<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 33-30677-NY
AMERICAN HEALTHCHOICE, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
New York 11-2948752
------------------------------ -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 West Walnut Hill Lane, Suite 275, Irving, Texas 75038
---------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 751-1900
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 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 [ ] No [X]
As of March 31, 1996, there were outstanding 6,690,001 shares of the
issuer's Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format
Yes [ ] No [X]
F-1
<PAGE> 2
AMERICAN HEALTHCHOICE, INC.
QUARTERLY REPORT ON FORM 10-QSB/A FOR THE
QUARTER ENDED MARCH 31, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
- ------------------------------ ------
<S> <C>
ITEM 1. Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Condensed Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . F-4
Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . F-5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . F-6
ITEM 2. Management's Discussion and Analysis of Results of Operation
and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
ITEM 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
ITEM 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
ITEM 4. Submission of Matters to a Vote of Securities Holders . . . . . . . . . . . . . . . . . F-13
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
- ----------
</TABLE>
F-2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
------------ -------------
(unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 584,184 $ 402,166
Accounts receivable, less allowance for doubtful accounts of $2,581,794
in 1995 and $3,099,452 in 1996 6,197,590 8,597,679
Advances due from an affiliate and stockholders 323,463 365,544
Advances to physicians 35,013 26,667
Other receivables 36,788 32,623
Current portion of note receivable from stockholder - 54,000
Other current assets 166,191 184,714
------------ -------------
Total current assets 7,343,229 9,663,393
NOTE RECEIVABLE FROM STOCKHOLDER, less current portion - 216,000
PROPERTY AND EQUIPMENT, net 652,255 1,215,434
GOODWILL, net 634,493 1,742,934
OTHER ASSETS 65,913 195,896
------------ -------------
Total assets $ 8,695,890 $ 13,033,657
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of notes payable, including $176,719 due to a stockholder
in 1995 and 1996 $ 498,719 $ 770,485
Current portion of capital lease obligations 112,094 114,094
Advances from stockholders 201,587 147,094
Accrued payroll and payroll taxes 277,787 260,436
Accounts payable and accrued expenses 321,755 527,484
Income taxes payable 161,000 28,000
Deferred income taxes 1,959,000 2,803,836
------------ -------------
Total current liabilities 3,531,942 4,651,429
NOTES PAYABLE, less current portion 300,000 1,377,547
CAPITALIZED LEASE OBLIGATIONS, less current portion 285,171 250,916
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 5,000,000 shares authorized; none issued - -
Common stock option - 100,000
Common stock subscription payable 75,000 -
Common stock, $.001 par value; 115,000,000 shares authorized; 5,797,000
shares issued and outstanding in 1995 and 6,690,001 in 1996 5,797 6,690
Additional paid-in capital 1,722,524 3,480,108
Retained earnings 2,775,456 3,166,967
------------ -------------
Total stockholders' equity 4,578,777 6,753,765
------------ -------------
Total liabilities and stockholders' equity $ 8,695,890 $ 13,033,657
============ =============
</TABLE>
See accompanying notes to these unaudited interim condensed consolidated
financial statements.
F-3
<PAGE> 4
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------------- --------------------------------
1995 1996 1995 1996
------------ -------------- ------------ -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
NET PATIENT REVENUES $ 1,651,191 $ 2,906,838 $ 2,971,939 $ 5,684,187
OPERATING EXPENSES:
Compensation and benefits 697,091 1,410,669 1,237,312 2,497,466
Advertising 16,288 127,989 112,524 323,028
Depreciation and amortization 23,721 30,018 39,148 47,459
General and administrative, including
management fees and other
expenses paid to related parties
of $65,000 for the six months
ended March 31, 1995 333,918 947,273 519,475 1,622,994
------------ -------------- ------------ -------------
Total operating expenses 1,071,018 2,515,949 1,908,459 4,490,947
------------ -------------- ------------ -------------
Income before income taxes
and pro forma income taxes 580,173 390,889 1,063,480 1,193,240
INCOME TAXES:
Current (12,291) (343,768) 43,125 (133,000)
Deferred 445,343 784,961 739,632 793,961
------------ -------------- ------------ -------------
433,052 441,193 782,757 660,961
------------ -------------- ------------ -------------
NET INCOME (LOSS) BEFORE
PRO FORMA INCOME TAXES 147,121 (50,304) 280,723 532,279
Pro forma income tax benefit (215,487) (294,610) (383,952) (213,496)
------------ -------------- ------------ -------------
NET INCOME AFTER PRO FORMA
INCOME TAXES $ 362,608 $ 244,306 $ 664,675 $ 745,775
============ ============== ============ =============
NET INCOME PER SHARE AFTER
PRO FORMA INCOME TAXES $ .06 $ .04 $ .11 $ .12
============ ============== ============ =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,797,000 6,448,559 5,797,000 6,480,654
============ ============== ============ =============
</TABLE>
See accompanying notes to these unaudited interim condensed consolidated
financial statements.
