U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB(A)
(Mark One)
[X] AMENDED QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NO. 0-15936
HEALTH OUTCOMES MANAGEMENT, INC.
(Name of small business issuer in its charter)
MINNESOTA 41-1546471
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2331 UNIVERSITY AVENUE S.E.
MINNEAPOLIS, MINNESOTA 55414
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER (612) 378-3053
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 ___
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding at January 5, 1996, was 8,099,885.
INDEX
HEALTH OUTCOMES MANAGEMENT, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets November 30, 1995 and February
28, 1995.
Condensed Consolidated Statements of Operations Three and nine months
ended November 30, 1995 and 1994.
Consolidated Statements of Cash Flows Nine months ended November 30,
1995 and 1994.
Notes to Consolidated Financial Statements - November 30, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Securities Holders.
Item 6 - Exhibits and Reports on Form 8-K.
SIGNATURES
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
HEALTH OUTCOMES MANAGEMENT, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
November 30,
1995 February 28,
(Unaudited) 1995
ASSETS
Current assets:
Cash and cash equivalents $ 30,253 22,795
Trade receivables, less allowance for doubtful
accounts of $26,250 at November 30, 1995
and $25,000 at February 28, 1995 190,611 262,742
Prepaid expenses 42,718 13,229
Other current assets 840 5,497
--------- ---------
Total current assets 264,422 304,263
Property and equipment, at cost (note 2):
Office and computer equipment 654,416 593,658
Less accumulated depreciation and amortization (459,289) (385,898)
--------- ---------
Net property and equipment 195,127 207,760
--------- ---------
Capitalized computer software, net of accumulated
amortization of $83,676 at November 30, 1995
and $62,757 at February 28, 1995 -- 20,919
Purchased computer software, net of accumulated
amortization of $126,597 at November 30, 1995
and $118,472 at February 28, 1995 9,195 9,028
Non-compete covenant, net of accumulated
amortization of $67,500 at November 30, 1995
and $45,000 at February 28, 1995 82,500 105,000
--------- ---------
Total assets $ 551,244 646,970
========= =========
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
November 30,
1995 February 28,
(Unaudited) 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable, current portion (note 3) -- 6,123
Notes payable to officer, current portion (note 3) -- 60,000
Current installments of obligation under capital leases 60,101 48,187
Accounts payable 91,320 227,934
Deferred revenue, current portion 200,187 115,676
Accrued compensation 64,421 129,051
Accrued payroll taxes 19,206 107,662
Other current liabilities 33,985 36,760
----------- -----------
Total current liabilities 469,220 731,393
----------- -----------
Obligation under capital leases, excluding
current installments 96,579 112,560
----------- -----------
Total liabilities 565,799 843,953
----------- -----------
Stockholders' deficit:
Common stock--$.01 par value. Authorized 15,000,000
shares; 8,099,885 outstanding at November 30, 1995
and 7,949,385 outstanding at February 28, 1995 80,999 79,494
Additional paid-in capital 4,565,719 4,532,309
Accumulated deficit (4,661,273) (4,808,786)
----------- -----------
Total stockholders' deficit (14,555) (196,983)
----------- -----------
Total liabilities and stockholders' deficit $ 551,244 646,970
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
HEALTH OUTCOMES MANAGEMENT, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
November 30, November 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 792,488 $ 766,126 $ 2,427,559 $ 2,448,791
Cost of revenues 461,362 478,364 1,384,783 1,340,430
----------- ----------- ----------- -----------
Gross profit 331,126 287,762 1,042,776 1,108,361
----------- ----------- ----------- -----------
Operating expenses:
Research and development 149,380 121,153 371,626 282,821
Selling and marketing 49,791 49,903 144,129 225,931
General and administrative 116,735 100,709 358,503 495,614
----------- ----------- ----------- -----------
Total operating expenses 315,906 271,765 874,258 1,004,366
----------- ----------- ----------- -----------
Income from operations 15,220 15,997 168,518 103,995
----------- ----------- ----------- -----------
Other (income) expense
Interest income -- (302) (252) (805)
Interest expense 6,327 9,943 21,257 26,531
----------- ----------- ----------- -----------
6,327 9,641 21,005 25,726
----------- ----------- ----------- -----------
Income tax expense -- -- -- --
Net income $ 8,893 $ 6,356 $ 147,513 $ 78,269
=========== =========== =========== ===========
Income per common share $ .00 $ .00 $ .02 $ .01
