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, 1997 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)
220 Davidson Avenue, Somerset, NJ 08873
(Address of Principal Executive Office) (Zip Code)
(732) 764-9898
(Registrant's telephone number, including area code)
(Registrant's Former Name)
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 11, 1997, the registrant had outstanding 6,351,000 outstanding
shares of Common Stock, $0.01 par value.
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION 1
CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 1997 AND
MARCH 31, 1997 2
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX AND
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 5-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8-12
PART II - OTHER INFORMATION 13
SIGNATURES 14
EXHIBIT INDEX 15-17
<PAGE>
PART I
FINANCIAL INFORMATION
1. Consolidated Financial Statements as at September 30, 1997
The consolidated balance sheet as of March 31, 1997 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
<TABLE>
<S> <C> <C>
September 30, March 31,
1997 1997
------------ ----------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and equivalents $3,085,000 $8,063,000
Certificate of deposit 300,000 300,000
Accounts receivable:
Billed, less allowance for doubtful
accounts of $642,000 and $464,000 7,636,000 4,092,000
Unbilled 1,607,000 1,387,000
Prepaid and refundable income taxes 41,000 41,000
Prepaid expenses and other current assets 646,000 838,000
---------- ----------
Total Current Assets 13,315,000 14,721,000
---------- ----------
PROPERTY AND EQUIPMENT: 1,790,000 1,763,000
---------- ----------
OTHER ASSETS:
Software technology, less accumulated
amortization of $597,000 and $481,000 353,000 322,000
Goodwill, less accumulated amortization
of $436,000 and $387,000 3,115,000 3,164,000
Other 821,000 769,000
---------- ----------
Total Other Assets 4,289,000 4,255,000
----------- -----------
$19,394,000 $20,739,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,464,000 $1,414,000
Accrued payroll & benefits 834,000 1,015,000
Accrued restructuring charges 459,000 696,000
Accrued expenses for use of trade name 21,000 62,000
Other accrued expenses 1,220,000 995,000
Current portion of capital lease obligation 133,000 263,000
Deferred income 338,000 439,000
Customers' deposits and other current liabilities 331,000 325,000
---------- ----------
Total Current Liabilities 4,800,000 5,209,000
---------- ----------
LONG TERM LIABILITIES:
Accrued restructuring charges - net of
current portion 300,000 369,000
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Convertible preferred stock, par value $.01
per share 10,0000,000 shares authorized,
2,500,000 issued and outstanding (liquidation
preference $11,345,000) at September 30, 1997 25,000 25,000
Common stock $.01 par value; 30,000,000 shares
authorized; 6,367,000 shares issued 64,000 64,000
Capital in excess of par value 24,882,000 24,865,000
Retained earnings (deficit) (10,194,000) (8,805,000)
Subscription receivable (140,000) (140,000)
Note receivable - related party (284,000) (789,000)
---------- ----------
14,353,000 15,220,000
Less Treasury Stock at cost: 15,700 shares 59,000 59,000
---------- ----------
Total Shareholders' Equity 14,294,000 15,161,000
---------- ----------
$19,394,000 $20,739,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
US SERVIS, INC. AND SUBSIDIAIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
----------- ----------
<S> <C> <C>
REVENUES:
Service fees $12,457,000 $9,749,000
Sales of equipment 11,000 110,000
Software license fees 290,000 95,000
Interest and other 144,000 145,000
---------- ----------
12,902,000 10,099,000
---------- ----------
EXPENSES:
Cost of services 9,331,000 7,082,000
Cost of equipment sales 7,000 56,000
Research and development 806,000 961,000
Selling, general and administrative 3,592,000 3,508,000
Interest expense 50,000 61,000
Loan impairment charge 505,000 -
---------- ----------
14,291,000 11,668,000
---------- ----------
LOSS BEFORE INCOME TAXES (1,389,000) (1,569,000)
BENEFIT FOR FEDERAL AND STATE INCOME TAXES - -
----------- -----------
NET LOSS (1,389,000) (1,569,000)
=========== ===========
NET LOSS PER COMMON SHARE (0.29) (0.29)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,351,000 6,296,000
=========== ===========
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
---------- ----------
REVENUES:
Service fees $6,564,000 $5,145,000
Sales of equipment 6,000 12,000
Software license fees 157,000 73,000
Interest and other 52,000 78,000
---------- ----------
6,779,000 5,308,000
---------- ----------
EXPENSES:
Cost of services 4,897,000 3,721,000
Cost of equipment sales 5,000 10,000
