<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20459
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FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the four months ended: December 31, 1999
Commission File Number: 0-11419
FAMILY HEALTH SYSTEMS, INC.
------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
DELAWARE 22-2435595
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
POST OFFICE BOX 21238, ST. SIMONS ISLAND, GEORGIA 31522-0738
------------------------------------------------- ----------
Address of Principal executive offices of Zip Code
Incorporation or organization
912-634-2584
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Registrants telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the last 90 days.
YES [ ] NO [X]
At December 31, 1999, 3,161,702 shares of the Registrant's Common Stock were
issued and 2,006,757 shares of the Registrant's Common Stock were outstanding
and the estimated aggregate market value of the Registrant's outstanding common
stock held by non-affiliates of the Registrant was approximately $165,000.
<PAGE> 2
Item 1. Management's Discussion and Analysis of Financial Condition and results
of operation
(A) General Development of Business.
Family Health Systems, Inc. (FHS or REGISTRANT), a Delaware
corporation, was incorporated on January 20, 1983. The
Registrant was formed to provide comprehensive business
services to physicians, dentists and professional corporations
operating full service dental centers and emergency/industrial
medical centers. FHS found this activity to be unprofitable
and it exited the business service activity in fiscal year
1987 and became engaged in the formation, registration,
distribution and sale of developmental stage companies. FHS
has no activities other than investment portfolio management
at this time.
(B) Description of business:
The Registrant is currently inactive in the formation of
subsidiaries, by registration of those stocks through filing
with the SEC, and is seeking a merger or business combination
for itself.
(C) Competition.
NONE
(D) Employees
NONE
Item 2. Properties
NONE
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders:
NONE
Item 5. Other information:
NONE
<PAGE> 3
Item 6. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market information:
The Registrant's common stock trades in the over-the-counter market.
The Registrant's common stock was listed on the NASDAQ National Market
System, under the symbol FHSI until November 26, 1986, at which time
such listing was suspended until FHS assets and Net Worth were
increased to the minimum required levels. FHS was reinstated on NASDAQ
on April 2, 1987, but was again suspended on February 12, 1988 when its
assets and net worth were below the NASDAQ minimum requirements. There
has not been any trading of FHS common stock any listed exchange during
calendar years 1995, 1996, 1997, 1998 and 1999.
HOLDERS:
As of December 31, 1999, the approximate number of holders of record of
the Registrant's common stock was 568. In addition to those who hold
shares in their individual names, it is reported to Registrant that
there are 267 holder's in "street names" for a total of 835
shareholders.
DIVIDENDS:
Cash dividends have not been paid by the Registrant since it was
formed; however, Registrant has during past fiscal years paid stock
dividends in it's wholly-owned subsidiaries from 1987-1988.
Item 7. SELECTED FINANCIAL DATA:
The following data, insofar as it relates to the period September 1,
1998 to December 31, 1999 has been derived from annual financial
statements, including the balance sheets at December 31, 1999 and
August 31, 1999 and 1998 and the related statements of income and cash
flows for four months ended December 31, 1999 and the years ending
August 31 1998 and 1999 and notes thereto appearing elsewhere herein.
This financial data should be read in conjunction with the financial
statements of the Company and the related notes thereto included in
Item 8 of this Annual Report.
<TABLE>
<CAPTION>
Four months
1999 1999 1998
----------- --------- ---------
<S> <C> <C> <C>
Operating Revenues $ Nil $ Nil $ Nil
Income (loss) from continuing
Operations $(57,505) $ 60,821 $(57,333)
Income (loss) from continuing
operations per share $ (.0287) $ .0303 $( .0286)
Current assets $140,832 $169,451 $165,488
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Four months
1999 1999 1998
----------- --------- ---------
<S> <C> <C> <C>
Working Capital $ 78,599 $ 34,665 $163,495
Total Assets $225,719 $300,749 $187,163
Stockholders' equity $163,486 $220,991 $185,170
</TABLE>
Item 8. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
(a) Results of Operations
The discontinuance in 1988 of the professional administrative
marketing business decreased revenues; however, it also
decreased liabilities and the risk of potential liabilities.