=========== =========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding 8,728,656 8,459,821 8,745,873 9,089,266
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
HEALTH OUTCOMES MANAGEMENT, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
November 30,
1995 1994
--------- ---------
Cash flows from operating activities:
Net income $ 147,513 $ 78,269
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation 80,675 69,509
Amortization 51,544 178,669
Provision for losses on accounts receivable 28,680 (1,685)
Payments in stock 3,650 --
Changes in operating assets and liabilities, net of
acquisition of Applied Micro Management
Decrease in trade receivables 43,451 95,645
Decrease (increase) in prepaid expenses (29,489) 36,520
Decrease (increase) in other current assets 4,657 (665)
Increase (decrease) in accounts payable (136,614) 15,217
Increase (decrease) in deferred revenue 84,511 (429,847)
Increase (decrease) in accrued compensation (64,630) 13,488
Decrease in accrued payroll taxes (88,456) --
Increase (decrease) in other current liabilities (2,775) 67,599
--------- ---------
Total adjustments (24,796) 44,450
--------- ---------
Cash provided by operating activities 122,717 122,719
--------- ---------
Cash flows from investing activities:
Capital expenditures (48,253) (32,244)
Cash paid for acquisition -- (22,500)
--------- ---------
Cash flows used in investing activities (48,253) (54,744)
--------- ---------
Cash flows from financing activities:
Bank overdraft -- 30,135
Principal payments under capital lease obligations (32,148) (34,399)
Repayment of bank loans assumed in the
Applied Micro Management, Inc. acquisition (6,123) (10,041)
Net repayment to officer (60,000) (57,000)
Repurchase of preferred stock -- (50,000)
Proceeds from issuance of common stock 31,265 53,330
--------- ---------
Cash flows used in financing activities (67,006) (67,975)
--------- ---------
Increase in cash and cash equivalents 7,458 0
Cash and cash equivalents at beginning of period 22,795 0
--------- ---------
Cash and cash equivalents at end of period $ 30,253 $ 0
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 21,257 $ 26,531
========= =========
The accompanying notes are an integral part of the financial statements.
HEALTH OUTCOMES MANAGEMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1995
(1) BASIS OF PRESENTATION
The unaudited financial statements presented herein include the accounts of
Health Outcomes Management, Inc. and Subsidiaries after elimination of material
intercompany accounts and transactions. These statements do not include all of
the information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-KSB for the year
ended February 28, 1995. In the opinion of management such financial statements
include all adjustments, consisting of only normal recurring adjustments,
necessary to summarize fairly the Company's financial position and results of
operations. The results of the three and nine month periods ended November 30,
1995, may not be indicative of the results that may be expected for the year
ending February 29, 1996.
(2) PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of the following:
Property under capitalized leases $ 310,006
Furniture and equipment 344,410
----------
$ 654,416
(3) NOTES PAYABLE
Notes payable to officer totaling $60,000 that were outstanding at February 28,
1995, were paid in full as of March 1, 1995.
In August 1993, the Company assumed a $31,223 note payable related to the
acquisition of certain assets of Applied Micro Management. This note payable was
paid in full as of August 3, 1995.
(4) CAPITALIZED COMPUTER SOFTWARE
The Company capitalizes software production costs after technological
feasibility has been established and prior to general release to clients.
(5) BUSINESS ACQUISITION
On August 17, 1993, the Company completed the acquisition of the client list and
certain assets of Applied Micro Management (AMM) of Belleville, Illinois. The
Company issued to AMM 450,000 shares of its restricted common stock, assumed a
note payable for $31,223 and paid $24,112 in cash to complete the transaction.
The terms of the acquisition also required the payment of additional cash and
the issuance of additional stock depending upon the number of former AMM clients
converting to the Company's Assurance Long-Term Care SystemTM. The purchase
method of accounting was used.
During June 1994, the Company paid an additional $22,500 in cash and issued an
additional 100,000 shares of its restricted common stock to AMM. The cash
payment and issuance of the Company's restricted common stock was in accordance
with the additional compensation provisions of the Company's agreement with AMM
in which the Company acquired the client list and certain assets of AMM.