Research and development 272,000 468,000
Selling, general and administrative 1,541,000 1,800,000
Interest expense 25,000 30,000
Loan impairment charge 221,000 -
---------- ----------
6,961,000 6,029,000
---------- ----------
LOSS BEFORE INCOME TAXES (182,000) (721,000)
BENEFIT FOR FEDERAL AND STATE INCOME TAXES - -
---------- ----------
NET LOSS (182,000) (721,000)
========== ==========
NET LOSS PER COMMON SHARE (0.06) (0.14)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,351,000 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, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK COMMON STOCK CAPITAL IN NOTE
--------------------- ---------------------- EXCESS OF RETAINED SUBSCRIPTION RECEIVABLE- TREASURY
SHARES PAR VALUE SHARES PAR VALUE PAR VALUE EARNINGS RECEIVABLE RELATED STOCK
PARTY
------ --------- ------ --------- --------- -------- ----------- ---------- --------
BALANCE, MARCH 31, 1997 2,500,000 $25,000 6,367,000 $64,000 $24,865,000 ($8,805,000) ($140,000) ($789,000) ($59,000)
SIX MONTHS ENDED
SEPTEMBER 30,1997
Allowance for loan
collateral impairment 505,000
Amortization of Stock
Issue Costs 17,000
Net Loss (1,389,000)
BALANCE, ---------- ------- ---------- ------- ----------- ----------- --------- --------- --------
SEPEMBER 30, 1997 2,500,000 $25,000 6,367,000 $64,000 $24,882,000 ($10,194,000) ($140,000) ($284,000) ($59,000)
========== ======= ========== ======= ========== ============ ========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,389,000) ($1,569,000)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization of property and equipment 339,000 326,000
Amortization of software technology 117,000 88,000
Amortization of goodwill 49,000 49,000
Amortization of convertible preferred issue costs 17,000 13,000
Gain on sale of equipment (11,000) (6,000)
Provision for losses on accounts receivable 178,000 48,000
Loan impairment charge 505,000 -
Changes in operating assets and liabilities-
Accounts receivable (3,942,000) (3,194,000)
Note and installment receivables - 143,000
Prepaid and refundable income taxes - 2,278,000
Prepaid expenses and other current assets 112,000 264,000
Other assets (52,000) (29,000)
Accounts payable 50,000 461,000
Accrued payroll & benefits (181,000) 164,000
Accrued expenses for use of trade name (41,000) (233,000)
Other accrued expenses 225,000 141,000
Accrued restructuring (306,000) (437,000)
Deferred income (101,000) 39,000
Customer deposits and other current liabilities 6,000 (24,000)
----------- -----------
Net cash flows from operating activities: (4,425,000) (1,478,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of software technology (148,000) (91,000)
Purchase of property and equipment (363,000) (149,000)
Proceeds from sale of equipment 8,000 27,000
----------- -----------
Net cash flows from investing activities (503,000) (213,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obigation (130,000) (112,000)
Issuance of preferred stock net of issue costs - 3,950,000
Loan repayments from officers 80,000 -
----------- -----------
Net cash flows from financing activities (50,000) 3,838,000
----------- -----------
NET CHANGE IN CASH AND EQUIVALENTS (4,978,000) 2,147,000
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 8,063,000 6,546,000
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $3,085,000 $8,693,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30
---------------------
1997 1996
-------- ----------
<S> <C> <C>
SUPPLEMENTAL INFORMATION:
Interest paid $30,000 $38,000
======== ==========
Income taxes refunded $ - $2,340,000
======== ==========
Transferred from deferred income taxes to prepaid and
refundable income taxes $ - $62,000
======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(UNAUDITED)
Note A - Basis of Presentation:
The consolidated financial statements include all the accounts of US SERVIS,
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 professional management company that provides outsourcing
services to physician networks and hospital business offices, associated with
Integrated Delivery Systems. The Company's principal focus is providing billing,
accounts receivable management services and information systems management
services. The Company, through strategic alliances, has expanded its product
offerings to include outsourcing of third party administrative services to a
managed care organization and the implementation of electronic medical records
systems. The Company has also historically been a provider of clinical
information systems products to hospitals. The Company is phasing out of this
activity. (See Note 2 to the Consolidated Financial Statements as of March 31,
1997).
