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 December 31, 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 February 8, 1998, the registrant had outstanding 6,351,000 outstanding shares
of Common Stock, $0.01 par value.
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
Page No.
PART I - FINANCIAL INFORMATION 1
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1997 AND
MARCH 31, 1997 2
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE AND
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996 3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY FOR THE NINE MONTHS ENDED DECEMBER 31, 1997 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED DECEMBER 31, 1997 AND 1996 5-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-9
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 December 31, 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>
December 31, March 31,
1997 1997
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents $4,108,000 $8,063,000
Certificate of deposit 300,000 300,000
Accounts receivable:
Billed, less allowance for doubtful
accounts of $667,000 and $464,000 6,432,000 4,092,000
Unbilled 1,797,000 1,387,000
Prepaid and refundable income taxes 42,000 41,000
Prepaid expenses and other current assets 472,000 838,000
---------- -----------
Total Current Assets 13,151,000 14,721,000
---------- ----------
PROPERTY AND EQUIPMENT 1,840,000 1,763,000
---------- ----------
OTHER ASSETS:
Software technology, less accumulated amortization
of $640,000 and $481,000 322,000 322,000
Goodwill, less accumulated amortization of $461,000 and $387,000 3,091,000 3,164,000
Other 786,000 769,000
----------- ----------
Total Other Assets 4,199,000 4,255,000
----------- ----------
$19,190,000 $20,739,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,009,000 $1,414,000
Accrued payroll & benefits 724,000 1,015,000
Accrued restructuring charges 340,000 696,000
Accrued expenses for use of trade name 42,000 62,000
Other accrued expenses 1,240,000 995,000
Current portion of capital lease obligation - 263,000
Deferred income 170,000 439,000
Customers' deposits and other current liabilities 325,000 325,000
---------- ----------
Total Current Liabilities 3,850,000 5,209,000
---------- ----------
LONG-TERM LIABILITIES:
Accrued restructuring charges - net of current portion 280,000 369,000
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Convertible preferred stock, par value $.01 per share
10,000,000 shares authorized, 2,500,000 issued and outstanding
(liquidation preference $11,573,000) at December 31, 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 24,891,000 24,865,000
Retained earnings (deficit) (9,390,000) (8,805,000)
Subscription receivable (140,000) (140,000)
Note receivable - related party (331,000) (789,000)
---------- ------------
15,119,000 15,220,000
Less Treasury Stock at cost: 16,000 shares 59,000 59,000
---------- ------------
Total Shareholders' Equity 15,060,000 15,161,000
----------- -------------
$19,190,000 $20,739,000
=========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C>
NINE MONTHS ENDED
DECEMBER 31,
-------------------------
1997 1996
----------- ------------
REVENUES:
Service fees $19,453,000 $15,306,000
Software license fees 440,000 138,000
Sales of equipment 11,000 133,000
Interest and other 212,000 236,000
---------- -----------
20,116,000 15,813,000
---------- -----------
EXPENSES:
Cost of services 14,281,000 11,037,000
Cost of equipment sales 7,000 62,000
Research and development 1,093,000 1,442,000
Selling, general and admini 4,787,000 5,415,000
Interest expense 75,000 85,000
Loan impairment charge 458,000 641,000
----------- -----------
20,701,000 18,682,000
----------- -----------
LOSS BEFORE INCOME TAXES (585,000) (2,869,000)
BENEFIT FOR FEDERAL AND STATE INCOME - -
------------ -----------
NET LOSS ($585,000) ($2,869,000)
============ ============
EARNINGS PER SHARE:
BASIC ($0.20) ($0.53)
============= ============
DILUTED ($0.20) ($0.53)
============= ============
THREE MONTHS ENDED
DECEMBER 31,
---------------------------
1997 1996
-------------- ------------
REVENUES:
Service fees $6,996,000 $5,557,000
Software license fees 150,000 43,000
Sales of equipment - 23,000
Interest and other 68,000 91,000
------------- ------------
7,214,000 5,714,000
------------- ------------
EXPENSES:
Cost of services 4,950,000 3,955,000
Cost of equipment sales - 6,000
Research and development 287,000 481,000
Selling, general and admini 1,195,000 1,907,000
Interest expense 25,000 24,000
Loan impairment charge (reversal) (47,000) 641,000
------------ -----------
6,410,000 7,014,000
------------ -----------
INCOME (LOSS) BEFORE INCOME TAXES 804,000 (1,300,000)
BENEFIT FOR FEDERAL AND STATE INCOME - -
------------ -----------
NET INCOME (LOSS) $804,000 ($1,300,000)
=========== ===========
EARNINGS PER SHARE:
BASIC $0.09 ($0.24)
=========== ===========
DILUTED $0.08 ($0.24)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<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 PARTY STOCK
--------- -------- -------- ------- ----------- ----------- ----------- ------------- -------
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)
NINE MONTHS ENDED
