ADDITIONAL
COMMON TREASURY COMMON TREASURY STOCK PURCHASE PAID-IN
STOCK STOCK STOCK STOCK REPURCHASE WARRANT CAPITAL DEFICIT
---------- -------- ------- --------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at January 31, 1995..... 41,577,788 -- $41,577 $ -- $ -- $500,000 $1,415,249 $(3,324,684)
Acquisition of treasury stock... -- (228,489) -- (100,000) -- -- -- --
Issuance of stock options....... -- -- -- -- -- -- 29,998 --
Net loss......................... -- -- -- -- -- -- -- (180,196)
---------- -------- ------- --------- -------- -------- ---------- -----------
Balance, at January 31, 1996..... 41,577,788 (228,489) 41,577 (100,000) -- 500,000 1,445,247 (3,504,880)
Issuance of common stock........ 13,387,440 -- 13,388 -- -- -- 1,417,206 --
Cancellation of warrant......... -- -- -- -- -- (500,000) 450,000 --
Issuance of warrant............. -- -- -- -- -- 80,000 -- --
Issuance of stock options....... -- -- -- -- -- -- 30,000 --
Capital contribution............ -- -- -- -- -- -- 110,000 --
Pending repurchase of common
stock......................... -- -- -- -- (65,000) -- -- --
Net income...................... -- -- -- -- -- -- -- 254,094
---------- -------- ------- --------- -------- -------- ---------- -----------
Balance, at January 31, 1997..... 54,965,228 (228,489) $54,965 $(100,000) $(65,000) $ 80,000 $3,452,453 $(3,250,786)
========== ======== ======= ========= ======== ======== ========== ===========
<CAPTION>
TOTAL
-----------
<S> <C>
Balance, at January 31, 1995..... $(1,367,858)
Acquisition of treasury stock... (100,000)
Issuance of stock options....... 29,998
Net loss......................... (180,196)
-----------
Balance, at January 31, 1996..... (1,618,056)
Issuance of common stock........ 1,430,594
Cancellation of warrant......... (50,000)
Issuance of warrant............. 80,000
Issuance of stock options....... 30,000
Capital contribution............ 110,000
Pending repurchase of common
stock......................... (65,000)
Net income...................... 254,094
-----------
Balance, at January 31, 1997..... $ 171,632
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 16
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Cash provided by (used in) operating activities:
Net income (loss)......................................... $(180,196) $ 254,094
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 114,056 110,635
Allowance for doubtful accounts........................ 18,368 (55,086)
Compensatory stock options............................. 29,998 30,000
Option cancellation expense............................ -- 110,000
Income tax benefit..................................... -- (891,000)
Changes in current assets and liabilities, net of
effects of acquisition:
Accounts and notes receivable........................ 107,540 47,975
Prepaid expenses and other assets.................... (5,424) (43,526)
Accounts payable and accrued expenses................ (47,235) (312,703)
Deferred revenue..................................... (21,692) (99,165)
--------- ----------
Net cash provided by (used in) operating activities....... 15,415 (848,776)
--------- ----------
Cash used in investing activities:
Property and equipment expenditures....................... (15,189) (16,941)
Cash paid for deferred acquisition costs.................. -- (196,680)
Expenditures for software development costs............... -- (32,461)
Cash paid for acquisition of HCD.......................... -- (150,000)
Proceeds from collection of notes and other receivables... 4,213 --
--------- ----------
Net cash used in investing activities..................... (10,976) (396,082)
--------- ----------
Cash provided by financing activities:
Proceeds from issuance of common stock.................... -- 1,320,402
Proceeds from note payable to stockholder................. 94,500 --
Repayment of note payable to stockholder.................. (73,027) --
Proceeds from issuance of long-term debt.................. 366,665 --
Principal payments on long-term debt...................... (47,563) (76,507)
Repurchase of common stock................................ (100,000) --
Repurchase of common stock warrant........................ -- (50,000)
--------- ----------
Net cash provided by financing activities................. 240,575 1,193,895
--------- ----------
Net increase (decrease) in cash and cash equivalents........ 245,014 (50,963)
Cash and cash equivalents, beginning........................ 4,684 249,698
--------- ----------
Cash and cash equivalents, ending........................... $ 249,698 $ 198,735
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 17
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND NATURE OF BUSINESS
American Medcare Corporation (the "Company" or "AMC") was incorporated on
January 11, 1983, and was originally formed to provide management services to
professional corporations practicing family and emergency medicine.
In May 1993, the Company merged with Newport Capital, Inc. ("Newport"),
whose principal asset was its wholly-owned subsidiary, International Computer
Solutions, Inc. ("ICS"). The Company, through its operating subsidiaries,
develops, markets and supports health care data processing and claims
transmission systems, including hardware and software packages, primarily for
physician and dentist practice offices.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. See Note 3 for accounting
for failed acquisitions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
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 could vary from these estimates.
The Company has recorded a deferred tax asset of $871,000 at January 31,
1997, reflecting the benefit of approximately $2.2 million in loss
carryforwards, which expire in varying amounts between 2003 and 2011.