(6) MASTER LICENSE AGREEMENT
On April 21, 1995, the Company signed a twelve (12) month Master License
Agreement with AmeriSource Health Corporation (AmeriSource) of Malvern, PA for
the Company's Assurance Community Pharmaceutical Care SystemTM. Pursuant to the
terms of the agreement, the Company granted to AmeriSource an exclusive license
to market and license the software system to retail pharmacies throughout the
United States directly or through its affiliate, Pharmacy Care Management Group
(PCMG). As consideration for the Company granting these rights to AmeriSource,
the Company received $200,000 cash upon signing the agreement. As further
consideration, AmeriSource agreed to license a minimum specified number of new
retail pharmacies over the term of the agreement in order to maintain the
exclusive status of the Master License Agreement. Additional provisions of the
agreement provide for the payment of monthly license and support fees to the
Company for each retail pharmacy licensing the software.
(7) CORPORATE NAME CHANGE
The Company changed its Corporate name to Health Outcomes Management, Inc., from
Data Med Clinical Support Services, Inc. The Company's Shareholders ratified the
name change at the Company's Annual Meeting held on September 21, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FOR THE THIRD QUARTER ENDED NOVEMBER 30, 1995, COMPARED WITH THE THIRD QUARTER
ENDED NOVEMBER 30, 1994:
REVENUE. Revenue for the third quarter ended November 30, 1995, increased by
$26,362 to $792,488, a 3.4% increase when compared to the prior year third
quarter revenue of $766,126. Revenues for the current period were primarily from
revenues generated by the Company's Assurance Long-Term Care SystemTM, Assurance
Community Pharmaceutical Care SystemTM and Assurance Homecare SystemTM.
The Company experienced revenue increases from ongoing software support fees,
license fees and training fees when compared to the prior year period. Support
fee revenue increased by approximately $101,000 or 32.5%. This increase was due
in part to an increase in the number of pharmaceutical care clients and former
clients of Applied Micro Management that converted to the Company's Assurance
products. The Company also experienced revenue increases in licensing fees,
primarily from its Assurance Community Pharmaceutical Care SystemTM and its
Assurance Homecare SystemTM. Total license fee revenues increased by
approximately $90,000 or 68.6% when compared to the prior year period. Revenues
from training fees increased by approximately 62% when compared to the prior
year period. This was primarily due to additional retail pharmacists training on
the Company's Assurance Community Pharmaceutical Care SystemTM. Revenue from
sales of services related to client network capabilities decreased by
approximately $33,000 or 52.9% due to no new conversions of former Applied Micro
Management clients upgrading their network capabilities. Consulting fee revenue
decreased by $174,000 or 95.6% when compared to the prior year period. This was
the result of the Company's largest client switching from payment of a monthly
retainer to recognizing revenue based on actual homecare systems licensed and
trained.
The effects of inflation on the Company's revenue and operating results were not
significant.
COSTS AND EXPENSES. Total costs and expenses incurred during the quarter ended
November 30, 1995, including interest, depreciation and amortization expense,
increased by approximately $24,000 or 3.1% when compared to the prior year
period. Compensation, benefits and payroll taxes increased by 7.7% when compared
to the prior year period. The increase in payroll expenses continues to be
modest when compared to previous quarters as the Company has been able to delay
hiring additional staff. Administrative expenses such as telephone expense and
equipment maintenance increased by approximately $34,000 when compared to the
prior year period. Equipment maintenance expense increased by approximately
$12,000 as a result of the Company's continuing efforts to upgrade and maintain
internal computer equipment. Education and seminars expense increased by
approximately $8,300 as the Company focuses on educating employees in new
software languages and tools for its next generation of software. Commissions
expense paid to commissioned sales representatives decreased by approximately
10.9% due to the decrease in commissionable software license fees. Training
expense has decreased by approximately $11,300 when compared to the prior year
period. In the prior year period, the Company had non-recurring remote training
site expenses associated with the conversion of former clients of Applied Micro
Management.
Interest expense decreased by approximately $3,600 or 36.4% when compared to the
prior year period. This decrease was partially due to reduced borrowing needs
from an officer of the Company. Notes payable to officer were fully paid on
March 1, 1995.
Depreciation and amortization expense, including amortization of covenants and
other intangibles, decreased by approximately $4,300 or 8.4% during the current
year period when compared to the prior year period. This decrease was primarily
due to the end of the amortization period for part of the Company's purchased
computer software. This decrease was partially offset by increased depreciation
expense associated with the purchase and lease of new computer equipment and
furniture.
RESULTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED NOVEMBER 30, 1995, COMPARED WITH THE NINE MONTH
PERIOD ENDED NOVEMBER 30, 1994:
REVENUE. Revenue for the nine month period ended November 30, 1995, was
$2,427,559 down $21,232 or 0.9% when compared to the prior year period revenue
of $2,448,791. Revenues for the current period were primarily from revenues
generated by the Company's Assurance Long-Term Care SystemTM, Assurance
Community Pharmaceutical Care SystemTM and Assurance Homecare SystemTM.
The Company experienced substantial revenue increases from ongoing software
support fees and training fees when compared to the prior year period. Revenues
from training fees increased by approximately $185,000 or 135.8% when compared
to the prior year period. This was primarily due to retail pharmacists training
on the Company's Assurance Community Pharmaceutical Care SystemTM. This increase
was partially offset by a decrease in training revenue derived from the
Company's other products including the long-term care system. Support fee
revenue increased by approximately $249,000 or 28.0% when compared to the prior
year period. This increase was due in part to an increase in the number of
homecare clients, pharmaceutical care clients and former clients of Applied
Micro Management that converted to the Company's Assurance product.
Non-recurring revenue, primarily license fees, received from former Applied
Micro Management clients in last year's nine month period ending November 30,
1994, was approximately $570,000. As a result of no new conversions, license fee
revenues decreased by 15.4%. To achieve special discounted license rights, these
clients had to complete training by September 1994. This decrease in licensing
fee revenue was partially offset by an approximately $229,000 increase in the
licensing revenue from the Company's homecare and pharmaceutical care systems.
Other revenue increased by approximately 144.3% due in part to the amortization
of a lump sum payment received for a long term contract. Revenue from sales of
services related to client network capabilities decreased by approximately
$150,000 or 70.6%. This decrease can be attributed to no new conversions of
former Applied Micro Management clients upgrading network capabilities when
compared to the prior period. Consulting fee revenue decreased by $355,000 or
64.8% when compared to the prior year period. This was the result of the
Company's largest client switching from payment of a monthly retainer to
recognizing revenue based on actual homecare systems licensed and trained.
The effects of inflation on the Company's revenue and operating results were not
significant.
COSTS AND EXPENSES. Total costs and expenses incurred during the nine month
period ended November 30, 1995, including interest, depreciation and
amortization expense, decreased by approximately $90,000 or 3.8% when compared
to the prior year period. Total costs excluding interest, depreciation and
amortization expense increased by approximately $30,200 or 1.4%. This small
increase in costs and expenses is the result of the Company's cost containment
goals. Compensation, benefits and payroll taxes increased by 6.1% when compared
to the prior year period. The increase in payroll expenses has slowed when
compared to previous periods. Administrative expenses, such as telephone
expense, equipment maintenance and accounting and legal, increased by
approximately 7.6% when compared to the prior year period. Equipment maintenance
expense increased by approximately $7,400 or 54.8% as a result of the Company's
continuing efforts to upgrade and maintain internal computer equipment.
Education and seminars expense increased by approximately $9,600 as the Company
focuses on educating employees in new software languages and tools for its next
generation of software. Rent expense increased by approximately $7,200 when
compared to the prior year period. The increased rent and occupancy costs were
due to the addition of new office space at the Company's corporate headquarters.
This increase was partially offset by the cessation of rent expense for the
Belleville, IL office. This office was closed in the prior year period.
Commissions expense paid to commissioned sales representatives decreased by
approximately 26.2% when compared to the prior year period. This decrease is
primarily due to the decrease in commissionable software license fees. Travel
and training expenses decreased by approximately $46,700 when compared to the
prior year period. In the prior year period, the Company had non-recurring
travel obligations and remote training site expenses associated with the
conversion of former clients of Applied Micro Management. Outside consultant
expenses decreased by $18,800 or 11.2%. During the prior year period, the
Company utilized outside consultant services as it assumed additional
responsibilities from another company in connection with the Company's agreement
with OPTION Care, Inc. The utilization of these outside consultant services has
decreased.
Interest expense decreased by approximately $5,300 or 19.9% when compared to the
prior year period. This decrease was partially due to reduced borrowing needs
from an officer of the Company. Notes payable to officer were fully paid on
March 1, 1995.