Note C - Change in Revenue Recognition Method and Restructuring:
The accompanying financial statements for the six and three months ended
September 30, 1996 have been retroactively restated for the effects of a change
in income recognition. The Company changed its method of accounting for income
recognition for business management services, whereby, revenue is recognized on
collections in process as the services are performed. In prior years, revenue
was recognized based solely on the net collections by the third party customers.
The Company believes the new method of revenue recognition more accurately
reflects the earnings process and is the method used throughout the industry.
The effect of the change was to increase by $252,000 (or $.04 per share)
reported revenues and net income in the statement of operations for the six
months ended September 30, 1996.
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 was reported. Net loss per common share includes an
adjustment for the amount equal to accrued dividends on the Company's preferred
stock of $442,000 and $253,000 for the six months ended September 30, 1997 and
1996, respectively and $224,000 and $129,000 for the three months ended
September 30, 1997 and 1996, respectively.
7
<PAGE>
Note E - MetroPlus Settlement:
On October 31, 1997, the Company reached a full settlement of the litigation and
all matters of dispute between it and its largest customer, MetroPlus Health
Plan, a division of New York City Health and Hospitals Corporation
(MetroPlus/HHC).
As part of the settlement, the Company received $3,132,118 in full payment for
the third party administrative services provided through September 30, 1997.
Substantially all of this amount had been previously recorded as revenue and
accounts receivable. In addition, the Company will receive payments of
$2,237,500 for services to be rendered from October 1, 1997 through February 28,
1998. Pursuant to the original contract, MetroPlus/HHC has elected to terminate
the contract with the Company as of February 28, 1998. The settlement agreement
stipulates that all claims in the lawsuit will be dismissed.
Simultaneously, with the resolution of the dispute with MetroPlus/HHC, the
Company settled the case brought against it by VertiHealth, its subcontractor
for the MetroPlus contract. Pursuant to this settlement, the Company paid
$795,540 to VertiHealth for prior services rendered. Such amount was reflected
as an expense of the Company prior to September 30, 1997 and was reflected as
accounts payable on the balance sheet of the Company as of such date.
GENERAL
During the second quarter of Fiscal 1998, the Company was successful in signing
a multi-year agreement to provide billing and accounts receivable management
services to the Department of Radiology of a major New York City university.
During the quarter, the Company concluded a series of actions that will result
in a reduction of ongoing operating expenses estimated to be greater than
$2,500,000 per year. Excluding the loan impairment charge of $221,000, the
Company achieved positive net income ($39,000) for the quarter ended September
30, 1997 for the first time since the quarter ended December 31, 1993.
The MetroPlus/HHC settlement (see Note E) did not have a material impact on the
Company's financial results for the period ending September 30, 1997, but it
will have an immediate beneficial impact on the Company's balance sheet. The
termination of the MetroPlus/HHC contract will have an adverse impact on the
Company's financial performance after February 28, 1998.
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES
<S> <C> <C>
September 30, 1997 March 31, 1997
------------------ --------------
Total Current Assets $13,315,000 $14,721,000
Total Current Liabilities 4,800,000 5,209,000
Working Capital $8,515,000 $9,512,000
Working Capital Ratio to 1 2.8 2.8
</TABLE>
During the six months ended September 30, 1997, Working Capital decreased
$997,000 from $9,512,000 to $8,515,000 primarily as a result of continued
operating losses. Cash and Equivalents decreased $4,978,000 primarily due to the
8
<PAGE>
net loss, an increase in accounts receivable, billed, of $3,544,000, and a net
decrease in current liabilities of $409,000.
The major components of the increase in accounts receivable, billed, were an
increase in the amount due from MetroPlus/HHC of $2,795,000 (which, together
with other funds, was subsequently paid - see Note E), an increase in hospital
receivables of $569,000 and an increase in physician receivables of $232,000.
Approximately one-third of the increase in hospital receivables and
substantially all of the increase in physician receivables related to billings
to new customers.