Realization is dependent on generating sufficient taxable income prior to
expiration of the loss carryforwards. Although realization is not assured,
management believes it is more likely than not that all of the deferred tax
asset will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near future if estimates of future
taxable income during the carryforward period are reduced.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed over the
estimated useful lives of the related assets using both straight line and
accelerated methods for financial reporting and accelerated methods for income
tax purposes. Substantial betterments to property and equipment are capitalized
and repairs and maintenance are expensed as incurred.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Certain costs incurred in the internal development of computer software and
costs of purchased computer software, which is to be licensed, sold, or
otherwise marketed, are capitalized and amortized on a straight-line basis over
the expected useful life of the individual software products (generally two to
three years). Development costs include detailed design, prototyping, coding,
testing, documentation, production and quality assurance. Such costs are
capitalized once the product's technological feasibility is established and are
expensed after the product is available for general release. During the year
ended January 31, 1997, the Company capitalized $32,461 of software development
costs. Amortization of capitalized software development costs for the years
ended January 31, 1996, and 1997, was $42,925 and $15,914, respectively.
The Company's operational policy for the assessment and measurement of the
continuing value of capitalized software is to evaluate the recoverability of
the remaining life of its capitalized software and
F-6
<PAGE> 18
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
determine whether the software should be completely or partially written off or
the amortization period accelerated. The Company will recognize an impairment if
undiscounted estimated future cash flows of the capitalized software is
determined to be less than the carrying amount of capitalized software.
INTANGIBLE ASSETS
Intangible assets have been recorded as the result of the acquisition of
HCD and costs associated with potential acquisitions. Intangible assets consist
of goodwill which is being amortized over 15 years and deferred acquisition
costs which will be amortized upon completion of the Company's pending
acquisitions (Note 2). Amortization of goodwill for the year ended January 31,
1997 was $21,408. The Company periodically evaluates the carrying amount of
goodwill based on projected undiscounted cash flows of HCD.
REVENUE RECOGNITION
Revenue is recognized, net of allowances for estimated returns, from the
sale of computer hardware and computer software when the product is shipped and
when training services, where applicable, are provided. Revenue from hardware
maintenance and customer support contracts and claims processing services are
recognized in the period in which the services are provided; amounts not yet
earned are recorded as deferred revenue. Revenue from contract services for
maintenance and support were approximately $805,000 and $747,000 for 1996 and
1997, respectively. Revenue from claims processing services totaled
approximately $338,000 and $290,000 for 1996 and 1997, respectively.
INCOME TAXES
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than possible enactments of changes in the tax laws or rates.
INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding during each
year.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" is effective for years beginning after December 15, 1995 and was adopted by
the Company as of February 1, 1996. This statement requires that long-lived
assets, including certain intangibles, held and used by the Company be reviewed
for potential impairment. This new pronouncement did not have a material effect
on the Company's financial statements when adopted.
SFAS No. 123, "Accounting for Stock Based Compensation" is effective for
years beginning after December 15, 1995 and was adopted by the Company as of
February 1, 1996. This statement establishes financial accounting and reporting
standards for stock based employee compensation plans. SFAS No. 123 permits, but
does not require, a fair-value based method of accounting for employee stock
option plans which results in compensation expense recognition when stock
options are granted. As permitted by SFAS No. 123, the Company will provide pro
forma disclosure of net income and earnings per share, as applicable in the
notes to the consolidated financial statements.
F-7
<PAGE> 19
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SFAS No. 128, "Earnings Per Share" is effective for periods ending after
December 15, 1997. This statement revises the manner in which earnings per share
is calculated and requires the restatement, when first applied, of prior period
earnings per share data. The Company does not expect the adoption of this
pronouncement to have a material effect on the previously reported earnings per
share data.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Accounts receivable
arise from sale of healthcare practice management systems to the Company's
customer base located throughout the United States. The Company performs ongoing
credit evaluations of its customers' financial condition, and generally requires
no collateral from its customers. The Company's credit losses are subject to
general economic conditions of the healthcare industry.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is the amount at which the
instrument could be exchanged in a current transaction between willing parties.
The carrying amounts of the Company's financial instruments included in the
accompanying consolidated balance sheets approximate estimated fair value as of
January 31, 1997 and 1996.
STATEMENT OF CASH FLOWS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. BUSINESS ACQUISITIONS
In fiscal 1997, AMC initiated an acquisition program to strengthen its
market position and leverage its customer base. AMC targeted similar and
compatible companies in various locations throughout the United States and, as
described below, completed one acquisition and entered into agreements for four
others.
In addition, AMC agreed to merger terms with InfoCure Corporation,
("InfoCure"), a newly-formed Delaware corporation, whereby AMC shareholders
would receive approximately 3.5 million shares of InfoCure Common Stock in
exchange for all outstanding shares of AMC common stock (approximately one
InfoCure "Equivalent Share" for every 15 AMC shares). AMC, together with the
targeted acquisitions described below, would be Founding Businesses of InfoCure
contingent upon successful completion of InfoCure's public offering which was
pending at the date of these financial statements.
