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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 0-16206
OAK TREE MEDICAL SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 02-0401674
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
375 PASSAIC AVENUE
FAIRFIELD, NEW JERSEY 07004
(Address of principal executive offices)
(973)- 439-1911
(Issuer's telephone number, including area code)
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ___
Indicate number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date:
Common Stock, $.01 par value 7,116,403 shares
Class Outstanding at January 16, 2001
2001
Transitional Small Business Disclosure Format (check one):
YES ___ NO _X_
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<PAGE>
Oak Tree Medical Systems, Inc. and Subsidiaries
Index
Part I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet as of November 30, 2000 and May 31, 2000
Consolidated Statement of Operations for the three and six months
ended November 30, 2000 and 1999
Consolidated Statement of Stockholders' Equity for the six months
ended November 30, 2000
Consolidated Statement of Cash Flows for the six months ended
November 30, 2000 and 1999
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
Oak Tree Medical Systems, Inc. and Subsidiaries
Consolidated Balance Sheet
(Unaudited)
November 30, 2000 May 31, 2000
----------------- ------------
ASSETS
Current Assets
Cash $ 14,835 $ 145,369
Patient care receivables - 20,000
Other current assets 500 13,500
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Total Current Assets 15,335 178,869
Other Assets
Investment in gold ore 1,994,214 1,994,214
Fixed assets - 1,962
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TOTAL ASSETS $2,009,549 $2,175,045
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See notes to consolidated financial statements
<PAGE>
Oak Tree Medical Systems, Inc. and Subsidiaries
Consolidated Balance Sheet
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
November 30, 2000 May 31, 2000
----------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
<S> <C> <C>
Accounts payable and accrued expenses 814,389 914,868
- ------------------------------------------------------------------------------------------------
Total Current Liabilities 814,389 914,868
Stockholders' Equity
Common stock, $.01 par value, 25,000,000 shares
authorized, 6,841,803 and 6,617,703 shares issued and
outstanding as of November 30, 2000 and May 31, 2000,
respectively 68,417 66,176
Additional paid-in-capital 18,113,368 17,511,404
Deficit (16,986,625) (16,317,403)
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Total Stockholders' Equity 1,195,160 1,260,177
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,009,549 $2,175,045
==================================================================================================
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
Oak Tree Medical Systems, Inc. and Subsidiaries
Consolidated Statement of Operations
(Unaudited)
For the Three Months For the Six Months
Ended November 30, Ended November 30,
2000 1999 2000 1999
---- ---- ---- ----
REVENUE
<S> <C> <C> <C> <C>
Net patient services $ -- $ 59,628 $ -- $ 118,574
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EXPENSES
Costs of patient services -- 64,368 -- 87,439
Selling, general and administrative ( 6,776) 279,570 182,222 456,612
Consulting 315,000 52,500 487,000 187,500
Depreciation and Amortization -- 1,655 -- 3,310
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TOTAL EXPENSES 308,224 398,093 669,222 734,861
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NET LOSS ($308,224) ($338,465) ($669,222) ($616,287)
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NET LOSS PER COMMON SHARE ($ 0.05) ($ 0.06) ($ 0.10) ($0.11)
============================================================================================================
Weighted average number of common and
common equivalent shares outstanding 6,708,403 5,998,044 6,694,732 5,862,243
============================================================================================================
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
Oak Tree Medical Systems, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the Six months ended November 30, 2000
(Unaudited)
Total
Common Stock Additional Stockholders'
Shares Amount Paid-in-Capital Deficit Equity
============================================================================================================
<S> <C> <C> <C> <C> <C>
BALANCE MAY 31, 2000 6,617,703 $66,176 $17,511,404 ($16,317,403) $1,260,177
Sale of common stock 99,100 991 119,714 120,705
Issuance of shares for services 25,000 250 34,250 34,500
Exercise of stock options 100,000 1,000 68,000 69,000
Issuance of stock options
to consultants 380,000 380,000
Net Loss (669,222) (669,222)
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BALANCE November 30,2000 6,841,803 $68,417 $18,113,368 ($16,986,625) $1,195,160
===========================================================================================================
</TABLE>
See notes to consolidated financial statements
<PAGE>