The Company expects that its cash position will show substantial improvement
during the next quarter as a result of the MetroPlus/HHC settlement. The Company
anticipates that available cash and cash flow from operations will be sufficient
to meet the Company's operating and capital requirements for the next twelve
months.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
REVENUES
<S> <C>
Six Months Ended September 30,
------------------------------
1997 1996
----------- ----------
Service fees $12,457,000 $9,749,000
Sales of equipment 11,000 110,000
Software license fees 290,000 95,000
Interest and other 144,000 145,000
----------- -----------
$12,902,000 $10,099,000
=========== ===========
</TABLE>
For the six months ended September 30, 1997, the Company's revenues increased
$2,803,000, or 27.8%, when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in service fees of $2,708,000 and
software license fees of $195,000. These increases were partially offset by
decreases in sales of equipment of $99,000 and interest and other of $1,000.
Contributing to the increase in revenues from service fees were increases of
$934,000 from hospital services, $866,000 from physician services and $1,048,000
from TPA services provided to MetroPlus/HHC. (See Note E - MetroPlus
Settlement). These increases were partially offset by a $140,000 decrease in
revenues from clinical services.
9
<PAGE>
<TABLE>
<S> <C>
Three Months Ended September 30,
--------------------------------
1997 1996
------------ ----------
Service fees $6,564,000 $5,145,000
Sales of equipment 6,000 12,000
Software license fees 157,000 73,000
Interest and other 52,000 78,000
------------ ----------
$6,779,000 $5,308,000
============ ==========
</TABLE>
For the three months ended September 30, 1997, the Company's revenues increased
$1,471,000, or 27.7%, when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in service fees of $1,419,000 and
software license fees of $84,000. These increases were partially offset by
decreases in sales of equipment of $6,000 and interest and other of $26,000.
Contributing to the increase in revenues from service fees were increases of
$465,000 from hospital services, $772,000 from physician services and $258,000
from TPA services provided to MetroPlus/HHC. (See Note E - MetroPlus
Settlement). These increases were partially offset by a $76,000 decrease in
revenues from clinical services.
<TABLE>
<CAPTION>
EXPENSES
<S> <C>
Six Months Ended September 30,
------------------------------
1997 1996
---------- ----------
Cost of services $9,331,000 $7,082,000
Cost of equipment sales 7,000 56,000
Research and development 806,000 961,000
Selling, general and administrative 3,592,000 3,508,000
Interest expense 50,000 61,000
Loan impairment charge 505,000 -
----------- -----------
$14,291,000 $11,668,000
=========== ===========
</TABLE>
For the six months ended September 30, 1997, the Company's expenses increased
$2,623,000, or 22.5%, (excluding a loan impairment charge of $505,000, expenses
increased 18.2%) when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in the cost of services of
$2,249,000, selling, general and administrative expenses of $84,000 and a loan
impairment charge of $505,000 recorded in Fiscal 1998. A description of this
charge for the current quarter is set forth below. These increases were
partially offset by decreases in cost of equipment sales of $49,000, research
and development expenses of $155,000 and interest expense of $11,000.
The major components of the increase in cost of services were approximately
$921,000 of start-up expenses for new services to University Physician
Associates ("UPA"), approximately $412,000 relating to additional infrastructure
10
<PAGE>
to support planned expansion of hospital-based physician processing,
approximately $391,000 related to the implementation of MedicaLogicTM for one of
our hospital clients and approximately $650,000 for additional services to other
hospital clients. These increases were partially offset by a $125,000 decrease
in the cost of clinical services.
The major components of the $84,000 increase in selling, general and
administrative expenses were an increase in legal fees related to the MetroPlus
lawsuit of $211,000, and an increase in the allowance for doubtful accounts of
$130,000 and a decrease in sales and marketing expense of $261,000.
<TABLE>
<S> <C>
Three Months Ended September 30,
--------------------------------
1997 1996
----------- -----------
Cost of services $4,897,000 $3,721,000
Cost of equipment sales 5,000 10,000
Research and development 272,000 468,000
Selling, general and administrative 1,541,000 1,800,000
Interest expense 25,000 30,000
Loan impairment charge 221,000 -
----------- -----------
$6,961,000 $6,029,000
=========== ===========
</TABLE>
For the three months ended September 30, 1997, the Company's expenses increased
$932,000, or 15.5%, (excluding a loan impairment charge of $221,000 expenses
increased 11.8%) when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in the cost of services of
$1,176,000, and a loan impairment charge of $221,000 (see below for details)
recorded in Fiscal 1998. These increases were partially offset by decreases in
cost of equipment sales of $5,000, research and development expenses of
$196,000, selling, general and administrative expenses of $259,000 and interest
expense of $5,000.