In December 1996, the Company acquired certain assets and assumed certain
liabilities of the Health Care Division ("HCD") (formerly a division of Info
Systems of North Carolina, Inc. ("ISI")). HCD is engaged in designing,
programming, licensing, installing, and supporting hardware and software systems
to the medical industry throughout the United States. HCD has long-term
marketing rights to and ownership of licensed software in various industry
segments. As consideration, the Company paid $150,000 and issued a $1.55 million
note payable for an aggregate purchase price of $1.7 million. The acquisition is
accounted for under the purchase method of accounting. HCD's results of
operations from December 3, 1996, to January 31, 1997, are included in the
accompanying financial statements.
F-8
<PAGE> 20
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following unaudited pro forma information presents the consolidated
results of operations of the Company as if the acquisition had occurred as of
February 1, 1995. The pro forma information is not necessarily indicative of
what would have occurred had the acquisition been made as of February 1, 1995,
nor is it indicative of future results of operations. The pro forma amounts give
effect to appropriate adjustments for the fair value of the net assets acquired,
reductions for personnel costs and other operating expenses not assumed as part
of the acquisition, amortization of goodwill, interest expense, and income
taxes.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
1996 1997
------ ------
(000'S, EXCEPT PER SHARE
DATA)
(UNAUDITED)
<S> <C> <C>
Net sales.................................................. $8,051 $6,383
Net income................................................. 824 584
Earnings per share......................................... 0.02 0.01
</TABLE>
The fair values of the net assets acquired and liabilities assumed were as
follows:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 154,358
Property and equipment...................................... 60,000
Goodwill.................................................... 1,926,717
Other assets................................................ 8,902
Deferred revenue............................................ (432,324)
Accounts payable............................................ (14,305)
Notes payable............................................... (1,550,000)
Customer deposits........................................... (3,348)
-----------
Cash used for acquisition................................... $ 150,000
===========
</TABLE>
The Company or InfoCure has entered into Agreements to acquire the
following companies:
<TABLE>
<CAPTION>
NAME LOCATION
- ---- -----------------------
<S> <C>
Millard-Wayne, Inc. ............................... Atlanta, Georgia
DR Software, Inc. ................................. Atlanta, Georgia
ROVAK, Inc......................................... Lake Elmo, Minnesota
KComp Management Systems, Inc...................... Los Angeles, California
</TABLE>
Aggregate consideration for the foregoing acquisitions is approximately $9
million, including approximately $7 million cash and the balance in common
stock. Closing of these acquisitions is contingent upon the successful
completion of InfoCure's pending public offering.
As of January 31, 1997, the Company had incurred approximately $631,000 in
costs, principally professional fees, relating directly to its acquisition
program. A portion of these costs were allocated to goodwill in connection with
the HCD Acquisition. The remaining $521,000 will be allocated appropriately as
the remaining acquisitions are completed.
3. FAILED ACQUISITIONS
On July 22, 1994, Integrated Computer Systems, Inc. ("Integrated") and
Electronic Transmitting Solutions, Inc. ("Electronic"), two wholly-owned
subsidiaries of the Company, filed voluntary petitions for Chapter 7 bankruptcy
with the United States Bankruptcy Count -- Northern District of Georgia. The
Company also filed suit against the sellers of Integrated and Electronic in 1996
in the United States Bankruptcy Court -- Northern District of Georgia. The suit
called for rescission of the October 29, 1993 acquisitions along with the return
of the stock issued to the sellers. In addition, the suit asks for damages for
monetary amounts incurred by the Company as a result of problems related to the
acquisitions.
F-9
<PAGE> 21
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The shares of common stock issued in connection with the acquisition of
Integrated and Electronic are reflected as being outstanding in the accompanying
consolidated balance sheets and statements of shareholders' equity (capital
deficit). The Company has entered into an agreement with the sellers and the
trustee in bankruptcy granting the Company the right to purchase these 1,926,470
shares (136,472 Equivalent Shares of InfoCure Common Stock) for $65,000. The
purchase is contingent upon the approval of the settlement by the bankruptcy
court. The pending repurchase has been reflected in the financial statements as
accrued stock repurchase.
The Company has also reached agreement with the trustee for settlement of
all other matters associated with the bankruptcy of these former subsidiaries.
Costs attributable thereto are not material.
4. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets consisted of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Current deferred tax asset.................................. $ -- $25,000
Deposits.................................................... 850 11,414
Prepaid expenses............................................ 17,365 5,396
Other....................................................... 14,405 20,554
------- -------
$32,620 $62,364
======= =======
</TABLE>
5. PROPERTY, EQUIPMENT AND DEPRECIATION
Major classifications of property and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS) 1996 1997
------------ -------- --------
<S> <C> <C> <C>
Computer equipment.................................... 3-5 $331,436 $441,464
Furniture and fixtures................................ 5-7 293,381 240,898
--- -------- --------
624,817 682,362
Less accumulated depreciation......................... 570,445 588,205
-------- --------
$ 54,372 $ 94,157
======== ========
</TABLE>
Depreciation was $34,389 and $37,156 for the years ended January 31, 1996
and 1997, respectively.
6. MISCELLANEOUS ASSETS
Miscellaneous assets consisted of the following:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Deferred rent asset, net.................................... $52,547 $ 59,136
Capitalized software development costs, net................. 19,511 41,253
Long-term notes receivable.................................. 1,257 --
------- --------
$73,315 $100,389
======= ========
</TABLE>
Capitalized software development costs are stated net of accumulated
amortization of $656,505 and $657,115, at January 31, 1996 and 1997,
respectively.