Depreciation and amortization expense, including amortization of covenants and
other intangibles, decreased by approximately $116,000 or 46.7% during the
current year period when compared to the prior year period. This decrease was
primarily due to the expiration of the write-off period for certain assets and
intangibles related to the acquisition of certain assets of Applied Micro
Management, Inc. This decrease was partially offset by increased depreciation
expense associated with the purchase and lease of new computer equipment and
furniture.
LIQUIDITY AND FINANCIAL CONDITION
WORKING CAPITAL. The Company had a working capital deficit of ($204,798) at
November 30, 1995, compared to a deficit of ($427,130) at February 28, 1995; an
improvement of $222,332. This decrease in working capital deficit can be
attributed primarily to the Company recording net income of $147,513 for the
nine month period ended November 30, 1995.
The Company's negative working situation continues.
Improved capital availability and the ability to continue operations will
ultimately depend on strong sales performances of the Company's Assurance
Long-Term Care SystemTM and the Assurance Community Pharmaceutical Care
SystemTM. There can be no assurance that sales results will improve and that the
Company will experience continued profitable operations.
ADDITIONAL CAPITAL REQUIREMENTS. Management believes that the Company may
require additional financing of up to $100,000 during the balance of fiscal 1996
if sales expectations are not met. Management believes that the Company will be
able to meet its short term cash needs for 1996 without any external financing
or cost reductions.
Notes payable to officer outstanding as of February 28, 1995, were fully paid
off on March 1, 1995.
PART II
Item 4 - Submission of Matters to a Vote of Securities Holders
At the Annual Meeting of the stockholders of the Company held on September 21,
1995, the stockholders elected to the Board of Directors those nominees as
listed in the proxy statement. Those individuals are William A. Peter, Jr.,
Michael J. Frakes, Robert J. Cipolle and Jerry L. Hoganson. These individuals
constitute the entire Board of Directors of the Company.
The stockholders also ratified an amendment to the Company's articles of
incorporation to change the name of the Corporation to "Health Outcomes
Management, Inc."
No other matters were submitted to a vote of the security holders.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
3(a) Restated Articles of Incorporation of Health Outcomes
Management, Inc.
3(b) Restated Articles of Incorporation of HO Management, Inc.
11 Schedule showing calculation of earnings per share.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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.
Health Outcomes Management, Inc.
(registrant)
Date: January 9, 1996 By: /s/ William A. Peter, Jr.
---------------- ------------------------------
William A. Peter, Jr.
President, CEO
Date: January 9, 1996 By: /s/ Russell Jackson
----------------- ------------------------
Russell Jackson
Chief Financial Officer and
Principal Financial Officer
Index to Exhibits
Exhibit
3(a) Restated Articles of Incorporation of Health Outcomes Management, Inc.
3(b) Restated Articles of Incorporation of HO Management, Inc.
11 Schedule showing calculation of earnings per share.
27 Financial Data Schedule
RESTATED ARTICLES OF INCORPORATION
AS OF SEPTEMBER 21, 1995
OF
HEALTH OUTCOMES MANAGEMENT, INC.
The undersigned, for the purpose of forming a corporation under and
pursuant to the provisions of Chapter 302A, Minnesota Revised Statutes, and laws
amendatory thereof and supplementary thereto, does hereby adopt the following
Articles of Incorporation.
ARTICLE I
The name of this corporation shall be Health Outcomes Management, Inc.
ARTICLE II
The registered office of this corporation in the State of Minnesota
shall be at 2331 University Avenue S.E., Minneapolis, Minnesota 55414. The name
of the registered agent of the corporation at that address is William A. Peter,
Jr.
ARTICLE III
3.01 This corporation shall have the authority to issue an aggregate of
fifteen million (15,000,000) shares of Common Stock, each with $.01 par value.
Such shares shall be designated as this corporation's "Common Stock."
3.02 This corporation shall have the authority to issue an aggregate of
one million (1,000,000) shares of Preferred Stock, which may be issued in one or
more series as determined from time to time by the Board of Directors. Such
shares shall be designated as the "Preferred Stock, Series ." The shares of
Preferred Stock of any series authorized for issuance by the Board of Directors
shall be senior to the Common Stock with respect to any distribution (as such
term is defined in Section 302A.011, Subd. 10, Minnesota Statutes) if so
designated by the Board of Directors upon issuance of the shares of that series.
