<PAGE> 1
This document is a copy of Form 10-QSB filed on September 14, 1995 pursuant to
a Rule 201 temporary hardship exemption.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
--------------------------------------
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING JULY 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO ____________________.
COMMISSION FILE NUMBER 0-15117
----------------------------------------------------------
THE ADMAR GROUP, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 95-2579295
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1551 N. TUSTIN AVENUE, SUITE 300, 92701
SANTA ANA, CALIFORNIA (zip code)
(Address of principal executives offices)
Registrant's telephone number, including area code: (714) 953-9600
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 past 90 days. Yes X No
--- ---
The number of outstanding shares of Common Stock was 8,762,602 as of July
31, 1995.
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Page 1 of 13
Exhibit Index at Page 12
1.
<PAGE> 2
THE ADMAR GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at July 31, 1995 3-4
and January 31, 1995
Consolidated Statements of Operations for 5
the Three and Six Months Ended July 31, 1995
and July 31, 1994
Consolidated Statements of Cash Flows for the 6-7
Six Months Ended July 31, 1995 and
July 31, 1994
Notes to Condensed Consolidated Financial 8-9
Statements
Item 2. Management's Discussion and Analysis 10-11
of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2.
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE ADMAR GROUP, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
July 31, 1995 January 31,
(Unaudited) 1995
------------- -----------
<S> <C> <C>
Current Assets:
Cash $ 52 $ 315
Accounts receivable - trade, net of allowance
for doubtful accounts of $100,000 1,612 1,550
Income tax refund receivable -- 63
Notes receivable from related parties 76 76
Accounts receivable - other 53 69
Other current assets 342 351
------ ------
Total current assets 2,135 2,424
Property and Equipment, Net 1,013 1,130
Preopening Costs - Net of accumulated
amortization of $2,210,900 at July 31,
1995 and $2,180,500 at January 31, 1995 2,761 2,440
Costs in excess of net assets acquired,
net of accumulated amortization of
$804,300 at July 31, 1995 and $735,400
at January 31, 1995 2,341 2,410
Other Assets 26 24
------ ------
Total Assets $8,276 $8,428
====== ======
</TABLE>
SEE ACCOMPANYING NOTES.
3.
<PAGE> 4
THE ADMAR GROUP, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31, 1995 January 31,
(Unaudited) 1995
------------- -----------
<S> <C> <C>
Current Liabilities:
Note payable to bank $ 200 $ 475
Accounts payable 210 579
Accrued salaries and benefits 315 356
Other accrued liabilities 374 496
Income taxes payable 154 --
Current portion of long-term debt and
obligations under capital leases 419 446
------ ------
Total current liabilities 1,672 2,352
Deferred Rent 123 179
Deferred Income Taxes 94 94
Note Payable to Stockholder 1,000 1,000
Long-term Debt 466 237
Obligations Under Capital Leases 64 79
Stockholders' Equity:
Common stock, $.005 par value, 20,000,000
shares authorized; 8,762,602 issued
and outstanding 44 44
Paid-in capital 3,046 3,046
Retained earnings 1,767 1,397
------ ------
Total stockholders' equity 4,857 4,487
------ ------
Total Liabilities and Stockholders' Equity $8,276 $8,428
====== ======
</TABLE>
SEE ACCOMPANYING NOTES
4.
<PAGE> 5
THE ADMAR GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JULY 31,1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JULY 31, ENDED JULY 31,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 4,569 $ 4,256 $ 8,971 $ 8,635
Cost and Expense
General administration and selling 4,031 3,802 7,953 7,676
Depreciation and amortization 186 198 337 397
Interest expense 46 38 94 76
---------- ---------- ---------- ----------
Total costs and expenses 4,263 4,038 8,384 8,149
---------- ---------- ---------- ----------
Earnings before provision for income
taxes 306 218 587 486
Provision for income taxes 112 92 217 193
---------- ---------- ---------- ----------
Net income $ 194 $ 126 $ 370 $ 293
========== ========== ========== ==========
Per share information:
Net income per common share $ .022 $ .014 $ .042 $ .034
========== ========== ========== ==========
Weighted average number of common
shares outstanding 8,762,602 8,727,602 8,762,602 8,604,004
========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES
5.
