UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996 OR
[ ] 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: 0-15352
US SERVIS, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2467332
(State or other jurisdiction of (I.R.S. Employer or Identification Number)
incorporation of organization)
414 Eagle Rock Avenue, West Orange, NJ 07052
(Address of Principal Executive Office) (Zip Code)
(201) 731-9252
(Registrant's telephone number, including area code)
Registrant's former name, former address and former fiscal year, if
changed since last report)
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 _______
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes _______ No _______
APPLICABLE ONLY TO CORPORATE ISSUERS
At November 12, 1996, the registrant had outstanding 6,296,137 outstanding
shares of Common Stock, $0.01 par value.
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION 1
CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 1996 AND
MARCH 31, 1996 2
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX AND
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 5,6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7,8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-12
PART II - OTHER INFORMATION 13
SIGNATURES 14
EXHIBIT INDEX 15-17
</TABLE>
<PAGE>
PART I
FINANCIAL INFORMATION
1. Consolidated Financial Statements as at September 30, 1996
The consolidated balance sheet as of March 31, 1996 has been derived
from the audited Consolidated Balance Sheet contained in the Company's
Form 10-K and is presented for comparative purposes. Certain items have
been reclassified to conform to the current presentation. The
accompanying consolidated financial statements presume that users have
read the audited consolidated financial statements of the preceding
fiscal year. Accordingly, footnotes which would have substantially
duplicated such disclosures have been omitted.
The interim consolidated financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair statement
of the results for interim periods presented. Such interim adjustments
consist solely of normal recurring adjustments. The results of
operations for interim periods are not necessarily indicative of the
results to be expected for a full year.
-1-
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<S> <C> <C>
September 30, March 31,
1996 1996
------------- ------------
ASSETS (Unaudited)
CURRENT ASSETS
Cash and equivalents 8,693,000 6,546,000
Certificate of deposit 300,000 300,000
Accounts receivable, less allowance for doubtful
of $470,000 and $458,000 5,452,000 2,558,000
Current maturities of notes receivable 47,000 190,000
Prepaid and refundable income taxes 65,000 2,343,000
Inventories, prepaid expenses and other current assets 385,000 649,000
----------- -----------
Total Current Assets 14,942,000 12,586,000
PROPERTY AND EQUIPMENT 1,331,000 1,529,000
----------- -----------
OTHER ASSETS:
Software technology, less accumulated amortization
of $379,000 and $292,000 322,000 319,000
Goodwill, less accumulated amortization of $372,000 and $323,000 3,572,000 3,621,000
Other 233,000 204,000
----------- -----------
Total Other Assets 4,127,000 4,144,000
----------- -----------
20,400,000 18,259,000
=========== ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 1,095,000 634,000
Accrued payroll & benefits 888,000 724,000
Accrued restructuring charges 900,000 963,000
Accrued expenses for use of trade name 21,000 254,000
Other accrued expenses 946,000 805,000
Current portion of capital lease obligation 300,000 230,000
Deferred income 281,000 242,000
Customers' deposits and other current liabilities 386,000 410,000
----------- -----------
Total Current Liabilities 4,817,000 4,262,000
----------- -----------
LONG-TERM LIABILITIES:
Accrued restructuring charges - net of current portion 531,000 905,000
Long-term capital lease obligation - net of current portion 85,000 267,000
----------- ------------
Total Long-term Liabilities 616,000 1,172,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK:
Convertible redeemable preferred stock, par value $.01
per share, 1,500,000 shares authorized, issued and outstanding
(liquidation preference $6,228,000) at March 31, 1996 - 6,110,000
----------- -----------
SHAREHOLDERS' EQUITY:
Convertible preferred stock, par value $.01 per share
10,0000,000 shares authorized, 2,500,000 issued and outstanding
(liquidation preference $10,481,000) at September 30,1996 9,845,000 -
Common stock $.01 par value; 30,000,000 shares authorized;
6,312,000 shares issued 63,000 63,000
Capital in excess of par value 14,864,000 14,864,000
Retained earnings (deficit) (8,381,000) (6,788,000)
Subscription receivable (140,000) (140,000)
Note receivable - related party (1,225,000) (1,225,000)
----------- -----------
15,026,000 6,774,000
Less Treasury Stock at cost: 15,700 shares 59,000 59,000
----------- -----------
Total Shareholders' Equity 14,967,000 6,715,000
----------- -----------
20,400,000 18,259,000
=========== ===========
See accompanying notes to consolidated financial statements.