The Board of Directors is hereby granted the express authority to fix by
resolution any other designations, powers, preferences, rights, qualifications,
limitations or restrictions with respect to any particular series of Preferred
Stock prior to issuance thereof.
3.03 Except as otherwise required by law, the holders of the shares of
Common Stock shall have the sole voting rights of this corporation.
3.04 There shall be no cumulative voting by the holders of the Common
Stock.
3.05 The shareholders shall take action by the affirmative vote of the
holders of a majority of the voting power of the shares represented and voting
at a duly held meeting, except where the affirmative vote of a greater number or
the affirmative vote of a majority of the voting power of all voting shares is
required by statute and except where the holders of a class or series are
entitled by statute to vote as a class or series whether or not such holders are
otherwise entitled to vote.
3.06 The shareholders of this corporation shall have no preemptive
rights to subscribe for or otherwise acquire any new or additional shares of
stock of this corporation of any class whether now authorized or authorized
hereafter, or any options or warrants to purchase, subscribe for or otherwise
acquire any such new or additional shares of any class or any shares, bonds,
notes, debentures, or other securities convertible into or carrying options or
warrants to purchase, subscribe for or otherwise acquire any such new or
additional shares of any class.
ARTICLE IV
In addition to, and not by way of limitation of, the powers granted to
the Board of Directors by the Chapter 302A, Minnesota Statutes, the Board of
Directors of this corporation shall have the following powers and authority:
4.01 To fix by resolution any designation, power, preference, right,
qualification, limitation or restriction with respect to the issuance of any
series of the Preferred Stock of this corporation authorized by these Articles
of Incorporation.
4.02 To issue shares of a class or series to holder of shares of
another class or series to effectuate share dividends, splits, or conversion of
its outstanding shares.
4.03 To fix the terms, provisions and conditions of and to authorize
the issuance, sale, pledge or exchange of bonds, debentures, notes, or other
evidences of indebtedness of this corporation.
4.04 To adopt, amend or repeal all or any of the Bylaws of this
corporation by the vote of a majority of its members present at a duly held
meeting, subject to the power of the shareholders to adopt, amend or repeal such
Bylaws.
4.05 As to any member of the Board, to give advance written consent or
opposition to a resolution stating an action to be taken by the Board. If such
member is not present at the meeting at which action is taken upon such
resolution, such consent or opposition does not constitute presence for purposes
of determining the existence of a quorum, but shall be counted as a vote in
favor of or against the resolution and shall be entered in the minutes or other
record of action taken by the Board at the meeting if the resolution acted upon
by the Board at the meeting is substantially the same or has substantially the
same effect as the resolution to which the member of the Board has consented or
objected.
4.06 To indemnify and to purchase and maintain insurance for officers,
directors, employees and agents against liability asserted against them and
incurred in any such capacity or arising out of their status as such to the
fullest extent permissible under the provisions of Chapter 302A, Minnesota
Statutes.
ARTICLE V
Section 302A.671, Minnesota Statutes, shall apply to any control share
acquisition of the capital stock of this corporation.
ARTICLE VI
The name and post office address of the sole incorporator, who is a
natural person of full age, is:
Name Address
William A. Peter, Jr. P.O. Box 1320
Kennebunkport, Maine 04046
IN WITNESS WHEREOF, the undersigned incorporator has hereunto set his signature
in Minneapolis, Minnesota, on this 4th day of February, 1986.
IN THE PRESENCE OF:
/s/ Janna Severance /s/ William A. Peter, Jr.
William A. Peter, Jr.
STATE OF MINNESOTA)
) SS.
COUNTY OF HENNEPIN)
On this 4th day of February, 1986, before me personally appeared William A.
Peter, Jr. to me known to be the person described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same as his free act
and deed.
/s/ Patti S. Boller
Notary Public
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
HEALTH OUTCOMES MANAGEMENT, INC.