DECEMBER 31,1997
Allowance for loan collateral
impairment 458,000
Amortization of Stock Issue
Costs 26,000
Net Loss (585,000)
--------- ------- --------- ------- ----------- ----------- ----------- ---------- ---------
BALANCE, DECEMBER 31, 1997 2,500,000 $25,000 6,367,000 $64,000 $24,891,000 ($9,390,000) ($140,000) ($331,000) ($59,000)
========= ======= ========= ======= =========== ============ =========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
NINE MONTHS ENDED
DECEMBER 31,
-----------------------
1997 1996
---------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($585,000) ($2,869,000)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization of
property and equipment 514,000 472,000
Amortization of software technology 160,000 134,000
Amortization of goodwill 74,000 74,000
Amortization of convertible
preferred issue costs 26,000 21,000
Gain on sale of equipment (14,000) (6,000)
Provision for losses on accounts
receivable 202,000 72,000
Loan impairment charge 458,000 641,000
Changes in operating assets and
liabilities-
Accounts receivable (2,952,000) (2,605,000)
Note and installment
receivablies - 190,000
Prepaid and refundable
income taxes (1,000) 2,286,000
Prepaid expenses and other
current assets 291,000 171,000
Other assets (17,000) (666,000)
Accounts payable (405,000) 66,000
Accrued payroll & benefits (291,000) 170,000
Accrued expenses for use of
trade name (20,000) (213,000)
Other accrued expenses 245,000 667,000
Accrued restructuring (445,000) (649,000)
Deferred income (269,000) (42,000)
Customer deposits and other
current liabilities - (24,000)
---------- -----------
Net cash flows from operating activities (3,029,000) (2,110,000)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of software technology (161,000) (101,000)
Purchase of property and equipment (587,000) (408,000)
Proceeds from sale of equipment 10,000 27,000
--------- ----------
Net cash flows from investing activities (738,000) (482,000)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligation (263,000) (99,000)
Issuance of preferred stock net of issue costs - 3,965,000
Loan repayments from officers 75,000 -
--------- ---------
Net cash flows from financing activities (188,000) 3,866,000
--------- ---------
NET CHANGE IN CASH AND EQUIVALENTS (3,955,000) 1,274,000
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 8,063,000 6,546,000
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $4,108,000 $7,820,000
=========== ===========
See accompanying notes to consolidated financial statements.
5
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(concluded)
NINE MONTHS ENDED
DECEMBER 31,
----------------------
1997 1996
---------- ----------
SUPPLEMENTAL INFORMATION:
Interest paid $39,000 $38,000
========== ==========
Income taxes refunded (paid) ($1,000) $2,382,000
========== ==========
Transferred from deferred income taxes to prepaid and
refundable income taxes $ - $62,000
========== ==========
Gross proceeds from issue of convertible preferred
stock $ - $4,000,000
========== ==========
Capitalized issue costs for convertible preferred
stock $ - $35,000
========== ==========
Accretion equal to accrued dividends on convertible
preferred stock $ - $383,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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 nine and three months ended
December 31, 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 reported revenues and decrease
the net loss by $244,000 (or $.04 per share) in the statement of operations
for the nine months ended December 31, 1996.
Note D - Earnings Per Share:
In February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE. This
Statement established new standards for computing and presenting earnings per
share ("EPS"). The statement requires dual presentation of basic and diluted EPS
on the face of this income statement for entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. The following is a reconciliation of the numerators and
denominators for the computation of basic and diluted earnings per share (in
thousands, except per share amounts):
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Nine Months Ended Three Months Ended
December 31, December 31,
--------------------------- -----------------------
1997 1996 1997 1996
-------- -------- -------- --------
Basic earnings per share
Numerator
Net income (loss) (585) (2,869) 804 (1,300)
Less preferred dividends 671 464 229 212
-------- -------- -------- --------
Income (loss) for common (1,256) (3,333) 575 (1,512)
Denominator
Weighted average number of
common shares outstanding 6,351 6,296 6,351 6,296
Basic EPS ($0.20) ($0.53) $0.09 ($0.24)
Diluted earnings per share
Numerator
Income (loss) for common (1,256) (3,333) 575 (1,512)
Denominator
Weighted average number of
common shares outstanding 6,351 6,296 6,351 6,296
Common equivalents of -
Warrants 365
Stock options 343
------- -------- ------- -------
Total shares 6,351 6,296 7,059 6,296
Diluted EPS ($0.20) ($0.53) $0.08 ($0.24)
</TABLE>
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. As of February 6, 1998, $1,343,000 of this amount has been received and
the Company anticipates no difficulty in obtaining the remainder of such amount.