2
</TABLE>
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
REVENUES:
Service fees 9,497,000 7,439,000
Sales of equipment 110,000 176,000
Software license fees 95,000 244,000
Interest and other 145,000 57,000
---------- ----------
9,847,000 7,916,000
---------- ----------
EXPENSES:
Cost of services 7,082,000 5,309,000
Cost of equipment sales 56,000 48,000
Research and development 961,000 1,306,000
Selling, general and administrative 3,508,000 4,179,000
Restructuring charges (gains) - (589,000)
Interest expense 61,000 36,000
---------- ----------
11,668,000 10,289,000
---------- ----------
LOSS BEFORE INCOME TAXES (1,821,000) (2,373,000)
BENEFIT FOR FEDERAL AND STATE INCOME TAXES - (847,000)
---------- ----------
NET LOSS (1,821,000) (1,526,000)
========== ==========
NET LOSS PER COMMON SHARE ($0.33) ($0.24)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,296,000 6,269,000
========== ==========
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
REVENUES: ---------- ----------
Service fees 4,928,000 3,733,000
Sales of equipment 12,000 123,000
Software license fees 73,000 145,000
Interest and other 78,000 25,000
----------- -----------
5,091,000 4,026,000
----------- -----------
EXPENSES:
Cost of services 3,721,000 2,799,000
Cost of equipment sales 10,000 22,000
Research and development 468,000 680,000
Selling, general and administrative 1,800,000 2,256,000
Restructuring charges (gains) 0 (589,000)
Interest expense 30,000 18,000
---------- ----------
6,029,000 5,186,000
---------- ----------
LOSS BEFORE INCOME TAXES (938,000) (1,160,000)
BENEFIT FOR FEDERAL AND STATE INCOME TAXES 0 (480,000)
----------- -----------
NET LOSS (938,000) (680,000)
=========== ===========
NET LOSS PER COMMON SHARE ($0.17) ($0.11)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,296,000 6,296,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK
---------------- CAPITAL IN NOTE
CARRYING COMMON STOCK EXCESS OF RETAINED SUBSCRIPTION RECEIVABLE - TREASURY
SHARES VALUE SHARES PAR VALUE PAR VALUE EARNINGS RECEIVABLE RELATED PARTY STOCK
------ ----- ------ --------- --------- -------- ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1996 6,312,000 $63,000 $14,864,000 ($6,788,000)($140,000)($1,225,000) $59,000
SIX MONTHS ENDED
SEPTEMBER 30, 1996:
Reclassification of Series A
Convertible preferred Stock
as a result of the elimination of
the redemption provision 1,500,000 $5,895,000
Reversal of accretion equal to
accrued dividends on redeemable
preferred stock 228,000
Issuance of Series B Convertible
Preferred Stock 1,000,000 $3,950,000
Net Loss (1,821,000)
--------- ---------- --------- ------- ---------- ----------- --------- ----------- -------
BALANCE, SEPTEMBER 30, 1996 2,500,000 $9,845,000 6,312,000 $63,000 $14,864,000 ($8,381,000)($140,000)($1,225,000) $59,000
========= ========== ========= ======= =========== ============ ========= =========== =======
See accompanying notes to consolidated financial statements.