Oak Tree Medical Systems, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended November 30,
--------------------------
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss ($669,222) ($616,287)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and Amortization -- 3,310
Common stock and options
issued for services 414,500 144,313
Increase (decrease) in cash from
Patient care receivables 20,000 7,008
Other current assets 13,000 3,394
Accounts payable and accrued payable (100,479) (6,707)
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NET CASH USED IN OPERATING ACTIVITIES: (322,201) (464,969)
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INVESTING ACTIVITIES
Deferred acquisition costs -- (452,000)
Proceeds from sale of fixed assets 1,962 --
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: 1,962 (452,000)
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FINANCING ACTIVITIES
Proceeds from issuance of common stock 189,705 832,169
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NET CASH PROVIDED BY FINANCING ACTIVITIES: 189,705 832,169
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NET INCREASE ( DECREASE) IN CASH (130,534) (84,800)
CASH - Beginning of Period 145,369 121,477
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CASH - End of Period $ 14,835 36,677
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SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest Expense Paid $0 $0
======================================================================================================
</TABLE>
See notes to consolidated financial statements
<PAGE>
OAK TREE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. OPERATIONS
Oak Tree Medical Systems, Inc., a Delaware corporation, and its
subsidiaries (the "Company") as of May 31,2000, have closed their one medical
facility in New York City. The Company has no operating revenue for the current
quarter.
2. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include all the accounts of Oak Tree
Medical Systems, Inc. and its wholly-owned subsidiaries and Oak Tree Medical
Practice, P.C., a professional practice entity over which the Company exercises
significant influence and control. All material intercompany balances and
transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for consolidated financial statements. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation have been included. Operating results for the six months ended
November 30, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending May 31, 2001. These statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
May 31, 2000.
3. LIQUIDITY
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as going concern. The Company has incurred substantial losses in 2000
and 1999, used cash from operating activities in 2000 and 1999, and has negative
working capital at November 30, 2000.
The Company has funded its capital requirements from operating cash flow,
sales of equity securities and the issuance of equity securities in exchange for
services rendered. The Company continues to explore opportunities to raise
private equity capital and, in conjunction therewith, to provide credit support
for the Company's operations and potential acquisitions. Although the Company
has in the past been and continues to be in discussions with potential
investors, there can be no assurance that its efforts to raise any substantial
amount of private capital will be successful. Any substantial private equity
investment in the Company will result in voting dilution of the Company's
existing stockholders and could also result in economic dilution. If the Company
is unable to obtain new capital, the Company's President has agreed to
personally support the Company's cash requirements to meet its current
obligations through September 1, 2001 and fund future operations. The Company
believes that its ability to raise private equity and support from the Company's
President will provide sufficient liquidity to fund current operations.
4. COMMON STOCK
During July 2000, the Company closed an offshore placement of 61,100
shares of common stock, for aggregate purchase prices of $94,705. The Company
incurred expenses of $32,383 in connection with such placement, resulting in net
proceeds of $62,322.
In June 2000, the Company entered into a consulting agreement with
American Financial Communications, Inc. (AFC) for a six month period. AFC will
act as a public and financial relations advisor and consultant to the Company.
AFC received 25,000 shares of the Company's Common Stock. These shares are "
restricted securities " within the meaning of Rule 144 under the Securities Act
and were valued at a price of $ 1.38 per share.
In October 2000, Mr. Timothy Stoakes, consultant to the Company, exercised
options to acquire 100,000 shares of Common Stock at $0.69 per share.
<PAGE>
During November 2000, the Company issued 38,000 shares of Common Stock to
Sokol & Stoakley in a private placement. These shares were valued at an average
price of $ 0.68 per share.
In November 2000, the Company completed a registration of 1,844,600 shares
of its common stock to be issued to Employees, Directors and Consultants for
services provided.