F-4
<PAGE> 5
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------------------
1995 1996
------------ -------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 280,723 $ 532,279
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization 39,148 47,457
Change in assets and liabilities:
Increase in trade accounts receivable, net (872,966) (2,041,827)
Increase in other current assets (245,468) (6,023)
Increase in deferred taxes 721,980 793,961
Other, net 51,865 (270,875)
------------ -------------
Net cash used in operating activities (24,718) (945,028)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable from stockholder - (270,000)
Cash acquired from acquisitions 200,000 99,434
Cash acquired in Peachtree acquisition - (234,887)
Amounts paid for acquisitions (58,330) -
Advances to physicians and other receivables, net (35,489) (33,735)
Purchases of property and equipment (107,715) (101,136)
Other, net - (207,670)
------------ -------------
Net cash used in investing activities (1,534) (747,994)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and capital leases - (77,212)
Proceeds from sale of common stock - 1,683,477
Proceeds from sale of stock option - 100,000
Contributions by members of Valley Family Health Center, L.L.C. 71,145 -
Dividends paid to members of Valley Family Health Center, L.L.C. - (140,768)
Cash advances from (to) stockholders, net (63,711) (54,493)
------------ -------------
Net cash provided by financing activities 7,434 1,511,004
------------ -------------
DECREASE IN CASH (18,818) (182,018)
CASH, beginning of period 267,815 584,184
------------ -------------
CASH, end of period $ 248,997 $ 402,166
============ =============
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Net liabilities purchased (See Note 4) $ - $ (893,931)
Equipment contributed by stockholders $ 55,000 $ -
============ =============
</TABLE>
See accompanying notes to these unaudited interim condensed consolidated
financial statements.
F-5
<PAGE> 6
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS:
American HealthChoice, Inc. and subsidiaries (the Company) consists of a parent
company and eighteen clinics providing physical therapy, chiropractic and
medical services in San Antonio and Houston, Texas, New Orleans, Louisiana and
Atlanta, Georgia, and one clinic providing diagnostic services throughout the
United States. Substantially all of the Company's revenues are derived from
chiropractic, physical therapy and medical services provided to individuals
living in the vicinity of the clinics.
On March 31, 1995, Paudan, Inc. acquired 100% of the outstanding common stock
of the Company in exchange for 91.6% of the outstanding common stock of Paudan,
Inc. As a result, the stockholders of American HealthChoice, Inc. became the
controlling stockholders of Paudan, Inc. Paudan, Inc. was an inactive public
shell company which had total assets of $200,000, consisting entirely of cash,
and no liabilities at the time of the acquisition. This transaction was
accounted for as a reverse acquisition of Paudan, Inc. by American
HealthChoice, Inc. The accompanying financial statements are those of American
HealthChoice, Inc. for all periods presented. The legal name of Paudan, Inc.
was changed to American HealthChoice, Inc. after the merger.
2. BASIS OF PRESENTATION:
The accompanying condensed consolidated financial statements have been prepared
by the Company. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. In the opinion of the
Company's management, the disclosures made are adequate to make the information
presented not misleading, and the condensed consolidated financial statements
contain all adjustments necessary to present fairly the financial position as
of March 31, 1996, results of operations for the three months and six months
ended March 31, 1996 and 1995 and cash flows for the six months ended March 31,
1996 and 1995.
The results of operations for the six months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year. It is
suggested that the March 31, 1996 financial information be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-KSB dated September 30, 1995.
3. SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES:
Net Patient Revenues - Revenue is recognized upon performance of services.