The only income presently is gains and losses from sales of
stock in the marketplace. Losses from sales of stocks for the
four months ending December 31, 1999 aggregated $(37,547).
(b) Financial Condition, Liquidity and Capital Resources.
Management does not expect that the condition of FHS can be
improved unless it can form a business relationship between it
and another going concern.
Item 9. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
<S> <C>
(1)Independent Auditor's Report on the Financial Statements F-1
(2)Financial statements:
Balance Sheet as of December 31, 1999 F-2
Statement of income for the four months ending December 31, 1999 F-3
Statement of Stockholders' Equity (deficit) for Four months ended
December 31, 1999
Statement of cash flows for the four months ending December 31, 1999 F-4
Notes to Financial Statements F-5
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or other notes herein.
Item 10. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL MATTERS
NONE
<PAGE> 5
Item 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth all the directors, executive officers
and significant employees of the Registrant as of December 31, 1999:
William S. Bryant President
Chief Executive Officer
Treasurer
Director
Directors hold office until the next annual meeting of shareholders.
Officers are elected by the Board of Directors following the Annual
meeting of stockholders.
Item 12. EXECUTIVE COMPENSATION
Cash compensation. The following table sets forth the actual cash
compensation of any officer or director of the Registrant who received
in excess of $60,000 in the fiscal year ended December 31, 1999 and the
actual cash compensation of all officers and directors of the
Registrant as a group for said fiscal year.
Officer or Director NONE
All Officers or Directors as a group NONE
Compensation of Directors:
During the Registrant's fiscal year ended December 31, 1987, the
Registrant passed a resolution that all officers and directors who
attended meetings of the Board of Directors or Shareholders and who
were not on other salary with FHS, would receive restricted shares of
stock of FHS, equal to $500 per day. The number of shares to be
determined by the bid price of the stock on the meeting date.
Item 13. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND
MANAGEMENT
The following table sets forth information regarding ownership of the
Registrant's common stock by all persons who are known by the
Registrant to own more than 5% of the total outstanding shares and by
all officers and directors of the Company as of December 31, 1999.
E.L. Carman 1,009,673 shares 53% ownership
Changes in Control:
<PAGE> 6
Registrant is not aware of any arrangement which may result in a change
of control of Registrant at present.
Item 14. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Certain Business Relationships.
NONE
Indebtedness of Management
NONE
Item 15. OTHER
Exhibit 27 - Financial Data Schedule
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date 06/23/00 /s/ WILLIAM S. BRYANT
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WILLIAM S. BRYANT, Director,
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial and Accounting Officer
Treasurer
<PAGE> 8
EXHIBITS
FINANCIAL INFORMATION
<PAGE> 9
EXHIBIT F-1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Family Health Systems, Inc.
St. Simons Island, Georgia
We have audited the accompanying balance sheets of Family Health Systems, Inc.
as of December 31, 1999 and the related statements of income, stockholders'
equity (deficit), and cash flows for the four months ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the overall accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Family Health Systems, Inc. as
of December 31, 1999 and the results of its operations and its cash flows for
the four months ended December 31, 1999 in conformity with generally accepted
accounting principles.
MOORE STEPHENS TILLER LLC
Brunswick, Georgia
May 23, 2000
<PAGE> 10
EXHIBIT F-2
FAMILY HEALTH SYSTEMS, INC.
BALANCE SHEET
December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash $ 41,758
Marketable securities 99,074
-----------
Total current assets 140,832
-----------
Other receivables 60,512
-----------
Investment in closely-held company 24,375
-----------
Total Assets $ 225,719
===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Cash overdraft - Investment margin account $ 23,333
Accounts payable 13,900
Note payable 25,000
-----------
62,233
-----------
Common Stock 3,351
Paid in capital 2,673,705
Retained earnings (deficit) (2,513,570)
-----------
163,486
-----------
Total Liabilities and stockholder's equity (deficit) $ 225,719
===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 11
EXHIBIT F-3
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF INCOME
Four months Ended December 31,1999
<TABLE>
<CAPTION>
<S> <C>
Revenues $ NIL
Expenses
Auto expense 109
Miscellaneous 189
Office Supplies 353
Postage 66
Professional Fees 17,900
Publications 62
Telephone 80
Travel 1,199
-----------
19,958
-----------
Operating income (loss) (19,958)
-----------
Other income (expense)
Capital gains (losses) on available-for-sale securities (37,547)
-----------
Net Income(Loss) (57,505)
Retained earnings (deficit), beginning (2,456,065)
-----------
Retained earnings (deficit), ending $(2,513,570)
===========
</TABLE>
See Notes to Financial Statements.