F-10
<PAGE> 22
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Taxes other than income..................................... $ 57,995 $ 84,503
Compensation................................................ 151,537 82,371
Interest.................................................... 5,095 75,182
Accrued stock repurchase.................................... -- 65,000
Professional fees........................................... 50,000 30,000
Customer costs.............................................. 28,606 3,924
Expenses related to loss on failed acquisition.............. 119,590 --
Other....................................................... 35,804 17,691
-------- --------
$448,627 $358,671
======== ========
</TABLE>
8. NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Notes payable to banks...................................... $396,042 $366,932
Other....................................................... 389,780 380,849
-------- --------
785,822 747,781
Less current portion........................................ 335,542 49,529
-------- --------
$450,280 $698,252
======== ========
</TABLE>
During fiscal 1994, ICS refinanced its existing bank loans with a new note
payable to a bank which is guaranteed by the Small Business Administration
("SBA"). This loan bears interest at a rate of 11.25% and is payable in monthly
installments through May 2003. The loan is secured by substantially all of the
assets of ICS, and certain other real estate owned by two stockholders. In
addition, the loan is personally guaranteed by five of the Company's
stockholders.
In January 1996, the Company received a loan from a third party in the
amount of $366,666 in the form of a promissory note payable bearing interest at
a rate of 9.95%. In conjunction with this note the Company has entered into an
agreement to exclusively promote the third party's claims processing services as
a component of the Company's products. The note is to be repaid based on fees
charged by the third party for claims submitted by the Company for processing.
As of January 31, 1997, no material amount of such claims had been submitted.
The note is payable together with accrued and unpaid interest at December 31,
1998 and is included in other long-term debt.
Also included in other long-term debt are capital leases of $19,612 and
$10,682 at January 31, 1996 and 1997, respectively.
F-11
<PAGE> 23
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of January 31, 1997, future maturities of these obligations are as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1998........................................................ $ 49,529
1999........................................................ 419,637
2000........................................................ 52,344
2001........................................................ 58,691
2002........................................................ 65,808
Thereafter.................................................. 101,772
--------
$747,781
========
</TABLE>
In April 1995, the Company borrowed $94,500 from a stockholder of the
Company in exchange for a promissory note bearing interest at 12% payable in a
balloon payment of principal and interest in April 1998.
As partial consideration for the acquisition of HCD, the Company issued ISI
a note payable in the original amount of $1.55 million. The original note
balance was subsequently reduced for post-closing adjustments, and the balance
is payable on June 2, 1998, or within 5 days of a successful public offering by
the Company or its successor. The note bears interest of prime plus 2% (10.25%
at January 31, 1997) and is collateralized by HCD's assets. The foregoing
schedule of future maturities excludes this note and the note payable to
stockholder described above.
9. OPERATING LEASES
The Company leases certain office equipment under noncancellable operating
leases with initial or remaining terms of one year or more. At January 31, 1997,
the remaining amounts due under these leases totaled approximately $45,000 in
the aggregate.
The Company leases office space with future minimum annual rental payments
of approximately $126,000 and $76,000 for 1998 and 1999, respectively. The
Company issued an aggregate of 1,087,762 shares of common stock from 1995 to
1997 to the lessor as partial consideration for rent.
Rent expense for 1996 and 1997, which included lease payments for office
space, was approximately $101,000 and $140,000, respectively.
10. COMMON STOCK
The Company had 50,000,000 and 75,000,000 shares of common stock, par value
$.001 per share, authorized at January 31, 1996 and 1997, respectively. Shares
of common stock outstanding totaled 41,349,299 and 54,736,739 at January 31,
1996 and 1997, respectively.
In 1996, the Company acquired 228,489 shares of treasury stock as payment
for a note receivable from one of the Company's former salespersons in the
amount of $100,000, which is the basis for the valuation of the treasury stock.
As indicated in Note 3, the Company has accrued $65,000 for the anticipated
repurchase of 1,926,470 shares issued to sellers of Integrated and Electronic,
former subsidiaries. Completion of the repurchase is pending approval of the
bankruptcy court.
11. STOCK PURCHASE WARRANT AND OPTIONS
On January 4, 1991, the Company issued to Moore Business Forms, Inc.
("Moore") a stock purchase warrant, exercisable through December 31, 2000, for
20% of ICS common stock, in full satisfaction of approximately $445,000 of
amounts owed to Moore. In addition, Moore transferred ownership of the Medical
Practice Manager, Dental Practice Manager and Oral Surgeon Practice Manager
software and source code to
F-12
<PAGE> 24
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ICS. The warrant was assigned a value of $500,000 and the Company recorded
approximately $55,000 as the value of the software and source code. Pursuant to
terms of an agreement dated December 20, 1996, the Company repurchased the
warrant for $50,000 and terminated all related obligations and liabilities.