We, the undersigned, the President and Secretary, respectively, of
Health Outcomes Management, Inc., a corporation subject to the provisions of
Chapter 302A, Minnesota Statutes, known as the Minnesota Business Corporation
Act, do hereby certify that at a meeting of the shareholders of the corporation
duly held on June 15, 1987, in accordance with the provisions of Sections 302A
.431 and 302A .435, Minnesota Statutes, the following resolution providing for
the amendment of the Articles of Incorporation of said corporation was duly
adopted:
"RESOLVED: That the Articles of Incorporation of this corporation dated
February 4, 1986, and filed of record with the Secretary of State of
Minnesota on February 5, 1986, in Book F-66, on page 858, shall be
amended by the amendment and restatement of Section 4.06 thereof as
follows:
4.06 To adopt an indemnity plan and to purchase and maintain
insurance for officers, directors, employees and agents against
liability asserted against them and incurred in any such capacity or
arising out of their status as such to the fullest extent permissible
under the provisions of Chapter 302A, Minnesota Statutes. Except as
expressly provided in Section 302A.251, Subd. 4, Minnesota Statutes, a
member of the Board of Directors of this corporation shall have no
personal liability to this corporation or to the shareholders for
monetary damages for breach of fiduciary duty as a member of the Board
of Directors . "
IN WITNESS WHEREOF, we have set our signatures hereto this 25th day of
June, 1987.
IN THE PRESENCE OF:
/s/ Michael Frakes /s/ William A. Peter, Jr.
William A. Peter, Jr., President
/s/ Michael Frakes /s/ Richard B. Thon
Richard B. Thon, Secretary
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
On this 25th day of June, 1987, before me, a notary public, personally
appeared William A. Peter, Jr. and Richard B. Thon, to me known to be the
persons named and described as the President and Secretary, respectively, of
Health Outcomes Management, Inc., and who executed the foregoing Certificate of
Amendment to the Articles of Incorporation, and having been first duly sworn and
under oath, did acknowledge and say that they executed the foregoing Certificate
as their free act and deed and the free act and deed of said corporation for the
uses and purposes therein expressed
/s/ Connie Dow
Notary Public
RESTATED ARTICLES OF INCORPORATION
AS OF SEPTEMBER 11, 1995
OF
HO MANAGEMENT, INC.
The undersigned, being of full age, for the purpose of forming a
corporation under Chapter 302A of the Minnesota Statutes, hereby adopts the
following Articles of Incorporation.
ARTICLE 1 - NAME
1.1) The name of the corporation shall be HO Management, Inc.
ARTICLE 2 - REGISTERED OFFICE
2.1) The registered office of the corporation is 2331 University Avenue
S.E., Minneapolis, Minnesota 55414.
ARTICLE 3 - PURPOSE
3.1) The corporation is organized for general business purposes.
ARTICLE 4 - DURATION
4.1) The duration of the corporation shall be perpetual.
ARTICLE 5 - STOCK
5.1) The aggregate number of shares of stock which the corporation
shall have the authority to issue shall be 15,000,000 shares, each with $.01 par
value. Such shares shall be designated as the corporation's "Common Stock."
5.2) Shareholders shall not have any preemptive rights to subscribe for
or purchase any shares of the corporation. The Board of Directors may, at any
time and from time to time, issue and sell for such consideration as may be
permitted by law, any or all of the authorized shares of the corporation not
then issued (including without limitation any shares previously issued and
reacquired by the corporation, provided such shares have not been retired), and
any and all of any stock of any class that may hereafter be authorized.
5.3) The Board of Directors may cause to be issued authorized but
unissued stock of the corporation only with the prior written consent in each
instance of all holders of the outstanding stock. Shares of stock may be issued
for any consideration, or for no consideration to effectuate share conversions,
dividends or splits, including reverse splits. The Board of Directors may
determine the value of non-monetary consideration received for shares.
5.4) The Board of Directors may issue rights to purchase shares of the
corporation, and shall fix the terms, provisions and conditions of such rights
to purchase, including the conversion basis and the price at which shares may be
purchased or subscribed.
5.5) The Common Stock shall have one vote per share, shall have all
voting power of the corporation, and shall be without distinction as to powers,
preferences and rights.
ARTICLE 6 - NON-CUMULATIVE VOTING
6.1) In all elections for directors, each shareholder shall have one
vote for each share of stock held. A shareholder shall not have the right to
cumulate his or her shares in any election of directors.
ARTICLE 7 - DIRECTORS
7.1) The Board of Directors shall have the power and authority to take
any action required or permitted of it by law or by these Articles. The Board
shall take action by the affirmative vote of a majority of directors present at
a duly held meeting, except where law requires the affirmative vote of a larger
proportion or number.