The major components of the increase in cost of services were approximately
$641,000 of start-up expenses for new services to University Physician
Associates ("UPA"), approximately $172,000 relating to additional infrastructure
to support planned expansion of hospital-based physician processing,
approximately $191,000 related to the implementation of MedicaLogicTM for one of
our hospital clients and approximately $249,000 for additional services to other
hospital clients. These increases were partially offset by a $54,000 decrease in
the cost of clinical services and other decreases of $23,000.
Substantially, all of the $259,000 decrease in selling, general and
administrative expenses related to planned decreases in sales and marketing
expenses.
On September 30, 1997, the Company incurred a loan impairment charge of $221,000
representing the decline in market value of the 252,557 shares of the Company's
common stock held as security for a loan made in connection with an acquisition
in 1991. This charge was based on the closing price of the Company's common
stock on September 30, 1997, which was $1.125 per share. If and to the extent
that the closing stock price at the end of any subsequent quarter is greater
than $1.125, there will be a reversal of this charge.
11
<PAGE>
NET LOSS
For the six months ended September 30, 1997, the Company reported a net loss of
$1,389,000 or $0.29 per common share compared to a net loss of $1,569,000 or
$0.29 per common share during the same period last year.
For the three months ended September 30, 1997, the Company reported a net loss
of $182,000 or $0.06 per common share compared to a net loss of $721,000 or
$0.14 per common share during the same period last year.
Excluding the loan impairment charge of $221,000 recorded during the second
quarter, the Company achieved positive net income for the quarter of $39,000 for
the first time since the quarter ended December 31, 1993.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Litigation
MetroPlus Litigation Reference is made to the description of
the litigation between the Company and MetroPlus Health Plan
and the New York Health and Hospitals Corporation that is
contained in Item 3 of the Company's report on Form 10-K for
the fiscal year ended March 31, 1997. On October 31, 1997 a
complete settlement of this litigation was effected by the
parties. See Footnote E to the Consolidated Financial
Statements of the Company dated September 30, 1997. In
connection with this settlement, the Company settled all
outstanding matters in dispute between itself and VertiHealth,
a subcontractor to the Company in its contract with
MetroPlus/HHC.
Other Litigation There has been no material change to the
status of the other litigation described in Item 3 of the
Company's report on Form 10-K for the fiscal year ended March
31, 1997.
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: No report on Form 8-K was filed
during the first six months of the fiscal year ending
March 31, 1998.
13
<PAGE>
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.
<TABLE>
<CAPTION>
US SERVIS, INC.
(Registrant)
<S> <C> <C>
Date: November 11, 1997 By: ____/s/___________________ (L.S.)
Graham O. King
Chairman of the Board and
Chief Executive Officer
Date: November 11, 1997 By: ____/s/____________________(L.S.)
Robert E. Van Metre
Principal Accounting Officer and
Chief Financial Officer
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS INDEX
<S> <C> <C>
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
<PAGE>
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. (XIII) *
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) *
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
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) *
10(43) First Amendment to Registration Rights Agreement among US Servis, Inc. and the Purchasers signatory
thereto, dated September 30, 1996. (XIX) *
10(44) Agreement for Services, dated December 31, 1996, between University Physician Associates and the
Registrant. (XX) *
</TABLE>
<TABLE>
<S> <C>
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.
(XX) Incorporated by reference from the Registrant's Form 10-Q, dated February 12, 1997 as amended June 17,
1997.
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,385,000
<SECURITIES> 0
<RECEIVABLES> 9,885,000
<ALLOWANCES> 642,000
<INVENTORY> 0
<CURRENT-ASSETS> 13,315,000
<PP&E> 4,729,000
<DEPRECIATION> 2,939,000
<TOTAL-ASSETS> 19,394,000
<CURRENT-LIABILITIES> 4,800,000
<BONDS> 0
0
25,000
<COMMON> 64,000
<OTHER-SE> 14,205,000
<TOTAL-LIABILITY-AND-EQUITY> 19,394,000
<SALES> 0
<TOTAL-REVENUES> 12,902,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,241,000
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<INCOME-PRETAX> (1,389,000)
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