Substantially all of the Company's revenues are derived from personal injury
claims and claims filed on major medical policies, worker's compensation
policies, Medicare or Medicaid. Allowances for doubtful accounts are
maintained at levels considered appropriate by management based upon historical
charge-off experience and other factors deemed pertinent by management.
Property and Equipment, net - Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided over the estimated useful
lives of the related assets, primarily using accelerated methods. Leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful lives of the improvements.
Goodwill - Goodwill arose from the Company's acquisitions of various clinics
and is being amortized on the straight-line method over 20 years.
F-6
<PAGE> 7
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. ACQUISITIONS:
During the second quarter of fiscal 1996, the Company acquired 100% of the
ownership interest of Valley Family Health Center, L.L.C. (a chiropractic
clinic) for 360,000 shares of its common stock. This acquisition was accounted
for under the pooling of interest method of accounting. Accordingly, the
historical financial statements of the Company have been restated as if the
acquisition had occurred on October 1, 1994, the date Valley Family Healthcare,
L.L.C. began operations. The following is a summary of selected historical
operating information of the Company and Valley Family Health Center, L.L.C.
for the six months ended March 31, 1996:
<TABLE>
<CAPTION>
Valley
Family
American Health
HealthChoice, Center
Inc. L.L.C. Combined
------------- ------------- -------------
<S> <C> <C> <C>
Revenues $ 4,964,340 $ 719,847 $ 5,684,187
Income before income taxes $ 674,834 $ 518,406 $ 1,193,240
Net income before pro forma income taxes $ 56,252 $ 476,027 $ 532,279
Net income after pro forma income taxes $ 421,771 $ 324,004 $ 745,775
============= ============= =============
Also during the second quarter of fiscal 1996, the Company acquired substantially all of the asset and liabilities of
four medical clinics located in and around Atlanta, Georgia for $1,539,398, consisting of various trade liabilities and
notes payable due physicians assumed by the Company. These clinics were part of a bankruptcy proceeding at the time of
their acquisition. This acquisition was accounted for on the purchase method of accounting and gave rise to goodwill of
$951,997, which is being amortized over 20 years. The following is a summary of the assets acquired and liabilities
assumed:
Current assets $ 429,901
Furniture, fixtures and equipment 157,500
-------------
Total assets acquired 587,401
Trade liabilities (377,128)
Notes payable to physicians (1,162,270)
-------------
Total liabilities acquired (1,539,398)
-------------
Goodwill $ (951,997)
=============
During the first quarter of fiscal 1996, the Company acquired a medical clinic in San Antonio from the Southcross Joint
Venture. The clinic was acquired for $315,000 consisting of cash of $100,000, a note for $200,000 and direct
acquisition costs of $15,000. This acquisition was accounted for on the purchase method of accounting. No goodwill
arose from this transaction. The following is a summary of the assets acquired:
Accounts receivable and inventory $ 45,000
Land and buildings 200,000
Furnitures and fixtures 70,000
-------------
$ 315,000
=============
</TABLE>
F-7
<PAGE> 8
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. STOCKHOLDERS' EQUITY:
The Company granted an investment group the right to acquire an option to
acquire the Company's common stock at specified prices over a defined period of
time. The agreement provides for each option to be issued in exchange for
$100,000, which amount will be applied to the purchase of common stock, when
and if the option is exercised. The following is a summary of the terms of the
transaction:
<TABLE>
<CAPTION>
Lowest
Last Nonrefundable Possible
Option Fee To Total Exercise
Purchase Acquire Exercise Price
Date Option Price Per Share
----------------------- --------------- ----------- -----------
<S> <C> <C> <C>
March 18, 1996 $ 100,000 $ 750,000 $ 2.25
June 18, 1996 $ 100,000 $ 750,000 $ 4.90
September 18, 1996 $ 100,000 $ 750,000 $ 4.90
December 18, 1996 $ 100,000 $ 750,000 $ 4.90
</TABLE>
The first option was exercised in May 1996 and 333,333 shares of common stock
were issued in exchange for the remaining exercise price of $650,000. In
addition, $100,000 was received in May 1996 to acquire the second option.