4
</TABLE>
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (1,821,000) (1,526,000)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization of property and equipment 326,000 218,000
Amortization of software technology 88,000 50,000
Amortization of goodwill 49,000 47,000
Amortization of convertible preferred issue costs 13,000 -
Gain on sale of equipment (6,000) -
Provision for losses on accounts receivable 48,000 445,000
Amortization of officer stock compensation - 326,000
Allowance for impairment of related party note - 119,000
Changes in operating assets and liabilities-
Accounts receivable (2,942,000) (640,000)
Note and installment receivables 143,000 247,000
Prepaid and refundable income taxes 2,278,000 1,032,000
Inventories, prepaid expenses and other current assets 264,000 (60,000)
Other assets (29,000) (310,000)
Accounts payable 461,000 142,000
Accrued payroll & benefits 164,000 (340,000)
Accrued expenses for use of trade name (233,000) 39,000
Other accrued expenses 141,000 101,000
Accrued restructuring (437,000) (1,158,000)
Deferred income 39,000 (152,000)
Customer deposits and other current liabilities (24,000) 321,000
------------ ------------
Net cash flows from operating activities: (1,478,000) (1,099,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in software technology (91,000) (113,000)
Purchase of property and equipment (149,000) (275,000)
Proceeds from sale of equipment 27,000 293,000
------------ ------------
Net cash flows from investing activities (213,000) (95,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on capital lease obligation (112,000) (14,000)
Loans to officers - (238,000)
Cost of listing additional shares - (17,000)
Issuance of preferred stock net of issuance costs 3,950,000 -
----------- ------------
Net cash flows from financing activities 3,838,000 (269,000)
----------- ------------
NET CHANGE IN CASH AND EQUIVALENTS 2,147,000 (1,463,000)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 6,546,000 4,121,000
----------- ------------
CASH AND EQUIVALENTS, END OF PERIOD 8,693,000 2,658,000
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(concluded)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
SUPPLEMENTAL INFORMATION:
Interest paid 38,000 2,000
============ ============
Income taxes paid (refunded) (2,340,000) (1,879,000)
============= ============
Deferred gain on sale-leaseback - 41,000
============= ============
Value assigned to goodwill relating to shares of common
stock issued for prior year business acquisition - 200,000
============= ============
Transferred from deferred income taxes to prepaid and
refundable income taxes 62,000 500,000
============= ============
See accompanying notes to consolidated financial statements.
6
</TABLE>
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(UNAUDITED)
Note A - Basis of Presentation:
The consolidated financial statements include all the accounts of
US SERVIS, Inc. (f/k/a MICRO Healthsystems, Inc.) and its wholly-owned
subsidiaries (collectively, the "Company"). All significant intercompany
transactions have been eliminated.
Note B - Nature of Business:
The Company is a provider of business and information management systems and
services. The Company's primary markets are physician delivery systems, hospital
business offices and managed care organizations. As part of its business
management services, the Company has traditionally been an outsourcer of the
billing and accounts receivable management and related information systems
departments and performed related personnel management and systems integration
services of its customers. The Company is currently strengthening these areas
and expanding its services and information systems to include: financial and
administrative management, systems support and management and consulting
services in areas that directly complement its business management services
offerings, such as at risk contracting and contract management, revenue
enhancement and re-engineering of the billing and accounts receivable management
activities. The Company, through strategic alliances, has expanded its
information systems offerings to include managed care and electronic medical
records systems. The Company has also historically been a provider of clinical
information systems products and services for hospital inpatient departments.
The Company is phasing out of these activities. (See Note C below)
Note C - Restructuring Charges:
During fiscal 1995, the Company implemented a significant restructuring of its
business operations in an effort to: refocus and redirect resources away from
clinical, inpatient information systems and towards contract management,
physician practice management, ambulatory care and software integration business
services; consolidate operations; negotiate a termination of the employment
agreement of the former chairman; downsize, and sell underperforming assets.
These actions resulted in a fiscal 1995 $6.8 million, pre-tax, restructuring
charge.
The restructuring program was substantially completed during fiscal 1996,
although the payment of certain items - principally, termination costs related
to the former Chairman and selected severance costs, will continue for several
years.
7
<PAGE>
Note D - Net Loss Per Common Share:
The computation of fully diluted net loss per share was antidilutive in each of
the applicable periods presented; therefore, no separate calculation of fully
diluted loss per share is reported. Net loss per common share includes an
adjustment for the amount equal to accrued dividends on the Company's preferred
stock, in the amount of $253,000 or $.04 per share for the six months ended
September 30, 1996.