During fiscal 1995, the Company granted options to a director and an
officer of the Company. The options enabled the holders to purchase up to
4,000,000 shares of common stock (3,000,000 shares for the director; 1,000,000
shares for the officer) at prices ranging from $0.01 to $1.00 per share. The
options had exercise dates at various times through September 1999. In fiscal
1997, the officer exercised options to purchase 500,000 shares for $500. Also in
fiscal 1997, the director resigned and certain shareholders transferred to the
former director an aggregate of 1,000,000 shares of common stock from their
personal holdings to retire the 3,000,000 options. The Company accounted for
this transaction as a contribution to capital for $110,000, the estimated fair
value of the shares involved, with a corresponding charge to operating expenses
to recognize the cost of cancelling the options.
During fiscal 1997, the Company granted 2,325,000 options to several
employees and an officer of the Company. Each option enables the holders to
purchase one share of common stock at prices ranging from $0.125 to $0.25. The
exercise prices approximate fair market value of the common stock on the
issuance dates. The options may be exercised at various times through November
15, 2004. Additionally, in conjunction with the pending acquisitions, the
Company granted 1,865,500 warrants to a third party for assistance in securing
potential acquisitions. Each warrant enables the holder to purchase one share of
common stock at $0.0625, and the warrants are currently exercisable. The
warrants' estimated fair value of $80,000 was accounted for as additional
deferred acquisition costs.
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recorded in conjunction with options
issued to employees. Had compensation cost been determined based on the fair
value of the options at the grant date, consistent with the method prescribed by
SFAS No. 123, the Company's net earnings would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Net income (loss) -- as reported............................ $(180,196) $254,094
Net income (loss) -- pro forma.............................. (180,196) 14,388
Net income (loss) per common share -- pro forma............. (0.00) 0.00
</TABLE>
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions used
for grants in 1997: expected volatility of 0%; risk-free interest rate of 7.50%;
and expected lives from five to eight years.
F-13
<PAGE> 25
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Current
Federal................................................... $ -- $ --
State..................................................... -- 5,000
-------- ---------
Total current..................................... -- 5,000
-------- ---------
Deferred
Federal................................................... (66,000) (195,000)
State..................................................... (11,000) (30,000)
-------- ---------
Total deferred.................................... (77,000) (225,000)
-------- ---------
Change in deferred tax
Asset valuation allowance................................. 77,000 (671,000)
-------- ---------
Net income tax expense (benefit).................. $ -- $(891,000)
======== =========
</TABLE>
Deferred taxes result from temporary differences between the bases of
assets and liabilities for financial reporting purposes and such amounts as
measured by tax laws and regulations. The sources of the temporary differences
and their effect on deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Current:
Deferred tax assets
Allowance for doubtful accounts........................ $ 34,000 $ 14,000
Accrued expenses....................................... 8,000 11,000
--------- --------
42,000 25,000
--------- --------
Noncurrent:
Deferred tax assets (liabilities)
Basis difference of capitalized software costs and
other assets......................................... (75,000) (40,000)
Net operating loss carryforwards....................... 704,000 911,000
--------- --------
629,000 871,000
--------- --------
Gross deferred tax assets................................... 671,000 896,000
Valuation allowance......................................... (671,000) --
--------- --------
Net deferred tax assets........................... $ -- $896,000
========= ========
</TABLE>
Reduction of the deferred tax asset valuation allowance reflects the
anticipated impact of the Company's acquisition of HCD (Note 2) and the
resolution of previous contingencies associated with failed acquisitions (Note
3). In the opinion of management, it is now "more likely than not" that the
future tax benefits represented by the net operating loss carryforwards will be
realized.
Income taxes differed from amounts computed by applying the U.S. Federal
income tax statutory rate to pretax income as a result of the following:
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Expected tax expense (benefit).............................. $(61,000) $(217,000)
Increase (decrease) in income taxes resulting from:
State income taxes........................................ 11,000 21,000
Effect of graduated rates................................. (17,000) (14,000)
Other, net................................................ (10,000) (10,000)
Change in deferred tax asset valuation allowance....... 77,000 (671,000)
-------- ---------
Net income tax expense (benefit).................. $ -- $(891,000)
======== =========
</TABLE>
F-14
<PAGE> 26
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of January 31, 1997, the Company and its subsidiaries have net operating
loss carryforwards for Federal income tax purposes of approximately $2.2 million
which expire at various dates from 2003 to 2011.
13. CLAIM PROCESSING AGREEMENT
ICS has an agreement with another company whereby ICS assisted in the
establishment of an electronic claims processing clearinghouse and in the
subsequent marketing of the clearinghouse by submitting electronic claims of ICS
customers for processing through the clearinghouse. The other company is owned
by a minority stockholder of the Company. ICS received a fee which included the
cancellation of a $324,000 note payable to this minority stockholder, plus
additional periodic payments totaling $100,000.
As part of the agreement, ICS agreed to submit all its eligible electronic
claims exclusively to the other company for processing and will pay $0.25 per
claim processed. The agreement commenced September 1, 1992 and will terminate
upon the processing of 11,800,000 claims, or certain other events (principally
related to the transfer of ownership of ICS) or discontinuance of electronic
claim-related business activities. If the agreement is terminated due to the
other events, five shareholders of the Company shall pay a termination fee of
$324,000 less the number of claims processed to date times $0.05 per claim, plus
an annual interest surcharge of prime plus 3%. ICS has guaranteed the
shareholders' obligation for the termination fee which totaled approximately
$234,000 at January 31, 1997. The service center became functional in September
of 1993 and processed approximately 431,000 and 495,000 claims from ICS
customers in fiscal 1996 and 1997, respectively. As of January 31, 1996 and
1997, approximately $284,000 and $234,000, respectively, was included in
deferred revenue related to this agreement.