Under the terms of the second, third and fourth option agreements, the holders
would have the right to acquire 153,061 shares of the Company's common stock
for $750,000, provided the option was exercised by September 18, 1996, and
thereafter at 30% below market price of the Company's common stock on the date
of exercise. The second, third and fourth options are exercisable over the
24-month period following the acquisition of the options. To the extent an
option is not purchased, then all rights to the remaining options are
forfeited. The Company has granted registration rights to all of the shares
issued and to be issued in connection with this transaction.
The Company issued 768,001 shares of common stock during the second quarter of
fiscal 1996 in connection with a private placement of its stock. Shares
totalling 711,111 were sold at $2.25 per share and another 56,890 were issued
to the placement agent as compensation. The net proceeds of the offering
amounted to $1,483,477. Under the terms of the private placement agreement,
the Company agreed to file a registration statement with the Securities and
Exchange Commission within a specified period of time following the private
placement for the purpose of registering such shares. The Company failed to
file a registration statement within the period specified and, as a result, may
be required to issue each holder of the shares sold in the private placement,
one share of common stock for every ten shares held by such stockholder. These
additional shares have not been issued yet.
The Company issued 100,000 shares of its common stock during the second quarter
of fiscal 1996 for $2.00 per share under Regulation S of the Securities Act of
1933. Total proceeds from this transaction amounted to $200,000. The Company
has granted registration rights to the holders of these shares.
6. PENDING ACQUISITIONS:
The Company has entered into letters of intent to acquire various companies.
These potential acquisitions are subject to due diligence, further negotiations
and execution of definitive agreements. At the present, it is uncertain as to
whether the Company will execute definitive agreements for the acquisition of
any of these companies.
F-8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion of the results of operations and financial condition
of the Company should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto for the fiscal years ended
September 30, 1995 and September 30, 1994 and the Company's unaudited condensed
consolidated financial statements and notes thereto for the three months and
six months ended March 31, 1996 and 1995, included elsewhere in this document.
The Company is an integrated provider network with an emphasis on non-invasive,
primary care and rehabilitative services. The Company acquires, organizes and
manages physician groups into cost-effective delivery systems which respond to
the economic imperative to control and reduce health care expenditures. The
Company will continue seeking acquisitions in its existing and expanding
regional markets. In addition, the Company plans to vertically integrate
health care services in order to deliver an increasing proportion of covered
benefits and to achieve operational efficiencies within its system. The
Company provides a variety of services to physicians' practices for the
purposes of maximizing revenues and services to the health care markets. Being
able to supply more services in a given market provides a strong competitive
edge when bidding on a contract basis. More important is the Company's ability
to focus on improved health care and reduced costs, and the Company's ability
to help ensure that each patient receives appropriate and necessary quality
care.
The Company has unilateral control over the assets and operations of the
various medical practices. American HealthChoice, Inc. manages all aspects of
the clinic other than the provision of medical services which is controlled by
the employed or contracted physician groups. The Company's financial
relationship with each practice offers the physician an opportunity to earn a
level of compensation commensurate with the marketplace, but usually less than
that which the physician earned prior to the affiliation, while giving the
practices access to capital, management expertise, information systems, and
managed care contracts.
ACQUISITIONS
During the six-month period ending March 31, 1996, the Company consummated five
acquisitions, of which two were minor. The Company acquired in a
stock-for-stock transaction all the membership interests of Valley Family
Health Center, L.L.C. ("Valley Family"), which owned a chiropractic clinic
located in McAllen, Texas. The Company issued 360,000 shares of Common Stock
in exchange for 100% of the interest in Valley Family. This acquisition closed
during the second quarter of fiscal 1996 and has been accounted for using the
pooling of interest method of accounting. Accordingly, the historical
financial statements of the Company have been restated as if the acquisition
had occurred on October 1, 1994, the date Valley Family began operations.
The Company acquired substantially all of the assets and liabilities of four
medical clinics located in and around Atlanta, Georgia for aggregate
consideration of approximately $1.5 million, consisting of various trade
liabilities and notes payable. These clinics were part of a bankruptcy
proceeding at the time of their acquisition. This acquisition was accounted
for on the purchase method of accounting and gave rise to goodwill of
approximately $952,000.