5. CONSULTING AGREEMENTS AND OPTION GRANTS
In June 2000, the Company entered into a consulting agreement with EBI
Securities Corporation (EBI) for a one year term. EBI will act as a public
relations advisor and consultant to the Company. EBI received options to acquire
25,000 shares of the Company's Common Stock at $1.75 per share and 25,000 shares
of the Company's Common Stock at $2.00 per share.
In July 2000, the Company entered into a consulting agreement with Timothy
Stoakes ( Stoakes) for a one year term. Stoakes will act as a public relations
advisor and consultant to the Company outside the United States. Stoakes
received options to acquire 150,000 shares of the Company's Common Stock at
$0.60 per share.
In July 2000, the Company entered into a consulting agreement with The
Titan Group LLC ( Titan) for a one year term. Titan will provide consulting and
advisory services relating to business management and marketing. Titan received
options to acquire 1000,000 shares of the Company's Common Stock at $0.60 per
share 50,000 shares of the Company's Common Stock at $2.25 per share, 50,000
shares of the Company's Common Stock at $3.00 per share and an additional 50,000
shares with an exercise price of $6.00 per share. The options may not be
exercised after July 1,2002.
In October 2000, the Company agreed to issue to Mr. Burton Dubbin
registered trading shares at the current market value of $ 0.68 per share in
lieu of his monthly cash consulting fee of $ 12,500. This Agreement was for the
ensuing twelve months ended August 2001 and covered 219,600 shares of Common
Stock. There have been no shares delivered as of November 30, 2000. In December
2000, Mr. Dubbin received 50,000 shares of Common Stock. In January 2001, the
Company due to current market conditions delivered to Mr. Burton Dubbin the
remaining 169,600 shares of Common Stock.
In December 2000, the Company issued to Washburn & Enright 45,000 shares of
Common Stock in consideration of past consulting services. These shares were
valued at a price of $ 0.68 per share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is engaged in the business of operating and managing
physical therapy care centers. As of May 31,2000, the Company closed the one
remaining facility which was acquired in October 1996 because the cash flows
from this facility was insufficient to support its operations.
As previously reported, the Company entered into definitive written
agreements for the acquisition of the management and certain assets of 41
medical practices and MRI facilities located in the greater New York
metropolitan area. Based on current market conditions, the Company is not
currently proceeding with the proposed transaction.
In December 2000, the Company entered into a letter of intent to
acquire a controlling interest in Everfill Inc. a provider of e-commerce
fulfillment to the long-term health care industry. Everfill Inc. sells
pharmaceuticals and over-the-counter products to home health agencies,managed
care organizations and assisted living facilities. Everfill Inc. enables
e-commerce based ordering by its customers from its automated pharmacies and
warehouse operations. There can be no assurance, however, that the Company will
successfully meet its obligations of raising capital to complete the acquisition
or that all the other conditions to the closing of the transaction will be met.
If the Company has not obtained financing by January 19, 2001, either party upon
written notice can terminate this Agreement.
RESULTS OF OPERATIONS
Six months ended November 30, 2000 compared to Six months ended November 30,
1999.
Patient revenues decreased by 100% from $118,574 for the six months
ended November 30, 1999 (the "2000 Six MOnths") to $0 for the six months ended
November 30, 2000 (the "2001 Six Months"). This reduction in revenue was
attributable to the Company's closing of its one remaining facility as of May
31,2000.