Note E - Convertible Preferred Stock:
On September 30, 1996, in consideration for the receipt of $4,000,000, the
Company issued, through a private placement, 1,000,000 shares of Series B
Convertible Preferred Stock, par value $0.01 per share (the "Series B Shares").
Dividends on the Series B Shares accrue at a rate equal to 8% per annum,
compounded quarterly. If not earlier paid, preferred dividends are payable on i)
redemption, ii) conversion, or iii) dissolution of the Company. After September
30, 1997, the Series B Shares are convertible at the option of the holders into
an equal number of common shares and under certain circumstances the Company may
require conversion. In the event of the Company's liquidation, the holders of
the Series B Shares are entitled to $4.00 per share plus all accumulated and
unpaid dividends. Details of this transaction are reflected in the Company's
Form 8-K, dated September 30, 1996.
On September 27, 1996, the Company filed an amendment to the Certificate of
Designation creating the rights and preferences of the Company's Series A
Convertible Preferred Stock (the "Series A Shares"). This amendment terminated
the optional redemption rights of holders of such Series A Shares.
In connection with the amendment to the Certificate of Designation, the Company
amended the warrants to purchase 118,500 shares of the Company's Common Stock at
an exercise price of $0.10 per share presently held by the holders of the Series
A Shares to delete certain forfeiture provisions. The deletion of the forfeiture
provisions vests these warrants in the holders thereof.
Note F - Additional Item:
As previously noted in the Company's last form 10Q filing, the Company received
on July 17, 1996 a letter from its largest customer, New York Health and
Hospitals Corporation ("MetroPlus"). The letter alleged that the Company was
failing to fulfill its responsibilities under its contract with MetroPlus,
indicated that the letter was intended to serve as a notice of default and
purported to give the Company 90 days to cure the alleged breaches.
Although the Company has taken issue with MetroPlus as to the legal effect of
the letter, it has mounted a substantial effort to resolve the problems and to
eliminate service shortfalls. MetroPlus has acknowledged these efforts by
extending the date for cure. The Company and MetroPlus are working together to
resolve outstanding issues and the Company believes that the letter will be
rescinded.
The Company recognizes that the MetroPlus implementation has been difficult and
protracted and as a result, it has provided adjustments to reported MetroPlus
revenues that it believes to be adequate.
8
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
For the six months ended September 30, 1996 (first six months of fiscal 1997)
the Company reported higher revenues as a result of sales booked in fiscal 1996.
Revenues totaled approximately $9.85 million, an increase of $1.9 million or 24%
over the same period last year. Expenses for the same period increased
approximately $1.4 million or 13%. The majority of the expense increases
occurred in cost of service and were revenue related. This resulted in a
$552,000 (23%) decline in the Company's pre-tax loss. The net loss (after
taxes), however, increased by $295,000, from $1.53 million to $1.82 million due
to the availability and use of carry forward tax benefits during fiscal 1996.
The Company's fiscal 1997 six month net loss per share was $0.33 compared to
$0.24 reported for the same period last year. The table below presents the net
loss per share by component. Pre-Tax Operating Loss per Share declined by $0.09;
however, this improvement from year to year was offset by an $0.18 per share
increase of loss resulting from a $0.04 per share accretion of Preferred Stock
dividends and a $0.14 per share loss of carry forward tax benefit.