Pursuant to the original contract, MetroPlus/HHC has elected to terminate the
contract with the Company as of February 28, 1998. All claims in the lawsuit
have been dismissed.
8
<PAGE>
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.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
Management is encouraged by the Company's financial performance for the third
quarter of fiscal 1998. While a great deal has been accomplished an immediate
challenge facing the Company is to replace the revenues and profits associated
with the termination of the Company's contract with MetroPlus on February 28,
1998. (See Note E). Without the MetroPlus contract, the Company would have
reported a loss for the third quarter. Returning the Company to profitability
and increased shareholder value will be primarily dependent upon the Company's
continued success in selling and implementing new customer agreements in a
timely and efficient manner.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<S> <C> <C>
December 31, 1997 March 31, 1997
----------------- ---------------
Total Current Assets $13,151,000 $14,721,000
Total Current Liabilities 3,850,000 5,209,000
----------- -----------
Working Capital $9,301,000 $9,512,000
Working Capital Ratio to 1 3.4 2.8
</TABLE>
During the nine months ended December 31, 1997, Working Capital decreased
$211,000 from $9,512,000 to $9,301,000 primarily as a result of operating
losses. Cash and Equivalents decreased $3,955,000 primarily due to operating
losses, an increase in accounts receivable of $2,750,000, and a net decrease in
current liabilities of $1,359,000.
The major components of the increase in accounts receivable were an increase in
the amount due from MetroPlus/HHC of $1,055,000 (which was subsequently paid -
see Note E), an increase in hospital receivables of $757,000 and an increase in
physician receivables of $1,152,000. These increases were partially offset by a
$11,000 decrease in clinical receivables and a $200,000 increase in the
allowance for doubtful accounts. Approximately one-half of the increase in
hospital receivables and substantially all of the increase in physician
receivables related to billings to new customers.
During the quarter ended December 31, 1997, the Company's cash position
increased $1,023,000 as a result of the MetroPlus/HHC settlement. The Company
9
<PAGE>
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.
RESULTS OF OPERATIONS
REVENUES
<TABLE>
<S> <C> <C>
Nine Months Ended December 31,
----------------------------------
1997 1996
------------ ------------
Service fees $19,453,000 $15,306,000
Software license fees 440,000 138,000
Sales of equipment 11,000 133,000
Interest and other 212,000 236,000
------------- -------------
$20,116,000 $15,813,000
</TABLE>
For the nine months ended December 31, 1997, the Company's revenues increased
$4,303,000, or 27.2%, when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in service fees of $4,147,000 and
software license fees of $302,000. These increases were partially offset by
decreases in sales of equipment of $122,000 and interest and other of $24,000.
Contributing to the increase in revenues from service fees were increases of
$785,000 from hospital services, $2,399,000 from physician services and
$1,153,000 from TPA services provided to MetroPlus/HHC. (See Note E). These
increases were partially offset by a $190,000 decrease in revenues from
discontinued clinical services.
<TABLE>
<S> <C> <C>
Three Months Ended December 31,
---------------------------------
1997 1996
----------- -----------
Service fees $6,996,000 $5,557,000
Software license fees 150,000 43,000
Sales of equipment --- 23,000
Interest and other 68,000 91,000
----------- -----------
$7,214,000 $5,714,000
</TABLE>
For the three months ended December 31, 1997, the Company's revenues increased
$1,500,000, or 26.3%, when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in service fees of $1,439,000 and
software license fees of $107,000. These increases were partially offset by
decreases in sales of equipment of $23,000 and interest and other of $23,000.
Contributing to the increase in revenues from service fees were increases of
$226,000 from hospital services, $1,022,000 from physician services and $105,000
10
<PAGE>
from TPA services provided to MetroPlus/HHC. (See Note E). These increases were
partially offset by a $50,000 decrease in revenues from discontinued clinical
services.
EXPENSES
<TABLE>
<S> <C> <C>
Nine Months Ended December 31,
-------------------------------
1997 1996
------------ ------------
Cost of services $14,281,000 $11,037,000
Cost of equipment sales 7,000 62,000
Research and development 1,093,000 1,442,000
Selling, general and administrative 4,787,000 5,415,000
Interest expense 75,000 85,000
Loan impairment charge 458,000 641,000
------------ ------------
$20,701,000 $18,682,000
</TABLE>
For the nine months ended December 31, 1997, the Company's expenses increased
$2,019,000, or 10.8%, when compared to the same period in the prior fiscal year.