<PAGE> 6
THE ADMAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 31, 1995 AND 1994
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 370 $ 293
Adjustment to reconcile net income to
net cash flows from operating activities:
Depreciation and amortization 335 397
Changes in assets and liabilities:
(Increase) decrease in accounts receivable - trade (62) 138
Decrease (increase) in receivables - other 16 (10)
Decrease in income tax receivable 63 67
Decrease (increase) in prepaid expenses 9 (143)
Decrease in accounts payable & accrued liabilities (532) (30)
Increase in unearned revenue -- 23
Decrease in deferred rent (56) (46)
(Increase) decrease in other assets (2) 5
Increase income tax payable 154 56
----- -----
Net cash flows (used by) from operating activities $ 295 $ 750
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to pre-opening $(351) $(475)
Purchase of property and equipment (119) (276)
Increase in Common Stock from sale of
stock 1
Increase on capital in excess of par value from
sale of stock 499
----- -----
Net cash flow (used by) from investing activities $(470) $(251)
----- -----
</TABLE>
SEE ACCOMPANYING NOTES
6.
<PAGE> 7
THE ADMAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JULY 31, 1995 AND 1994
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
1995 1994
------- -----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt $ (194) $(154)
Proceeds from issuance of long-term debt 400 --
Principal payments of obligations under
capital leases (19) (44)
Proceeds on note payable to bank 1,000 650
Principal payments of note payable to bank (1,275) (500)
------- -----
Net cash flows from financing activities (88) (48)
------- -----
Net (decrease) increase in cash (263) 451
Cash at beginning of period 315 386
------- -----
Cash at end of period $ 52 $ 837
======= =====
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $ 64 $ 76
======= =====
Income taxes paid $ -- $ 70
======= =====
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
There were no dividends declared or unpaid for the three month periods ended
July 31, 1995 and July 31,1994.
SEE ACCOMPANYING NOTES
7.
<PAGE> 8
THE ADMAR GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1995
(UNAUDITED)
1. BUSINESS
The Admar Group, Inc. ("Admar" or the "Company") develops, markets and
administers managed care products and services which facilitate the
delivery and manage the cost of health care services. Admar provides a
complete array of managed health care programs and services to insurance
companies, self-funded employers and health care providers.
Admar was one of the first Preferred Provider Organizations ("PPOs") in
the nation and provides managed health care delivery systems nationally
through customized programs, including extensive Preferred Provider and
Exclusive Provider organizations, complete Utilization Management services,
Catastrophic Case Management and Managed Care Administration services for
employers and insurance carriers.
Admar provides the following managed care programs and services:
EXCLUSIVE HEALTH is Admar's health maintenance organization
("HMO") alternative program which provides self-funded employers and
insurance companies the ability to have the same cost-containment
benefits and features of HMO's while still offering the flexibility of
self-funded and insured health benefit plans. The program creates a
financial and quality care partnership between medical providers,
patients and insurors, all of whom have the incentive to work together
to contain medical costs while maintaining the quality of care.
MED NETWORK is Admar's hospital and physician PPO which was
developed in 1978. Med Network offers a comprehensive network which
has continued to expand and now covers most of the nation. The
network consists of primary care physicians, specialists, hospitals
and pharmacies. Admar maintains and carefully selects health care
providers in order for network participants to receive the highest
quality health care programs available at the lowest cost.
MED$ELECT is a hospital-only PPO available in all of the Med
Network areas and in additional states. Med$elect enables employers
and patients to save on their health care costs when they access care
at contracted hospitals, regional medical centers and outpatient
surgical centers.
MED NETWORK EPO is Admar's national Exclusive Provider
Organization ("EPO") which offers the same quality as Med Network PPO
providers. Med Network EPO maintains stronger health care
cost-containment features than a PPO due to aggressive utilization
management controls, plan design incentives and referrals to the most
cost-effective network providers and primary care physicians.
HEALTHWATCH MEDICAL REVIEW SYSTEM is designed to ensure that
hospitalizations, the most expensive component of the nation's health
care budget, are prescribed and utilized appropriately without
compromising health care. Within the HealthWatch utilization
management system, medical/surgical, psychiatric, substance abuse,
catastrophic illnesses/diseases and maternity management are monitored
beginning with hospital pre-admission review through discharge and
alternate site planning. In addition, HealthWatch provides complete
Ambulatory Care Management, including authorization for all physician
to physician referrals and all high cost ancillary services.