1
<PAGE> 12
EXHIBIT F-4
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EARNINGS (DEFICIT)
Four months Ended December 31,1999
<TABLE>
<CAPTION>
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, August 31, 1998 as previously reported $ 3,351 $ 2,673,705 $(2,491,886) $ 85,170
Adjustment applicable to re-establishment of
note
Payable for liability written off in a
prior year -- -- (25,000) (25,000)
----------- ----------- ----------- -----------
Balance, August 31, 1998, as restated 3,351 2,673,705 (2,516,886) 160,170
Net income (loss) for year ending
August 31, 1999 -- -- (57,505) (57,505)
----------- ----------- ----------- -----------
Balance, August 31, 1999 3,351 2,673,705 (2,456,065) 220,991
Net income (loss) for four months ended
December 31, 1999 -- -- (57,505) (57,505)
----------- ----------- ----------- -----------
Balance, December 31, 1999 $ 3,351 $ 2,673,705 $(2,513,570) $ 163,486
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 13
EXHIBIT F-5
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF CASH FLOWS
Four Months Ended December 31,1999
1999
---------
CASH FLOWS FROM OPERATING ACTIVITIES
(USED IN) OPERATING ACTIVITIES
Net income (loss) $ (57,505)
Adjustments to reconcile net income (loss) to
(Gain) loss on sale of investments 37,547
Change in working capital components
Increase (decrease) in accounts payable 13,900
(Increase) decrease in trade receivables 688
---------
Net cash (used in) operating activities (5,370)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 124,979
Purchase of investments (95,554)
Advances made to drilling company (9,090)
Repayment of advances by drilling company 63,000
Investment in closely-held company 7,500
---------
Net cash provided by investing activities 75,835
---------
Net increase in cash 70,465
Cash:
Beginning (overdraft) (52,040)
---------
Ending $ 18,425
=========
Cash:
Cash - operating $ 41,758
Cash - Money Market (overdraft) (23,333)
---------
$ 18,425
=========
See Notes to Financial Statements.
<PAGE> 14
EXHIBIT F-6
FAMILY HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Four Months Ended December 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS -- Family Health Systems, Inc. ("FHS") was organized
to provide comprehensive administrative, marketing and consulting
services to group dental and medical practices and began operations on
May 1, 1983. Effective in October 1987, all administrative and
marketing agreements had been terminated and the Corporation has been
inactive since that time.
B. BASIS OF ACCOUNTING - The Company's policy is to prepare its financial
statements on the accrual basis of accounting.
C. NET INCOME (LOSS) PER SHARE -- Net income (loss) per share has been
computed using the weighted average number of shares of common stock
outstanding during the applicable period.
D. ESTIMATES -- The process of preparing financial statements in
conformity with generally accepted accounting principles requires the
use of management's estimates and assumptions regarding certain types
of assets, liabilities revenues and expenses. Such estimates primarily
relate to unsettled transactions and events as of the date of the
financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
2. CHANGE IN ACCOUNTING YEAR
The Company has elected to change its accounting year from a fiscal
year ending August 31 to a calendar year ending December 31. The change
results in a short accounting year of four months ended December 31,
1999.
3. OTHER RECEIVABLES
The Company is currently advancing funds to a going concern involved in
pumping water into otherwise non-productive or low production oil wells
and extracting the raw crude oil. These advances are non-interest
bearing with no stated method of repayment and are not evidenced by a
note. Advances made during the four months ended December 31, 1999
$2,800. Repayments of advances in the amount of $63,000 were made
during the four months ended December 31, 1999.