In November 1996, the Company entered into an agreement to terminate this
agreement in consideration of a $25,000 payment and tender of the remaining
outstanding balance to be paid upon the successful completion of a public
offering of the Company or its successor.
14. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest amounted to $55,338 and $42,626 for the years
ended January 31, 1996 and 1997, respectively.
In fiscal 1997, the Company issued common stock and a warrant with an
aggregate fair value of $190,192 for services rendered to the Company.
In fiscal 1997, the Company acquired certain assets and assumed certain
liabilities of HCD for consideration of a $1,550,000 note and $150,000 cash
(Note 2).
15. SUBSEQUENT EVENTS
In March 1997, the Company issued to third parties, through private
placements, 800,000 shares of common stock for aggregate consideration of
$280,000 in cash.
F-15
<PAGE> 27
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE - NONE
ITEM 9: DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
DIRECTORS
The following table sets forth the directors of AMC who served in such capacity
as of January 31, 1997 together with their respective ages as of April, 1997,
and other offices held. Each present director will hold office until the next
annual meeting of shareholders and until their successors have been elected and
qualifies for office:
<TABLE>
<CAPTION>
Name Age From To
<S> <C> <C> <C>
Frederick L. Fine 38 March, 1993 Present
James K. Price 39 March, 1993 Present
</TABLE>
EXECUTIVE OFFICERS
The following table sets forth the Executive Officers, and ages as of April
1997 of American Medcare who served in such capacity as of January 31, 1997:
<TABLE>
<CAPTION>
Name Office Held Age From To
<S> <C> <C> <C> <C>
Frederick L. Fine Executive Vice President 38 March, 1993 November, 1995
Chairman October 31, 1996 Present
President, CEO November, 1995 Present
James K. Price Vice President, Secretary 39 March, 1993 November, 1995
Executive Vice President November, 1995 Present
Michael Warren Vice President, CFO 43 November, 1995 Present
and Treasurer
Robert L. Fine President 63 March, 1993 November, 1995
Chairman November, 1995 October 31, 1996
R. Ernest Chastain Vice President, Sales 47 November, 1996 Present
</TABLE>
Frederick L. Fine joined AMC in May 1993 at which date Newport was merged into
AMC. Mr. Fine was a co-founder of International and has been a director of
International and AMC, and an officer and director of Newport. He has 15 years
experience in sales and marketing in the computer healthcare industry and has
been Vice President of sales and marketing for seven years and President for
the last three years of International. Prior to co-founding International, Mr.
Fine was with Moore Business Systems, Inc. and MCS of Atlanta, Georgia. He
holds a BA in Economics from the University of Georgia.
James K. Price joined American Medcare Vice President and Secretary on March
18, 1993, at which time he was elected to the Board of Directors. He served as
Vice President and Secretary of Newport from May 1991 to May 25, 1993, at which
date Newport was merged into AMC. Mr. Price was a co-founder of International,
and has been a director of International and AMC since January 1995 and
continues to serve in that capacity. He was President of International from
September 1987 to May 1988. During his affiliation with International, Mr.
Price was also a director and officer of Newport. Prior to co-founding
<PAGE> 28
International, Mr. Price was with Executive Business Systems, Moore Business
Systems, Inc. and Lanier Co. of Atlanta. He holds a BA degree in Marketing
from the University of Georgia.
Michael Warren joined International and American Medcare in September, 1994,
serving as Vice President of Operations, and then as Chief Financial Officer.
Prior to joining AMC, he directed the development of managed care software
products and operations at Millennium HealthCare. Prior to Millennium, he was
the director of Arthur Andersen's Computer Risk Management Practice in the
Southeast,. Prior to that date, he was Manager of Systems Auditing for
NationsBank, and was an auditor with Coopers & Lybrand. Michael holds a
Masters in Business Information Systems from Georgia State University, and a BA
in Accounting from the University of Georgia. He is a member of the AICPA, and
the Georgia Society of CPAs.
Robert L. Fine joined American Medcare as President and CEO on March 18, 1993,
at which time he was elected to the Board of Directors. He was President of
Newport from May 1991 to May 25, 1993 at which date Newport was merged into
AMC. Mr. Fine was a director of International since January 1985 until
October 1996. He was President of International from February 1989 to June
1992. Prior to that he had been President of a telephone service company and
has been in the private practice of law from 1962 to 1988. He is a graduate of
Georgia Tech and Emory University School of Law. In October of 1996, Mr. Fine
resigned as Chairman and director.
R. Ernest Chastain joined AMC in November 1996. From 1994 until his employment
by AMC, he servedas vice president of sales for Quality Systems, Inc., a health
care practice management company. From 1993 to 1994, Mr. Chastain served as
vice president of sales for ELCOMP, Inc., a health care practice management
company. From 1983 to 1986, Mr. Chastain served as regional vice president for
Contel Business Systems, Inc., a supplier of practice management systems, which
was acquired in 1986 by Versyss, Inc., another practice management systems
supplier. From 1986 to 1992, Mr. Chastain served as vice president of sales
management for Versyss, Inc. Mr. Chastain holds a B.A. in Marketing from the
University of Georgia.