During the first quarter of fiscal 1996, the Company acquired a medical clinic
in San Antonio from the Southcross Joint Venture. The clinic was acquired for
$315,000 consisting of cash of $100,000, a note for $200,000 and direct
acquisition costs of $15,000. This acquisition was accounted for on the
purchase method of accounting. No goodwill arose from this transaction.
The Company's profitability depends on enhancing clinic operating efficiency,
expanding health care services provided, increasing market share, and assisting
affiliated physicians in managing the delivery of medical care. The Company
does not charge management fees for managing the operations of the clinics
which it owns.
As of April 30, 1996, the Company owned 18 clinic sites in three states; Texas,
Louisiana and Georgia. The following chart details the clinics' locations,
metropolitan areas served, services provided, number of providers and date
acquired or started up by the Company.
F-9
<PAGE> 10
<TABLE>
<CAPTION>
Number Date
Metropolitan Of Acquired or
Clinic Location Area Served Services Provided Providers Started Up
-------------------------- --------------- -------------- --------------------- --------- ------------
<S> <C> <C> <C> <C> <C>
North East MediClinic San Antonio, TX San Antonio primary medical care 1 12/95
Nationwide Sports & Katy, TX Houston physical therapy and 2 10/94
Injury/United Chiropractic chiropractic
Nationwide Sports & Bandera, TX San Antonio physical therapy and 2 07/94
Injury/United Chiropractic chiropractic
Nationwide Sports & San Pedro, TX San Antonio physical therapy and 2 10/94
Injury/United Chiropractic chiropractic
Nationwide Sports & Wurzbach, TX San Antonio physical therapy and 2 10/94
Injury/United Chiropractic chiropractic
Peachtree Corners Norcross, GA Atlanta primary medical care, 9 09/95
Medical Center urgent care
Internal Medicine Atlanta, GA Atlanta internal medicine 1 02/96
Associates
San Pedro MediClinic San Antonio, TX San Antonio primary medical care 1 10/94
South Bexar MediClinic San Antonio, TX San Antonio primary medical care, 1 01/96
urgent care
South Cross MediClinic San Antonio, TX San Antonio primary medical care, 1 12/95
urgent care
Southmost Primary Brownsville, TX Rio G. Valley primary medical care, 2 10/95
Care Clinic urgent care
United Chiropractic New Orleans, LA New Orleans chiropractic 1 07/94
New Orleans East
United Chiropractic New Orleans, LA New Orleans chiropractic 1 07/94
Uptown
Peachtree Medical Atlanta, GA Atlanta internal medicine 1 02/96
Center of Northside
Peachtree Medical Marietta, GA Atlanta internal medicine 1 02/96
Center of Windy Hill
Peachtree Medical Conyers, GA Atlanta primary medical care 2 02/96
Center of Conyers
Peachtree Medical McDonough, GA Atlanta primary medical care 2 02/96
Center of McDonough
Valley Family Health McAllen, TX McAllen chiropractic 1 01/96
Center
</TABLE>
RESULTS OF OPERATIONS
Comparison of three months ended March 31, 1996 to three months ended March 31,
1995
For the three months ended March 31, 1996, net patient revenues amounted to
$2,906,838 compared to $1,651,191 for the same period in 1995. This increase
reflects the increase in net patient revenues from various acquisitions and new
clinics started since the previous fiscal year end and the Peachtree clinic
which was acquired in September 1995. These increases are partially offset by
a decline in revenues at the United Chiropractic New Orleans East clinic and
the Company's mobile diagnostic services unit which are the result of changes
in market demographics and reimbursement policies of third-party payors.
During the three-month period ended March 31, 1996, write-offs of accounts
receivable declined from 26% for the comparable period of 1995, to 21%. This
decline reflects the lower discounts and write-offs incurred by the Company's
medical clinics, the greater influence the Company has in the settlement of
personal injury claims, and controls introduced by the Company to lower
write-offs on personal
F-10
<PAGE> 11
injury claims. The increase in operating costs for the three months ended
March 31, 1996 were the result of increased activity within the Company as new
clinics were acquired and started up and the higher costs of operating medical
clinics as compared to chiropractic clinics. Substantially all of the
Company's revenues during fiscal 1995 were derived from delivery of
chiropractic services, whereas delivery of medical services accounted for
approximately 49% of revenues for the three-month period ending March 31, 1996.