Six Months Ended September 30
1996 1995
Pre-Tax Operating Loss per Share $.29 $.38
Allowance for the Preferred
Stock Dividends .04 -
Tax Benefit - (.14)
------ ------
Net Loss per Share $.33 $.24
LIQUIDITY AND CAPITAL RESOURCES
September 30, 1996 March 31, 1996
Total Current Assets $14,942,000 $12,586,000
Total Current Liabilities 4,817.000 4,262,000
----------- -----------
Working Capital $10,125,000 $8,324,000
Working Capital Ratio to 1 3.1 3.0
During the six months ended September 30, 1996, Working Capital increased
$1,801,000 from $8,324,000 to $10,125,000. The increase was the result of the
issuance of $4,000,000 of the Series B Shares that was partially offset by
continued operating losses. Cash and equivalents increased $2,147,000, primarily
due to the issuance of $4,000,000 of the Series B Shares, the receipt of a
$2,340,000 tax refund and an increase in current liabilities of $555,000, offset
by the net loss and a $2,894,000 increase in accounts receivable. The increase
in accounts receivable includes an increase in amounts due under the contract
with MetroPlus of $1,675,000. (See Note F - Subsequent Event) and an increase in
amounts due from hospital clients of $1,251,000. The increase in amounts due
from hospital clients includes approximately $200,000 relating to new business
9
<PAGE>
and $300,000 relating to disputed charges due from a former client. The
remainder relates to seasonal increases in the payment cycles of the Company's
hospital clients.
The Company expects that its cash position, enhanced through the sale of the
Series B Shares, will decrease throughout the remainder of fiscal 1997 as a
result of operating losses but anticipates that available cash and cash flow
from operations will be sufficient to meet the Company's operating and capital
requirements through the end of the current fiscal year and the fiscal year
ending March 31, 1998.
RESULTS OF OPERATIONS
REVENUES
Six Months Ended September 30,
1996 1995
Service fees $9,497,000 $7,439,000
Sales of equipment 110,000 176,000
Software license fees 95,000 244,000
Interest and other 145,000 57,000
---------- ----------
$9,847,000 $7,916,000
For the six months ended September 30, 1996, the Company's revenues increased
$1,931,000 or 24.4% when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in service fees of $2,058,000 and
interest and other items of $88,000. These increases were partially offset by
decreases in sales of equipment of $66,000 and software license fees of
$149,000.
Service fee increases occurred in physician services ($549,000) and third party
administrative ("TPA") services ($1,877,000) provided to MetroPlus. These
increases were partially offset by a $76,000 decrease in revenues from clinical
services and a $292,000 decrease in revenues from hospital services, resulting
from the phasing out of one hospital client and the ramp-up of a new hospital
client.
Three Months Ended September 30,
1996 1995
Service fees $4,928,000 $3,733,000
Sales of equipment 12,000 123,000
Software license fees 73,000 145,000
Interest and other 78,000 25,000
---------- ----------
$5,091,000 $4,026,000
For the three months ended September 30, 1996, the Company's revenues increased
$1,065,000 or 26.5% when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in service fees of $1,195,000 and
interest and other items of $53,000, offset by decreases in sales of equipment
of $111,000 and software license fees of $72,000.
Contributing to the increase in revenues from service fees were increases of
$390,000 from physician services and $673,000 from TPA services provided to
MetroPlus. These increases were partially offset by a $113,000 decrease in
revenues from clinical services and a $71,000 decrease in revenues from hospital
services.
10
<PAGE>
EXPENSES
Six Months Ended September 30,
1996 1995
Cost of services $7,082,000 $5,309,000
Cost of equipment sales 56,000 48,000
Research and development 961,000 1,306,000
Selling, general and administrative 3,508,000 4,179,000
Restructuring charges (gains) - (589,000)
Interest expense 61,000 36,000
----------- -----------
$11,668,000 $10,289,000
Excluding the $589,000 restructuring gain recorded last year, expenses for the
six months ended September 30, 1996, increased $790,000 when compared to the
same period in the prior fiscal year. Contributing to this increase were
increases in the cost of services of $1,773,000, cost of equipment sales of
$8,000, and interest expense of $25,000. These increases were partially offset
by decreases in research and development expenses of $345,000 and selling,
general and administrative expenses of $671,000.
Substantially all of the increase in cost of services related to expenses
associated with new clients for TPA and physician services. The reduction in
research and development expenses resulted primarily from the Company's decision
to de-emphasize its clinical information systems products. The decrease in
selling, general and administrative expenses resulted from the inclusion of
amortization of the CEO's signing bonus of $326,000 in the first six months of
last year and lower provision for allowance for doubtful accounts of $397,000 as
compared to last year.