8.
<PAGE> 9
HEALTHWATCH ADVANTAGE is a program that provides cost savings
opportunities outside of the formalized preferred provider networks.
HealthWatch Advantage identifies surgical and hospitalization cases
which are being treated outside the employer's contracted PPO network
and negotiates with attending hospitals and physicians to reduce their
costs and defray some of the expenses associated with providing non-
contracted health care services.
Admar also operates a third party administrator in Boulder
Colorado, Benefit Plan Administrators, Inc., which provides medically
managed claims payment services to self-insured employers. The
division also provides all required medical benefits consulting.
Admar received a loan payable over seven years maturing September 30,
2002 in the amount of $400,000 from Principal Mutual Insurance Company
("Principal") on February 1, 1995. This loan was in connection with
Principal's agreement to use Admar's Exclusive Health product in the
Southern California area.
Admar reserved for issuance three hundred thousand (300,000) shares of
the Company's Common Stock in conjunction with the adoption of the Employee
Stock Purchase Plan ("ESPP") on May 15, 1995.
2. RECENT DEVELOPMENTS
On September 7, 1995, Admar announced that it is in discussions with
Principal Health Care Inc. regarding the potential acquisition of all of
the outstanding stock of Admar at a proposed cash purchase price of $2.25
per share. Material terms remain to be negotiated, due diligence remains
to be completed, and there can be no assurance that a definitive agreement
will be reached or that the transaction will be consummated.
3. BASIS OF PRESENTATION
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of
the information and note disclosures required by generally accepted
accounting principles. These statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Form
10-KSB for the year ended January 31, 1995. The accompanying financial
statements have not been examined by independent accountants in accordance
with generally accepted auditing standards, but in the opinion of
management such financial statements include all adjustments, consisting
only of normal recurring adjustments, necessary to summarize fairly the
Company's financial position and results of operations. The results of
operations for the six months ended July 31, 1995 may not be indicative of
the results that may be expected for the year ending January 31, 1996.
4. PRE-OPENING COSTS
Costs relating to the development of medical networks are deferred and
amortized on a straight-line-basis over three years. Amortization
commences as the revenues from the networks are recognized. Costs
aggregating $351,000 have been capitalized for the six month period ending
July 31, 1995 compared to $475,000 being capitalized for period ending July
31, 1994.
9.
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THE SECOND QUARTER ENDED JULY 31, 1995 COMPARED WITH THE SECOND QUARTER
ENDED JULY 31, 1994
Revenues for the second quarter ended July 31, 1995 increased to $4,569,000
from 4,256,000 for the comparable period ended July 31, 1994. The increase
was primarily the result of an increase in revenue from PPO several clients
and from a price increase to a significant HealthWatch Utilization
Management client. The increase in revenue to Image was primarily due to
the increase of business with one client. The decrease in revenue to
BPA/Managed Benefits was due to the loss of several clients. Revenue from
HealthWatch Advantage increased due to an increase in the number of
clients. Inflation was not a factor in the Company's results of operation
for the period.
The following table sets forth the revenue derived from each product line
and the percentage that each product line bears to total revenue:
<TABLE>
<CAPTION>
REVENUE COMPARISON BY PRODUCT
2ND QUARTER ENDED 2ND QUARTER ENDED
JULY 31, 1995 % JULY 31, 1994 %
----------------- ---- ----------------- ----
<S> <C> <C> <C> <C>
Alternate Delivery Systems (PPOs & EPOs) $3,306,000 72.4 $2,719,000 63.9
HealthWatch (U.M. products) 653,000 14.3 556,000 13.0
Image Financial and Insurance Services, Inc. 138,000 3.0 64,000 1.5
Benefit Plan Administrators, Inc./ 255,000 5.6 808,000 19.0
Wm. G. Hofgard & Company, Inc.