Contributing to this increase was an increase in the cost of services of
$3,244,000. This increase was partially offset by decreases in cost of equipment
sales of $55,000, research and development expenses of $349,000, selling,
general and administrative expenses of $628,000 and interest expense of $10,000;
plus a reduction in the loan impairment charge during the current period
compared to the charge during the same period of the prior fiscal year in the
amount of $183,000.
The major components of the increase in cost of services were $1,699,000 of
start-up expenses for new services to University Physician Associates ("UPA"),
$526,000 relating to additional infrastructure to support planned expansion of
hospital-based physician processing, $445,000 related to the implementation of
MedicaLogicTM for one of our clients and $614,000 for additional services to
hospital clients. These increases were partially offset by a $151,000 decrease
in the cost of clinical services and other decreases of $40,000.
The decrease in selling, general and administrative expense resulted from
planned decreases in sales and marketing expenses of $555,000 and decreases in
senior management compensation of $168,000 as the result of pay reductions and
the elimination of one position effective August 15, 1997. These decreases were
partially offset by other net increases of $95,000.
<TABLE>
<S> <C> <C>
Three Months Ended December 31,
----------------------------------------
1997 1996
----------- -----------
Cost of services $4,950,000 $3,955,000
Cost of equipment sales --- 6,000
Research and development 287,000 481,000
Selling, general and administrative 1,195,000 1,907,000
Interest expense 25,000 24,000
Loan impairment charge (reversal) (47,000) 641,000
----------- -----------
$6,410,000 $7,014,000
</TABLE>
11
<PAGE>
For the three months ended December 31, 1997, the Company's expenses decreased
$604,000, or 8.6%, when compared to the same period in the prior fiscal year.
Excluding the impact of the loan impairment charge of $641,000 in the third
quarter of the previous fiscal year and the $47,000 reversal of loan impairment
charges during the third quarter of this year, expenses increased $84,000 or
1.3%. Contributing to this increase were increases in the cost of services of
$995,000, and a $1,000 increase in interest expenses. These increases were
largely offset by decreases in cost of equipment sales of $6,000, research and
development expenses of $194,000, and selling, general and administrative
expenses of $712,000.
The major components of the increase in cost of services were $778,000 of
start-up expenses for new services to University Physician Associates ("UPA"),
$114,000 relating to additional infrastructure to support planned expansion of
hospital-based physician processing, approximately $54,000 related to the
implementation of MedicaLogicTM for one of our hospital clients and
approximately $115,000 for additional services to other hospital clients and
other increases of $115,000.
A majority of the decrease in selling, general and administrative expenses
related to planned decreases in sales and marketing expenses of $294,000 and
decreases in senior management compensation of $102,000 as the result of pay
reductions and the elimination of one position.
On December 31, 1997, the Company recorded a reversal of loan impairment charges
in the amount of $47,000 representing the increase during the quarter 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 reversal was based on
the closing price of the Company's common stock on December 31, 1997, which was
$1.313 per share. If and to the extent that the closing stock price at the end
of any subsequent quarter is greater than $1.313, there will be additional
reversals of the loan impairment charge.
NET INCOME (LOSS)
For the nine months ended December 31, 1997, the Company reported a net loss of
$585,000 or $0.20 per common share compared to a net loss of $2,889,000 or $0.53
per common share during the same period last year.
For the three months ended December 31, 1997, the Company reported net income of
$804,000 or $0.09 per common share compared to a net loss of $1,300,000 or $0.24
per common share during the same period last year. The positive net income
recorded during the third quarter represents the first profitable quarter 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 December 31, 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 nine 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.
US SERVIS, INC.
(Registrant)
Date: February 11, 1998 By: _/s/ Graham O. King___________ (L.S.)
Graham O. King
Chairman of the Board and
Chief Executive Officer
Date: February 11, 1998 By: /s/ Robert Van Metre ________(L.S.)
Robert E. Van Metre
Principal Accounting Officer and
Chief Financial Officer
14
<PAGE>
EXHIBITS INDEX
<TABLE>
<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) *
16
<PAGE>
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) *
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' 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
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,408,000
<SECURITIES> 0
<RECEIVABLES> 8,896,000
<ALLOWANCES> 667,000
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<CURRENT-ASSETS> 13,151,000
<PP&E> 4,954,000
<DEPRECIATION> 3,114,000
<TOTAL-ASSETS> 19,190,000
<CURRENT-LIABILITIES> 3,850,000
<BONDS> 0
0
25,000
<COMMON> 64,000
<OTHER-SE> 14,971,000
<TOTAL-LIABILITY-AND-EQUITY> 19,190,000
<SALES> 0
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