Three Months Ended September 30,
1996 1995
Cost of services $3,721,000 $2,799,000
Cost of equipment sales 10,000 22,000
Research and development 468,000 680,000
Selling, general and administrative 1,800,000 2,256,000
Restructuring charges (gains) - (589,000)
Interest expense 30,000 18,000
---------- ----------
$6,029,000 $5,186,000
Excluding the $589,000 restructuring gain recorded last year, expenses for the
three months ended September 30, 1996 increased $254,000, when compared to the
same period in the prior fiscal year. Contributing to this increase were
increases in the cost of services of $922,000 and interest expense of $12,000,
offset by decreases in cost of equipment sales of $12,000, research and
development expenses of $212,000 and selling, general and administrative
expenses of $456,000.
11
<PAGE>
Substantially all of the increase in cost of services related to expenses
associated with new clients for TPA and physician services. The reduction in
research and development expenses result primarily from the Company's decision
to de-emphasize its clinical information systems products. The decrease in
selling, general and administrative expenses resulted from the inclusion of
amortization of the CEO's signing bonus of $163,000 in the second quarter of
last year and a lower provision for allowance for doubtful accounts of $361,000
as compared to last year.
NET LOSS
For the six months ended September 30, 1996, the Company reported a net loss of
$1,821,000 or $0.33 per common share, compared to a net loss of $1,526,000 or
$0.24 per common share during the same period last year. The per share loss for
the six months ended September 30, 1996 included approximately $.04 related to
preferred stock dividends and did not include a restructuring gain of $.09 per
share or a tax benefit of $.14 per share which were recorded in the first six
months of fiscal 1996. Although the Company has not recorded a tax benefit
associated with losses incurred during the current fiscal year, these losses
will be available to offset future income in subsequent years.
For the three months ended September 30, 1996, the Company reported a net loss
of $938,000 or $0.17 per common share, compared to a net loss of $680,000 or
$0.11 per common share during the same period last year. The per share loss for
the quarter ended September 30, 1996 included approximately $0.02 related to
preferred stock dividends and did not include a restructuring gain of $.09 per
share or a tax benefit of $.08 per share which were recorded in the same quarter
of last year.
12
<PAGE>
<TABLE>
<S> <C>
PART II -OTHER INFORMATION
Item 1 - Litigation
The Company has no material litigation pending.
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-K
(a) Exhibits: the exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the
Exhibit Index that follows the signature page.
(b) Reports on Form 8-K: One report on Form 8-K was filed
during the six months ended September 30, 1996. This
report, filed September 30, 1996, described the
issuance of the Series B Convertible Preferred Stock
and changes to the rights of the holders of the
Company's Series A Convertible Preferred Stock. (See
Note E - Convertible Preferred Stock).
13
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SIGNATURES
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.
US SERVIS, INC.
(Registrant)
Date: November 12, 1996 By: /s/Graham O. King
(L.S.)
Graham O. King
Chairman of the Board and
Chief Executive Officer
Date: November 12, 1996 By: /s/Michael B. Loscalzo
(L.S.)
Michael B. Loscalzo
Principal Accounting Officer and
Chief Financial Officer
14
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EXHIBITS INDEX
Exhibit No. Description Page
3(1) By-Laws. (I) *
3(2) Amended and Restated Certificate of Incorporation of the Registrant. (XVII) *
3(3) Certificate of Designation Relating to the Series A Convertible Preferred Stock of the Registrant.