Total expenses decreased by 8.9% from $734,861 in the 2000 Six Months
to $669,222 for the 2001 Six Months. Cost of patient services decreased from
$87,439 to $0 due to the closing of the one remaining medical facility. Selling,
general and administrative decreased from $456,612 to $182,222 or 60.1% due to
reductions in legal and accounting expenses. Consulting expenses increased from
$187,500 to $487,000 or 159.7% due to a Black Scholes stock option adjustment of
$300,000 during the 2001 Six Months. The above factors contributed to a net loss
of $669,222 ($0.10 per share) for the 2001 Six Months as compared to a net loss
of $616,287 ($0.11 per share) for the 2000 Six Months.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its capital requirements from operating cash
flow, sales of equity securities and the issuance of equity securities in
exchange for services rendered. The Company continues to explore opportunities
to raise private equity capital and, in conjunction therewith, to provide credit
support for the Company's operations and potential acquisitions. Although the
Company has in the past been and continues to be in discussions with potential
investors, there can be no assurance that its efforts to raise any substantial
amount of private capital will be successful. Any substantial private equity
investment in the Company will result in voting dilution of the Company's
existing stockholders and could also result in economic dilution. If the Company
is unable to obtain new capital, , the Company's President has agreed to
personally support the Company's cash requirements to meet its current
obligations through September 1, 2001 and fund future operations. The Company
believes that its ability to raise private equity and support from the Company's
President will provide sufficient liquidity to fund current operations.
In May 1993, the Company acquired 50,000 tons of gold ore from
Nevada Minerals Corporation in exchange for the issuance of 1,350,000 shares of
Common Stock. The ore was appraised as having a value of $5,000,000. The Company
subsequently formed a wholly-owned subsidiary, Aurum Mining Corporation, with
the gold ore as its only asset. In June 1995, the
<PAGE>
Company exchanged the stock of Aurum for 6,000,000 shares of common stock of
Accord Futronics Corp ("Accord"). The Company had the right to receive a royalty
of 12.5% of the net mining proceeds from the processing of the ore transferred
to Accord. In November 1997, the Company returned the 6,000,000 shares of common
stock of Accord in exchange for 100% of Aurum, because Accord had not commenced
and did not anticipate commencing mining operations and the Company desired to
take action to realize the value of the gold ore.
As of November 30, 2000, the Company (i) had been unsuccessful in its
attempts to sell the gold ore and (ii) did not have the capability or the
resources to commence the mining of the gold ore. For those reasons, and due to
the absence of current financial and other information for Accord, the Company
wrote down the value of its investment in the gold ore by $3,000,000 (from
$4,994,214 to $1,994,214) during the fiscal year ended May 31, 1998. The Company
intends to continue its attempt to sell the gold ore and anticipates a sale in
the near future, although there can be no assurance that it will be successful
in doing so.
During July 2000, the Company closed an offshore placement of 61,100
shares of common stock, for aggregate purchase prices of $94,705. The Company
incurred expenses of $32,383 in connection with such placement, resulting in net
proceeds of $62,322.
In June 2000, the Company entered into a consulting agreement with
American Financial Communications, Inc. (AFC) for a six month period. AFC will
act as a public and financial relations advisor and consultant to the Company.
AFC received 25,000 shares of the Company's Common Stock. These shares are "
restricted securities " within the meaning of Rule 144 under the Securities Act
and were valued at a price of $ 1.38 per share.
In October 2000, Mr. Timothy Stoakes, consultant to the Company,
exercised options to acquire 100,000 shares of Common Stock at $0.69 per share.
During November 2000, the Company issued 38,000 shares of Common Stock to
Sokol & Stoakley in a private placement. These shares were valued at an average
price of $ 0.68 per share.
Working capital decreased from ($735,999) as of May 31, 2000 to
($799,054) as of November 30, 2000, as a result of continued operating costs
with no operating income partially offset by an offshore and private placements.
FORWARD LOOKING STATEMENTS
Certain statements in this report set forth management's intentions,
plans, beliefs, expectations or predictions of the future based on current facts
and analyses. Actual results may differ materially from those indicated in such
statements. Additional information on factors that may affect the business and
financial results of the Company can be found in the other filings of the
Company with the Securities and Exchange Commission.
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: January 16, 2001 OAK TREE MEDICAL SYSTEMS, INC.
By: /s/ Henry Dubbin
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Henry Dubbin
President
By: /s/Simon Boltuch
--------------------------------
Simon Boltuch
Chief Financial Officer
(Principal Financial and
Accounting Officer)