7.2) Any action required or permitted to be taken at a Board meeting
may be taken by written action signed by a majority of directors. If the action
must also be approved by the shareholders, then the action must be taken by
written action of all the directors.
7.3) A director of the corporation shall not be personally liable to
the corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for (i) liability based on a breach of the duty of
loyalty to the corporation or the shareholders; (ii) liability for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) liability under Minnesota Statutes Section 302A.559 or
80A.23; (iv) liability for any transaction from which the director derived an
improper personal benefit; or (v) liability for any act or omission occurring
prior to the date when these Articles become effective. If Chapter 302A, or any
succeeding statutory authority, is hereafter amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Chapter 302A, the Minnesota Business Corporation Act. Any repeal or modification
of this article by the shareholders of the corporation shall be prospective
only, and shall not adversely affect any limitation on the personal liability of
a director of the corporation at the time of such repeal or modification.
7.4) The members of the initial Board of Directors of the corporation
are as follows:
Michael J. Frakes
William A. Peter, Jr.
Robert J. Cipolle
Jerry L. Hoganson
ARTICLE 8 - INCORPORATOR
8.1) The name and address of the incorporator of the corporation is as
follows:
William A. Peter, Jr.
2331 University Avenue S.E.
Minneapolis, Minnesota 55414
ARTICLE 9 - POWERS
9.1) The corporation shall have the unlimited power to engage in and to
do any act necessary or incidental to the carrying out of its purposes, together
with the power to do or perform any acts consistent with or which may be implied
from the powers expressly conferred upon corporations by Minnesota Statutes,
Chapter 302A.
ARTICLE 10 - BYLAWS
10.1) The corporation may adopt bylaws which may contain any provision
relating to the management of the business or the regulation of the affairs of
the corporation not inconsistent with the law or the Articles. The power to
adopt, amend or repeal the bylaws shall be vested in the shareholders.
ARTICLE 11 - SHAREHOLDERS
11.1) Actions which require shareholder approval shall be taken by the
affirmative vote of the holders of a majority of the voting power of the shares
present and entitled to vote, except when Minnesota Statutes, Chapter 302A,
requires a larger proportion or number.
ARTICLE 12 - CONTROL SHARE ACQUISITION
12.1) Section 302A.671 of the Minnesota Statutes pertaining to control
share acquisitions shall not apply to this corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of July ,
1995.
/s/ William A. Peter, Jr.
William A. Peter, Jr., Incorporator
HEALTH OUTCOMES MANAGEMENT, INC. & SUBSIDIARIES
Calculation of Earnings Per Share (1)
(Unaided)
<TABLE>
<CAPTION>
Three months ended Nine months ended
November 30, November 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earnings used in calculations:
Net income used in per
share calculation $ 8,893 $ 6,356 $ 147,513 $ 78,269
========== ========== ========== ==========
Shares used in calculation:
Average number of shares outstanding 8,094,643 7,935,473 8,042,601 7,783,349
Additional shares usable assuming
exercise of outstanding stock options 467,817 275,501 518,511 275,852
Additional shares usable assuming
exercise of outstanding warrants 166,196 166,429 184,761 166,429
Additional shares usable assuming con-
version of Convertible Preferred Stock -- 82,418 -- 863,636
---------- ---------- ---------- ----------
Weighted average number of common and
common equivalent shares outstanding 8,728,656 8,459,821 8,745,873 9,089,266
========== ========== ========== ==========
Income (loss) per common share .00 .00 .02 .01
========== ========== ========== ==========
</TABLE>
(1) Earnings per share assuming full dilution are not different from
primary earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 30,253
<SECURITIES> 0
<RECEIVABLES> 216,861
<ALLOWANCES> 26,250
<INVENTORY> 0
<CURRENT-ASSETS> 840
<PP&E> 654,416
<DEPRECIATION> 459,289
<TOTAL-ASSETS> 551,244
<CURRENT-LIABILITIES> 469,220
<BONDS> 96,579
80,999
0
<COMMON> 0
<OTHER-SE> (95,554)
<TOTAL-LIABILITY-AND-EQUITY> 551,244
<SALES> 2,427,559
<TOTAL-REVENUES> 2,427,559
<CGS> 1,384,783
<TOTAL-COSTS> 874,258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,257
<INCOME-PRETAX> 147,513
<INCOME-TAX> 0
<INCOME-CONTINUING> 147,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147,513
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
