SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 1995 Commission File Number 0-
14757
MEDMASTER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
No. 87-0400472
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification Number
2072 North Main, Logan
Utah
84341
(Address of principal executive
offices)
(Zip Code)
Registrant's phone number,
including area code
(801) 753-4101
Former name, former address and former fiscal year, if changed since
last report:
N/A
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
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 common shares outstanding on September 30, 1995 was
$10,844,117 shares.
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
Index
Page
Part I. Financial Information
Consolidated Condensed Balance Sheets - September 30, 1995
and March 31, 1995 3
Consolidated Condensed Statements of Operations - Three Months
and Six Months Ended September 30, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows - Three Months
and Six Months Ended September 30, 1995 and 1994 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Part II. Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
<TABLE>
Consolidated Condensed Balance Sheets (unaudited)
<CAPTION>
September
30,
March 31,
1995
1995
(Unaudited
)
Assets
<S>
<C>
<C>
Current assets
Cash
$ 171,077
$ 27,026
Accounts receivable (net of bad debt
allowance of $112,650 and $105,499)
Trade
421,118
512,627
Other
4,826
-
Prepaid expenses
15,280
20,138
Total current assets
612,301
559,791
Property & equipment net of accumulated
depreciation of $357,174 and $348,616
29,220
35,720
Note receivable - related party
161,352
331,689
Other assets
-
-
Total assets
$ 802,873
$ 927,200
Liabilities & Shareholders' Equity
Current liabilities
Current maturities of long-term debt
$ -
$ 1,362,087
Accounts payable
20,463
208,353
Demand reserve account
442,793
244,946
Accrued expenses
458,980
1,911,901
Total current liabilities
922,236
3,727,287
Long-term debt less current maturities
-
-
Shareholders' equity
Common stock - $.01 par value;
authorized - 30,000,000 shares; issued
- - 10,844,117 shares. Preferred stock -
$.01 par value; authorized - 500,000
shares; none issued and outstanding.
108,441
108,441
Additional paid-in capital
3,140,825
3,140,825
Retained (deficit)
(3,368,629)
(6,049,353)
(119,363)
(2,800,087)
Total liabilities & shareholders equity
$ 802,873
$ 927,200
</TABLE>
<TABLE>
Consolidated Condensed Statements of Operations
<CAPTION>
Three Months
Ended
Six Months
Ended
1995
1994
1995
1994
<S>
<C>
<C>
<C>
<C>
Net revenues
Healthcare
$ 105,085
$
117,567
$ 212,161
$ 251,739
Computer software
2,109
4,953
4,490
4,953
Printing
2,826
627
5,624
1,603
Travel
10,861
13,170
27,574
25,353
120,881
136,317
249,849
283,648
General and administrative
expenses
Related parties
13,305
13,305
26,610
26,610
Bad debt
-
3,000
-
3,000
Other
163,887
189,858
351,557
395,835
177,192
206,163
378,167
425,445
Income (loss) from operations
(56,311)
(69,846
)
(128,318)
(141,797)
Other income (expenses)
Interest inc - rel party
-
-
-
Interest income - other
7,378
251
12,899
475
Dividends
-
-
-
-
Interest expense
(64,935)
(65,353
)
(128,732)
(130,077)
Unrealized gain (loss) on
marketable securities
-
-
-
-
(57,557)
(65,102
)
(115,833)
(129,602)
Income (loss) before provision
for income taxes and
extraordinary item
(113,868)
(134,94
8)
(244,151)
(271,399)
Income tax expense (benefit)
-
-
-
-
Income (loss) before
extraordinary item
(113,868)
(134,94
8)
(244,151)
(271,399)
Extraordinary item - gain on
settlement
2,924,875
-
2,924,875
-
Net income (loss)
$ 2,811,007
$
(134,94
8)
$ 2,680,724
$ (271,399)
Per share earnings (loss)
.26
(.01)
.25
(.03)
Weighted average number of
common shares outstanding
10,844,117
10,844,
117
10,844,117
10,844,117
</TABLE>
<TABLE>
Consolidated Condensed Statements of Cash Flows
<CAPTION>
Six Months Ended
September
30,
1995
1994
<S>
<C>
<C>
Cash flows from operating activities
Net Gain (Loss)
$ 2,680,724
$ (271,399)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization
10,249
11,509
Provision for losses on accounts
receivable
-
3,000
Changes in assets and liabilities
Marketable secur.