FAMILY RELATIONSHIPS
Robert L. Fine is the father of Frederick L. Fine. W. K. Price, a former
director of AMC is the father of James K. Price. No other family
relationships have existed between any of the directors and officers of the
company.
<PAGE> 29
ITEM 10: EXECUTIVE COMPENSATION
The following table sets forth the amounts paid to the Executive Officers of
American Medcare.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Fiscal Year Cash Other
Ended Compensation Compensation
<S> <C> <C> <C>
January 31, 1996 All executive officers (4) $201,903
January 31, 1997 Frederick L. Fine $97,750 $19,250
James K. Price $97,750 $19,250
All executive officers (4) $301,249 $55,000
</TABLE>
The Other Compensation expense relates to director services previously
rendered.
DIRECTORS REMUNERATION
The directors of AMC are not compensated for their services.
OPTIONS, WARRANTS OR RIGHTS
AMC's subsidiary, International issued in January 1991 a warrant to Moore
Business Systems, Inc. to purchase up to twenty percent of International.
International repurchased these warrants from Moore Business Systems, Inc. on
January 23, 1997 for $50,000, terminating all rights of Moore to purchase any
interest in International.
On September 1, 1994, the Company granted options to Rod Scogin, then an AMC
director, in the amount of 1,000,000 shares exerciseable at 31 cents per share;
1,000,000 shares exerciseable at 62.5 cents per share; and 1,000,000 shares at
1.00 per share. All options were to expire 5 years from September 1, 1994. In
addition to these options, and in a separate agreement, five shareholders
provided Mr. Scogin with options for 200,000 shares each, totalling 1,000,000
shares of stock, at an exercise price of 1 cent per share.
By mutual agreement, Mr. Scogin terminated all existing options, and settled
certain other outstanding matters with the Company, and with the five
shareholders in return for the issuance of 162,762 shares to him by the
Company, and the issuance of 1,000,000 shares to him by the five shareholders.
The settlement agreement resulted in compensation expense relating to the
services provided to the Company by the former director during 1994 and 1995.
The shares provided by the five shareholders constituted a contribution of
capital by these shareholders to the Company to be used as compensation to Mr.
Scogin for services previously rendered to the Company.
On September 1, 1994, two options were also granted to Michael Warren, an AMC
officer and director. The first option was exercised during 1996, and resulted
in 500,000 shares at $.001 cents per share, subject to the provision of SEC
Rule 144. Under the additional option provisions, Mr. Warren may exercise a
purchase option for a total of 500,000 additional shares at 10 cents per share,
all subject to Rule 144, at any time within (5) years from September 25, 1994.
The Company established an employee stock option plan during fiscal 1997.
During the year, five key management personnel were granted 7 year stock
options with specified 4 year vesting periods, exercise and expiration dates,
and exercise prices.
<PAGE> 30
During fiscal 1997, a stock warrant was issued to Compass Partners, LLC for
services rendered and to be rendered by Compass and Richard Perlman. The
warrant provides Compass with the right to purchase 1,865,500 shares of stock
at the closing price of American's stock price on June 12, 1996 of 6.25 cents
per share.
During the year International acquired a previously outstanding warrant held by
Moore Business Systems, Inc. The requisition of the outstanding warrant
resulted in a $450,000 increase to Additional Paid In Capital, and a reduction
of $500,000 in the stock purchase warrant.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information at fiscal year ended, January 31,
1997 with respect to persons known by AMC to be the beneficial owners of more
than five percent of the common stock of AMC, $.001 par value, and the
ownership of the common stock by the directors of AMC and all executive
officers and directors of AMC as a group.
<TABLE>
<CAPTION>
Amount and Nature Percentage Of
Name of Beneficial Owner of Ownership Class
- -------------------------------------------------------------------------------------
<S> <C> <C>
Norsons International,LLC 9,118,792 16.4
1411 Rouse Lane, Suite 201
Roswell, GA 30076
Frederick L. Fine 6,862,787 12.4
2970 Clairmont Road Direct
Atlanta, GA 30329
James K. Price 6,882,787 12.4
2970 Clairmont Road Direct
Atlanta, GA 30329
Robert L. Fine 4,043,653 7.4
2970 Clairmont Road Direct
Atlanta, GA 30336
Jonathan Oscher 4,021,405 7.2
156 Morning Drive Direct
Cartersville, GA 30120
William A. Baker 3,586,134 6.4
4470 Chamblee-Dunwoody Rd. Direct
Atlanta, GA 30336
W. K. Price 3,406,793 6.1
3987 Land-O-Lake Drive Direct
Atlanta, GA 30342
Allied Associates Investment Corp. (a) 1,142,444 2.1
Direct
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C>
Michael Warren 1,225,524 2.1
2970 Clairmont Road Direct
Atlanta, GA 30336
Executive Directors Officers as a group (4) 14,971,098 26.9
</TABLE>
(a) Robert L. Fine, a former director of AMC owns controlling interest.