(XVII) *
3(4) Certificate of Designation Relating to the Series B Convertible Preferred Stock With a Par Value of
$.01 Per Share of US Servis, Inc. (XIX) *
3(5) Amendment to Certificate of Designation Relating to the Series A Convertible Preferred Stock With a
Par Value of $.01 Per Share of US Servis, Inc. (XIX) *
4(1) Form of warrant to purchase in the aggregate up to 390,000 shares of the Registrant's Common Stock
at an exercise price of $0.10 per share, such warrants issued October 12, 1995. (XV)
*
4(2) Form of warrant to purchase in the aggregate up to 198,000 shares of the Registrant's Common Stock
at an exercise price of $3.50 per share, such warrants issued October 12, 1995. (XV)
*
10(1) Lease date March 31, 1986, between Skyline Associates, Inc. And Digital Equipment Corporation
relating to the premises located at 414 Eagle Rock Avenue, West Orange, New Jersey. (I)
*
10(2) 1986 Stock Option Agreement. (I) *
10(3) Service Agreement between the Registrant and Digital Equipment Corporation. (I) *
10(4) Non-qualified Stock Option Agreement between the Registrant and S.M. Caravetta, dated February 10,
1990 and expiring February, 1995. (III) *
10(5) License Agreement between the Registrant and North County Computer Services, Inc. (III) *
10(6) Distribution/Sales Representation Agreement by and between Baxter Healthcare Corporation and
MedTake Corp., dated as of October 1, 1990. (IV) *
10(7) Letter Agreement by and among MedTake Corp., the Registrant, Salvatore M. Caravetta and Baxter
Healthcare Corporation, dated as of October 1, 1990. (IV) *
10(8) Guaranty of the Registrant in favor of Baxter Healthcare
Corporation, dated as of October 1, 1990.
(IV) *
10(9) Complimentary Marketing Agreement between International Business Machines Corporation and the
Registrant. (V) *
10(10) Service Agreements between Digital Equipment Corporation and the Registrant. (V) *
10(11) Asset Purchase Agreement and Plan of Reorganization by and among Administrative Information Systems
Corporation, the Registrant and Receivables Management Corp., dated as of June 14, 1991. (VI)
*
10(12) Registration Rights Agreement by and between the Registrant and Administrative Information Systems,
Inc. (Misnamed in said document as "Administrative Information Services Corporation"), dated June
14, 1991. (VI) *
10(13) Employment Agreement among Receivables Management Corp. (Renamed AISCorp.), the Registrant and
Stephen G. Sullivan, dated as of June 14, 1991. (VI) *
10(14) Option Registration Rights Agreement by and Between the Registrant and Stephen G. Sullivan, dated
June 14, 1991. (IV) *
10(15) Employment Contract between the Registrant and S.M. Caravetta. (VII) *
10(16) Employment Contract between the Registrant and James A. Pesce. (VII) *
15
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10(17) Agreement and Plan of Merger with Exhibits by and among the Registrant, Vanco Business Management,
Inc. and David K. Vanco, dated as of December 31, 1992. (VIII) *
10(18) Employment Agreement, dated as of January 1, 1993, between Management-Data Service, Inc., the
Registrant and David K. Vanco. (VIII) *
10(19) Registration Rights Agreement between David K. Vanco and the Registrant, dated as of December 31,
1992. (VIII) *
10(20) Guaranty dated March 5, 1993, given by the Registrant to Harris Bank Roselle relating to loans to
David K. Vanco. (VIII) *
10(21) Letter agreement between David K. Vanco and the Registrant, dated March 5, 1993, relating to the
guaranty of notes, from David K. Vanco to Harris Bank Roselle. (VIII) *
10(22) Agreement of Merger with ACT/PC, dated September 15, 1993, amended November 12, 1993. (X)
*
10(23) Term Loan Agreement, dated as of December 13, 1993, between Stephen G. Sullivan and Registrant. (X)
*
10(24) Guarantee Modification Agreement, dated as of December 13, 1993, between Stephen G. Sullivan and
the Registrant. (X) *
10(25) Escrow Agreement, dated as of December 13, 1993, between Stephen G. Sullivan, Registrant and Crummy
Del Deo Dolan Griffinger & Vecchione. (X) *
10(26) Termination Agreement relating to the Baxter Distribution/Sales Representation Agreement, dated
December 17, 1993. (X) *
10(27) Amendment to Agreement and Plan of Merger between the Registrant and Management-Data Services,
Inc., dated April 8, 1994. (XI) *
10(28) Amendment to Employment Agreement between David K. Vanco and the Registrant, dated April 8, 1994.
(XI) *
10(29) Employment Agreement, dated as of October 12, 1994, between the Registrant and Graham O. King. (XII)
*
10(30) Option Agreement, dated as of October 12, 1994, between the Registrant and Graham O. King. (XII)
*
10(31) Registration Agreement, dated as of October 12, 1994, between the Registrant and Graham O. King.