-
-
Accounts receivable
86,721
86,468
Prepaid expenses
4,858
3,672
Current maturities of long term
debt
(1,362,087)
-
Accounts payable
(187,890)
83,840
Demand res deposits
197,847
(18,761)
Accrued expenses
(1,452,921)
116,726
(2,703,223)
286,454
Net cash (used) provided by
operating activities
(22,499)
15,055
Cash flows from investing activities
Capital expenditures
(3,787)
(10,011)
Payments received on note receivable,
related party
170,337
26,610
Net cash provided by (used in)
investing activities
166,550
16,599
Cash flows from financing activities
Principal payments on long term debt
-
-
Net cash used in financing
activities
-
-
Net increase(decrease) in cash
144,051
31,654
Cash at beginning of period
27,026
40,278
Cash at end of period
$ 171,077
$ 71,932
Supplemental disclosure of cash flow information
Cash paid during the period for interest was $16,378 and $15,557
for September 30, 1995 and 1994, respectively.
Note 1
In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of September 30, 1995 and the
results of operations for the three months and six months ended
September 30, 1995 and 1994 and changes in cash flows for the six
months ended September 30, 1995 and 1994. The consolidated condensed
financial statements should be read in conjunction with the Company's
audited consolidated financial statements for the year ending March
31, 1995.
Note 2
The results of operations for the three months and six months ended
September 30, 1995 are not necessarily indicative of the results to
be expected for the full year.
Results of Operations
Gross transactions (the total amount of billings submitted by Health
Care Providers during the period, as well as a portion of income from
other operations) decreased $206,800 or 26% and $357,641 or 22% for
the three months and six months ended September 30, 1995 as compared
to the same periods in 1994 from $808,567 to $601,767 and from
$1,600,515 to $1,242,874, respectively. Net revenues decreased
$15,436 or 11% and $33,799 or 12% for the three months and six months
ended September 30, 1995 as compared to the same periods in 1994 from
$136,317 to $120,881 and from $283,648 to $249,849, respectively.
These decreases are a result of the Company lacking working capital
which would allow for an increase in the volume of healthcare
services financed by the Company for patients of participating
healthcare providers. The Company is now focusing on providing office
management services to healthcare providers and other small
businesses that do not require the Company to provide upfront cash to
its clients. The Company has become an authorized reseller of credit
reports and is providing credit reports, billing services and pre-
collection & collection services to clients. Although this direction
will initially result in a decrease in revenues, management is
confident that it is in the best interest of the Company and
profitability long term.
General and administrative expenses decreased $28,971 or 14% and
increased $47,278 or 11% for the three months and six months periods
ended September 30, 1995 as compared to the same periods in 1994 from
$206,163 to $177,192 and from $425,445 to $378,167, respectively.
Management has focused and will continue to focus on controlling
expenses in its efforts to becoming a profitable entity.
Liquidity and Capital Resources
The Company's working capital for the six months ended September 30,
1995 of a negative $(309,935) decreased $2,857,561 from the March 31,
1995 balance of a negative $(3,167,496). The change is primarily due
to settlement reached with County Savings Bank, Resolution Trust
Corporation, Bartlett Schlumberger Capital Corporation and other
parties. The settlement agreement provided that the terms and
conditions of the settlement remain confidential. As a result of the
settlement, the Company realized onetime extraordinary revenue
related to the forgiveness of debt of $2,924,875 which is net of
$10,055.01 in expenses.
Item 1. - Legal Proceedings
NONE. There are no pending legal proceedings outside of the normal
course of business to which the Company is a party or of which any of
its property is the subject.