The Company's operations are labor intensive with salaries and benefits
comprising the single largest item in operations. Payroll costs increased from
$697,091 for the three months ended March 31, 1995 to $1,410,669 for the three
months ended March 31, 1996. This increase reflects the increased cost of
physician compensation and the addition of new clinics.
The Company has continued its transition from the chiropractic to the primary
care medical services business; however, this has had a significant impact on
the profitability of the Company given the higher operating costs and lower
margins of the physician practices acquired by the Company. As a result, the
increase in net revenues during the three-month period ended March 31, 1996 has
not resulted in a corresponding increase in net income. The Company intends to
adjust the number of employees at the medical clinics and to renegotiate
physician contracts to establish a more acceptable level of physician and staff
costs in relation to revenues produced in those clinics.
General and administrative expenses increased from $333,918 for the three
months ended March 31, 1995 to $947,273 for the three months ended March 31,
1996. As a percentage of net patient revenues, general and administrative
expense increased from 20.2% for the three months ended March 31, 1995 to 32.6%
for the three months ended March 31, 1996. This increase is primarily due to
the medical clinic acquisitions consummated by the Company since the previous
fiscal year end and the Peachtree acquisition in September 1995.
Comparison of six months ended March 31, 1996 to six months ended March 31,
1995
For the six months ended March 31, 1996, net revenues amounted to $5,684,187
compared to $2,971,939 for the same period in 1995. This increase reflects the
increase in net revenues from various acquisitions and new clinics started
during the six-month period ending March 31, 1996 and the Peachtree clinic
acquisition in September 1995, offset by a decline in revenues at the United
Chiropractic New Orleans East clinic and the Company's mobile diagnostic
services unit. The reduction in revenues from these entities was caused by
changes in market demographics and reimbursement policies of third-party
payors. During the six-month period ended March 31, 1996, write-offs of
accounts receivable declined from 26% for the comparable period of 1995, to
21%. This decline reflects the lower discounts and write-offs incurred by the
Company's medical clinics, the greater influence the Company has in the
settlement of personal injury claims, and controls introduced by the Company to
lower write-offs on personal injury claims. The increase in operating costs
for the six months ended March 31, 1996 were the result of increased activity
within the Company as new clinics were acquired and started up and the higher
costs of operating medical clinics as compared to chiropractic clinics.
Substantially all of the Company's revenues during fiscal 1995 were derived
from delivery of chiropractic services, whereas delivery of medical services
accounted for approximately 46% of revenues for the six-month period ending
March 31, 1996.
The Company's operations are labor intensive with salaries and benefits
comprising the single largest item in operations. Payroll costs increased from
$1,237,312 for the six-months ended March 31, 1995 to $2,497,466 for the six
months ended March 31, 1996. This increase reflects the increased cost of
physician compensation and the addition of new clinics.
The Company has continued its transition from the chiropractic to the primary
care medical services business; however, this has had a significant impact on
the profitability of the Company given the higher operating costs and lower
margins of the physician practices acquired by the Company. As a result, the
increase in net revenues during the six-month period ended March 31, 1996 has
not resulted in a corresponding increase in net income. The Company intends to
adjust the number of employees at the medical clinics and to renegotiate
physician contracts to establish a more acceptable level of physician and staff
costs in relation to revenues produced in those clinics. However, management
believes that it takes approximately six months before it can begin
significantly adjusting the operations of an acquired clinic in such a way as
not to disrupt physicians and patient care.
General and administrative expenses increased from $519,475 for the six months
ended March 31, 1995 to $1,622,994 for the six months ended March 31, 1996. As
a percentage of net patient revenues, general and administrative expense
increased from 17.5% for the six months ended March 31, 1995 to 28.6% for the
six months ended March 31, 1996. This increase came as a result of the medical
clinic acquisitions consummated by the Company during the six-month period
ended March 31, 1996 and the Peachtree acquisition in September 1995.
F-11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had cash and working capital of $402,166 and
$5,011,964, respectively. The Company's primary current asset is accounts
receivable which represents amounts due from patients for services rendered.