Managed Benefits
HealthWatch Advantage 216,000 4.7 101,000 2.4
Miscellaneous 1,000 .0 8,000 0.2
---------- ---- ---------- ----
TOTAL $4,569,000 100 $4,256,000 100
========== ==== ========== ====
</TABLE>
Total costs and expenses increased to $4,263,000 from $4,038,000 an
increase of 5.6%, in second quarter ended July 31, 1995 compared with
the second quarter ended July 31, 1994. The increase was principally the
result of additional costs in the administrative area and sales. Operating
expenses improved as a percentage of revenues to 93.3% from 94.8%. General
administrative and selling expenses decreased to 88.2% from 89.3% of
revenues for the second quarter ended July 31, 1995.
Depreciation and amortization decreased to $186,000 in the quarter ended
July 31, 1995 from $198,000 in the comparable period of 1994 due to
the absence of amortization of preopening costs not yet expensed for
Exclusive Health and the majority of the preopening of PPO networks being
fully amortized. Interest expense increased to $46,000 for the quarter
ended July 31, 1995 from $38,000 for the comparable period of 1994
primarily due to an increase in debt.
Net income for the second quarter ended July 31, 1995 increased to $194,000
from $126,000 for the comparable period ended July 31, 1994. The increase
in net income resulted from an increase in revenue partially offset by an
increase in costs.
Pre tax income for the quarter ended July 31, 1995 increased to a profit of
$306,000 from a profit of $218,000 for the comparable period ended July 31,
1994.
10.
<PAGE> 11
The six months ended July 31, 1995 compared with the six months ended July
31,1994.
Revenues increased by 3.9% to $8,971,000 for the six months ended July 31,
1995, from $8,635,000 for the comparable period of the prior year. Total
costs and expenses increased by 2.9% to $8,384,000 for the six months ended
July 31, 1995 from $8,149,000 for the comparable period of the prior year,
and decreased as a percentage of revenue from 94.3% to 93.5%. The increase
in costs was due primarily to the additional costs in the administrative
and sales area. Depreciation, amortization and interest decreased by 8.9 %
to $431,000 for the six months ending July 31, 1995 from $473,000 for the
comparable period of the prior year, and decrease as a percentage of
revenues from 5.5% to 4.8%. The reduction is due to most of the preopening
of the PPO networks being fully amortized and the absence of preopening
costs net yet expenses for Exclusive Health.
Earnings before provision for income taxes for the six months ended July
31, 1995 increased by 20.1% to $587,000 as compared to $486,000 for the
comparable six months in 1994. Net income increased for the six months
ended July 31, 1995 to $370,000 from $293,000.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased approximately $263,000 for the quarter ended July 31,
1995 primarily due to a decrease in accounts payable and accrued
liabilities of $532,000 and a continued investment in the Exclusive Health
product of $351,000. The Company continued to funds its cash requirements
from internal operations. Cash flows from operating activities were
$295,000 due primarily to net income. Cash flows used by investing
activities totaled $470,000 due to the purchase of new equipment and
furniture and additional preopening costs. Net cash flows from financing
increased by $88,000 due to proceeds generated by increasing long term
debt. Management believes that existing working capital and funds generated
from operations will continue to be sufficient to meet its operational
requirements.
Inflation has not had a material effect on the Company.
11.
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
a. The Company is involved in legal actions incidental to its business.
There were no material developments during the quarter on any such
matters. Management does not believe the outcome of any of the
litigation will have a material adverse effect on the consolidated
operations or financial condition of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
Exhibit 27 Financial Data Schedule
(b) There were no reports on form 8-K filed for the quarter ended July 31,
1995.
12.
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ADMAR GROUP, INC.
REGISTRANT
Date: September 13, 1995 By: /s/Edward K. Evans
-------------------------
Edward K. Evans,
Principal Financial and
Accounting Officer and
Duly Authorized Officer
13.
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JUL-31-1995
<CASH> 52
<SECURITIES> 0
<RECEIVABLES> 1,712
<ALLOWANCES> 100
<INVENTORY> 0
<CURRENT-ASSETS> 2,135
<PP&E> 4,566
<DEPRECIATION> 3,553
<TOTAL-ASSETS> 8,276
<CURRENT-LIABILITIES> 1,672
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<COMMON> 44
0
0
<OTHER-SE> 4,813
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<SALES> 4,569
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</TABLE>