The following legal actions were all dismissed as part of a
settlement agreement between the parties which was approved by the
court on September 25, 1995:
County Savings Bank brought civil suit no. 181955 against MedMaster
Systems, Inc. in the Superior Court of California, County of Santa
Barbara on May 3, 1990. On April 2, 1991, the Company petitioned the
court to remove this case to the bankruptcy court hearing the
Bartlett-Schlumberger case described below. The case was subseqently
removed to that court as requested. The complaint alleged breach of
written contract and sought enforcement of a promissory note in the
amount of $1,830,836.29 mentioned in more detail below along with
interest and legal fees. The Company filed a response to the
complaint, a counter claim and a third party complaint against
certain individuals associated with County Savings Bank. The counter-
claim and third party complaint alleged causes of action against
County Savings Bank, et al. for breach of contract, fraud, violation
of RICO, negligent misrepresentation, unjust enrichment, mutual
mistake & reformation, and negligence. The Company was seeking actual
and consequential damages in excess of two million dollars. On March
27, 1991, the Director, Office of Thrift Supervision, appointed the
Resolution Trust Corporation as receiver for County Bank.
County Savings Bank brought civil suit No. 173499 against Bartlett-
SchlumbergerCapital Corporation (BSCC), Christiane Schlumberger
(Schlumberger), et al. in the Superior Court of California, County of
Santa Barbara on September13, 1988. The complaint alleged that
Schlumberger, among others, was obligated to County Savings Bank
pursuant to an alleged written guaranty agreement executed about
December, 1984 to guaranty the performance of several loans made by
County Savings Bank. MedMaster had a loan of $1,830,836 with County
Savings Bank which was due September 1, 1988 and was guaranteed by
Christiane Schlumberger and Bartlett-Schlumberger Capital
Corporation, among others. MedMaster was not named as a defendant in
this complaint.
On March 28, 1989 Christiane Schlumberger filed a cross complaint
against County Savings Bank, James L. Bartlett III, et al. MedMaster
Systems, Inc., among others, was also named as a cross defendant in
the cross complaint. The cross complaint alleged one cause of action
against the Company for failure to satisfy its loan obligation with
County Savings Bank. Pursuant to a stipulation with counsel for the
Cross-claimant no response was filed on behalf of the Company.
Item 2 - Changes in Securities
NONE.
Item 3 - Defaults Upon Senior Securities
NONE.
Item 4 - Submission of Matters to a Vote of Security Holders
NONE.
Item 5 - Other Information
NONE.
Item 6 - Exhibits and Reports on Form 8-KError! Reference source not
found.
NONE.
Signatures
Pursuant to the requirements of Section 13 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.
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
Date: November 14, 1995 By:
David C. Marx
Chief Executive Officer
Date: November 14, 1995 By:
Ronald G. Case
Sr. Vice President
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
<FN>
See notes to consolidated condensed financial statements.
</FN>
</TABLE>
- - 3 -
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
- - 11 -
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
Part II - Other Information
- - 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000794324
<NAME> MEDMASTER SYSTEMS INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 171,077
<SECURITIES> 0
<RECEIVABLES> 538,594
<ALLOWANCES> 112,650
<INVENTORY> 0
<CURRENT-ASSETS> 612,301
<PP&E> 386,394
<DEPRECIATION> 357,174
<TOTAL-ASSETS> 802,873
<CURRENT-LIABILITIES> 922,236
<BONDS> 0
<COMMON> 108,441
0
0
<OTHER-SE> 3,140,825
<TOTAL-LIABILITY-AND-EQUITY> 802,873
<SALES> 249,849
<TOTAL-REVENUES> 262,748
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 378,167
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,732
<INCOME-PRETAX> (244,151)
<INCOME-TAX> 0
<INCOME-CONTINUING> (244,151)
<DISCONTINUED> 0
<EXTRAORDINARY> 2,924,875
<CHANGES> 0
<NET-INCOME> 2,680,724
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