Except as otherwise indicated, the persons named above in the table have sole
voting and investment power with respect to the shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable. Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The percentages are based upon
55,536,739 shares outstanding as of April 18, 1996.
CHANGES IN CONTROL
Registrant is not aware of any arrangements which may at a subsequent date
result in a change in control of Registrant other than as set forth herein.
MANAGEMENT INDEBTEDNESS
Frederick L. Fine and James K. Price, both officers of AMC, are indebted to
AMC's subsidiary, International, in the amount of $10,000 and $5,000 each,
respectively.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AMC entered into a net lease for approximately 8,500 square feet of office
space from Centre Pointe Partners. International continues to occupy its
leased premises under the lease which began September 1, 1994, for a period of
four years. See Item 6, Leases for additional details regarding the lease.
Mr. Rod Scogin, a partner in Centre Pointe Partners, was a former director of
American Medcare.
ITEM 13: EXHIBITS AND REPORTS ON 8-K
EXHIBITS
2.1 Plan and Agreement of Merger dated March __, 1997 between InfoCure
Corporation and the Company. Exhibit 2.1 of the Company's
Registration Statement No. 333-18923. Included herein by
reference.
10.1 Stock Purchase Agreement among the Company and the Shareholders of
Millard Wayne, Inc. dated February 11, 1997. Exhibit 10.4 of
the Company's Registration Statement No. 333-18923. Included herein
by reference.
10.2 Asset Purchase Agreement between the Company and Info Systems of North
Carolina, Inc. dated December 3, 1996. Exhibit 10.8 of the Company's
Registration Statement No. 333-18923. Included herein by reference.
<PAGE> 32
10.3 Employment Agreement between the Company and R. Ernest Chastain Dated
December 3, 1991. Exhibit 10.14 of the Company's Registration
Statement No. 333-18923. Included herein by reference.
10.4 Employment Agreement between the Company and Michael E. Warren dated
September 23, 1994. Exhibit 10.15 of the Company's Registration
Statement No. 333-18923. Included herein by reference.
10.5 Form of Employment Agreement to be entered into between the Company
and M. Wayne George Exhibit 10.17 of the Company's Registration
Statement No. 333-18923. Included herein by referecnce.
10.6 Company's 1996 Stock Option Agreement, Exhibit 10.19 of the Company's
Registration Statement No. 333-18923. Included herein by reference.
10.7 Form of Incentive Stock Option Agreement of Company. Exhibit 10.20 of
the Company's Registration Statement No. 333-18923. Included herein
by reference.
21.1 Subsidiaries of Company
27.1 Financial Data Schedule
FINANCIAL STATEMENTS
The financial statements filed as a part of the report are as follows:
- - Report of Independent Certified Public Accountants
- - Consolidated Balance Sheets as of January 31, 1997 and 1996
- - Consolidated Statements of Operations for the years ended January 31,
1997 and 1996
- - Consolidated Statements of Shareholders' Equity (Capital Deficit) for
the years ended January 31, 1997 and 1996
- - Consolidated Statements of Cash Flows for the years ended January 31,
1997 and 1996
- - Footnotes to the Consolidated Financial Statements
REPORTS ON FORM 8-K:
Date Description
----------- ----------------------------------------
December 12, 1996 Acquisition of Health Care Division of
Info Systems of North Carolina.
January 2, 1997 Merger Agreement with and into
InfoCure Corporation subject to
completion of InfoCure's IPO.
April 3, 1997 Postponement of Proposed Merger with
InfoCure
<PAGE> 33
Corporation, due to postponement of the IPO.
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, whereunto duly authorized.
AMERICAN MEDCARE CORPORATION
By /s/ Frederick L. Fine
-------------------------
Frederick L. Fine
Chairman, President & CEO Dated: May 6, 1997
/s/ Frederick L. Fine
- ----------------------------------
Frederick L. Fine May 6, 1997
President/Director
Chief Operating Officer
/s/ James K. Price
- ----------------------------------
James K. Price May 6, 1997
Executive Vice President, Director
/s/ Michael Warren
- ----------------------------------
Michael Warren May 6, 1997
Chief Financial Officer
<PAGE> 1
EXHIBIT 21.1
Subsidiaries
- ------------
International Computer Solutions, Inc. - a Georgia corporation
Health Care Division, Inc. - a Georgia corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AMC
FINANCIALS DATED JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FILING OF THE AMC 10KSB.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 198
<SECURITIES> 0
<RECEIVABLES> 318
<ALLOWANCES> 35
<INVENTORY> 0
<CURRENT-ASSETS> 579
<PP&E> 94
<DEPRECIATION> 588
<TOTAL-ASSETS> 4,182
<CURRENT-LIABILITIES> 1,706
<BONDS> 0
0
0
<COMMON> 54
<OTHER-SE> 80
<TOTAL-LIABILITY-AND-EQUITY> 4,182
<SALES> 2,494
<TOTAL-REVENUES> 2,494
<CGS> 474
<TOTAL-COSTS> 2,579
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82
<INCOME-PRETAX> (636)
<INCOME-TAX> (891)
<INCOME-CONTINUING> (559)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