(XII) *
10(32) Stockholder Agreement, dated as of October 12, 1994, between the Registrant and Graham O. King.
(XII) *
10(33) S.M. Caravetta Termination Agreement between S.M. Caravetta and the Registrant, dated as of October
12, 1994, as amended. (XII) *
10(34) Letter of Intent, dated June 26, 1995, between the Registrant and Frontenac VI Limited Partnership.
(XIV) *
10(35) Registrant's Amended 1993 Stock Option Plan. (XIV) *
10(36) Registrant's Amended 1994 Stock Option Plan for Non-Employee Directors. (XIV) *
10(37) Series A Convertible Preferred Stock and Warrant Purchase Agreement, dated July 18, 1995, by and
among the Registrant, a trust established for the benefit of descendants of Robert E. King,
Frontenac VI Limited Partnership and Morgan Holland Fund II, L.P. (XV) *
10(38) Promissory Note of Graham O. King, dated June 14, 1995, payable to the Company. (XVI) *
10(39) First and Second Amendments to Series A Convertible Preferred Stock and Warrant Purchase Agreements
dated July 31, 1995 and October 10, 1995, respectively. (XVII) *
10(40) Registration Agreement, dated October 12, 1995, by and among the Registrant, a trust established
for the benefit of the descendants of Robert E. King, Frontenac VI Limited Partnership and Morgan
Holland Fund II, L.P. (XV) *
10(41) Agreement for Administrative Services, dated December 21, 1995, between New York Health and
Hospitals Corporation and the Registrant. (XVIII) *
10(42) Series B Convertible Preferred Stock Purchase Agreement among US Servis, Inc., and the Purchasers
named on Schedule 1 thereto, dated as of September 30, 1996. (XIX) *
16
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10(43) First Amendment to Registration Rights Agreement among US Servis, Inc. and the Purchasers signatory
thereto, dated September 30, 1996. (XIX) *
NOTES TO EXHIBIT INDEX
Note No. Description
(I) Incorporated by reference from the Form S-18 Registration
Statement of the Registrant, dated June 10, 1986.
(II) Incorporated by reference from Amendment No. 1, dated September 6, 1986, to the Form
S-18 Registration Statement of the Registration.
(III)Incorporated by reference from the Registrant's Form 10-K, dated
June 18, 1990. (IV) Incorporated by reference from the Registrant's Form
8-K, dated October 1, 1990.
(V) Incorporated by reference from the Registrant's Form S-3, Registration No. 33-39062,
dated April 11, 1991.
(VI) Incorporated by reference from the Registrant's Form 8-K, dated
June 18, 1991. (VII) Incorporated by reference from the Registrant's
Form 10-K, dated June 28, 1991.
(VIII) Incorporated by reference from the Registrant's Form 8-K, dated
March 9, 1993. (IX) Incorporated by reference from the Registrant's Form
8-K, dated September 15, 1993.
(X) Incorporated by reference from the Registrant's Form 8-K, dated
December 28, 1993. (XI) Incorporated by reference from the Registrant's
Form 8-K, dated April 15, 1994. (XII) Incorporated by reference from the
Registrant's Form 8-K, dated November 1, 1994.
(XIII) Incorporated by reference from the Registrant's Form 10-Q, dated
November 11, 1994. (XIV) Incorporated by reference from the Registrant's
Form 10-K, dated June 26, 1995. (XV) Incorporated by reference from the
Registrant's Form 10-K/A, dated July 24, 1995. (XVI) Incorporated by
reference from the Registrant's Form 10-Q, dated August 10, 1995.
(XVII) Incorporated by reference from the Registrant's Form 10-Q, dated
November 10, 1995. (XVIII) Incorporated by reference from the
Registrant's Form 10-Q, dated August 13, 1996.
(XIX) Incorporated by reference from the Registrant's Form 8-K, dated
September 30, 1996.
17
</TABLE>
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<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
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9,845,000
0
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