Approximately 80% of the Company's accounts receivable at March 31, 1996
represent receivables from the delivery of chiropractic services, of which the
majority represent personal injury claims which are typically collected once
the lawsuit or claim to which they relate is settled. As a result, the
Company's collections on personal injury claims are often more than a year
after the services are rendered. This extended collection period can and does
cause cash flow difficulties because of the growth in the number of
chiropractic clinics the Company operates and the acquisitions the Company has
consummated. Approximately 54% of revenues during the six-month period ended
March 31, 1996 were derived from chiropractic services.
The Company generally acquires clinics by cash payment, installment purchase
financing and the issuance of Common Stock of the Company. The Company then
relies upon increases in revenues or decreases in operating costs of the
clinics, or a combination thereof, in or to repay the installment financing.
The Company is dependent on the revenues from its existing clinics to fund the
Company's working capital requirements, including the payment of approximately
$2,000,000 of debt associated with the acquisition of its existing clinics. In
the event of unanticipated problems, including higher than expected costs of
operation of the Company's clinics or the Company is unable to expand the
revenues or the Company experiences ultimately cash flow of the clinics
receivables, the Company would be required to raise additional equity, engage
in debt financing or cease or curtail its activities.
During the six-month period ended March 31, 1996 the Company raised $1,783,477
from the sale of common stock and the sale of an option to acquire common
stock. The stock was sold in two private placements of 100,000 shares at $2.00
per share and 711,111 shares at $2.25 per share. An additional 56,890 shares
of common stock were issued in connection with the placement of the 711,111
shares as compensation to the placement agent.
In March 1996, the Company entered into an agreement with an investment group
whereby the group was granted the option to purchase up to four options to
acquire the Common Stock of the Company under the following summarized terms:
<TABLE>
<CAPTION>
Payable 10 Non-Refundable Total Lowest
Days From Option Fee, Exercise Possible
Closing and Credited To Price Price (i.e., Exercise
90 Days Each Upon Exercise Before Credit) Price/Share
------------ --------------- -------------- -----------
<S> <C> <C> <C> <C>
March 18, 1996 $ 100,000 $ 750,000 $ 2.25
June 19, 1996 $ 100,000 $ 750,000 $ 4.90
September 18, 1996 $ 100,000 $ 750,000 $ 4.90
December 18, 1996 $ 100,000 $ 750,000 $ 4.90
</TABLE>
Options 2, 3 and 4 are (a) exercisable only at the greater price of $4.90 per
share if purchased on or before September 18, 1996, and thereafter 30% below
market price on date of exercise, and (b) exercisable within 24 months of the
date each option payment is made. If any $100,000 option payment is not timely
made, then the option to purchase the subsequent options are forfeited;
however, any previously purchased options (i.e., where the $100,000 fee has
been timely paid) are not affected. The investment group purchased the first
two options and exercised the first option during May 1996. The Company issued
333,333 shares of its Common Stock upon the exercise of the first option.
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
</TABLE>
F-12
<PAGE> 13
<TABLE>
<S> <C>
None
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote
of Security Holders
Not Applicable
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit 27 -- Financial Data Schedule
</TABLE>
F-13
<PAGE> 14
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.
American HealthChoice, Inc.
(Registrant)
Date: August 21, 1996 By: /s/ Dr. Joseph Wesley Stucki, D.C.
-----------------------------------
Dr. Joseph Wesley Stucki, D.C.
Chairman of the Board
and President
Date: August 21, 1996 By: /s/ Jon A. Sommerhauser
-----------------------------------
Jon A. Sommerhauser
Executive Vice President of
Operations
F-14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 553,162
<SECURITIES> 0
<RECEIVABLES> 11,911,934
<ALLOWANCES> 8,582,482
<INVENTORY> 70,500
<CURRENT-ASSETS> 9,992,908
<PP&E> 1,594,241
<DEPRECIATION> 507,744
<TOTAL-ASSETS> 13,309,505
<CURRENT-LIABILITIES> 4,337,240
<BONDS> 0
<COMMON> 6,690
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,309,505
<SALES> 5,984,486
<TOTAL-REVENUES> 5,984,486
<CGS> 4,354,814
<TOTAL-COSTS> 4,354,814
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,629,672
<INCOME-TAX> 580,661
<INCOME-CONTINUING> 1,049,011
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,049,011
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