<PAGE> 15
In addition, the Company made advances during the year ending August
31, 1999 in connection with a natural gas drilling operation in West
Virginia. The drilling operations are on acreage adjoining a producing
natural gas field. Advances made to the Company during the four months
ended December 31, 1999 aggregated $2,090. No repayments have been
received.
Advances were also made to a formerly dormant corporation during the
four months ended December 31, 1999. This advance is not evidenced by a
note and bears no rate of interest or method of repayment. The amount
advanced during the four months ended December 31, 1999 aggregated
$5,000.
Additionally, advances of $2,000 were made to another going concern in
the oil and gas industry.
4. INVESTMENTS
The Company investments in marketable equity securities are held for an
indefinite period and thus are classified as available for sale.
Available for sale securities are recorded at fair value in investments
on the balance sheet, with the change in fair value during the period
excluded from earnings and recorded in the equity section of the
balance sheet. There were no unrealized holding gains or losses at
December 31, 1999 due to all unrealized losses being realized in the
write-down to cost.
At December 31, 1999, investments were written down to their estimated
realizable values, because in the opinion of management, the decline in
market value of those securities is considered to be other than
temporary.
Investments in securities are summarized below:
Unrealized Unrealized Fair
Description Gain Loss Value
----------- ---------- ---------- ------
December 31, 1999:
Available-for-sale securities:
Common Stock $ -- $ -- $99,074
------- ------- -------
5. INCOME TAXES
As of December 31, 1999, FHS has net operating loss carryforwards of
approximately $1,833,707, which expire under current law from 2000
through 2013. FHS also has investment tax credit carryforwards expiring
in 2000.
<PAGE> 16
6. DEFERRED INCOME TAXES
Temporary differences giving rise to the deferred tax accounts consist
primarily of the net operating loss carryforwards, capital loss
carryforwards and investment tax credit carryforwards.
The deferred tax benefit and deferred tax liability comprised the
following at December 31, 1999:
December 31,
1999
------------
Deferred tax benefit:
Net operating loss carryforwards $ 579,848
Capital loss carryforwards 17,070
Investment tax credit carryforwards 11,190
Value allowance (608,108)
---------
Net deferred tax benefit $ --
=========
The change in valuation allowance for the four months ended December
31, 1999 aggregated $201,895 largely due to expiration of tax
carryforwards.
7. RELATED PARTY TRANSACTIONS
The president and majority stockholder are reimbursed for travel
expenses as incurred in the ordinary course of business.
8. EARNINGS PER SHARE
The following data show the amounts used in computing earnings per
share.
December 31,
1999
------------
Income (loss) available to common
stockholder $ (57,505)
Weighted average number of common
shares used in basic EPS 2,006,757
----------
Earnings per common share $ (0.0287)
==========
<PAGE> 17
9. CONCENTRATIONS OF CREDIT RISK
The Company has outstanding accounts receivable from companies in oil
and gas exploration industry which are considered speculative
industries. Therefore, the Company has an industry concentration of
credit risk in the oil and gas industry.
10. PRIOR PERIOD ADJUSTMENT
The Company discovered during a review of old records a liability
determined to be valid which had been written off in a prior year. The
liability was re-established through a prior period adjustment charged
to retained earnings at August 31, 1998. The amount of the liability
was $25,000 and has been settled subsequent to December 31, 1999
through the issuance of 18,000 shares of common stock and a cash
payment of $5,000.
11. SUBSEQUENT EVENT
Subsequent to December 31, 1999, the Company sustained losses in the
stock market from options purchased due to a devaluation of
technologies stocks within the stock market. The losses aggregated
$160,797 at March 31, 2000 and reduced the value of marketable
securities to $23,578. Management for the Company represents the value
of their remaining portfolio is expected to increase to recover these
losses.
12. CONTINGENCY
As disclosed in Note 1, the Company has been inactive in its operating
business since 1987. As a result, several Forms 10-K and 10-Q have not
been filed. The Company has since filed a notification of late filing
with the Securities and Exchange Commission for reports 10-K and 10-Q
due to be filed for the period August 31, 1997 to December 31, 1999 and
is currently filing all late filings. Any liability resulting from the
late filing is undetermined and is not reflected in these financial
statements.
