<PAGE> 1
As filed with the Securities and Exchange Commission on July 31, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICAN HEALTHCHOICE, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C>
New York 11-2948752
(State or jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
-------------------------
(Primary Standard Industrial Classification Code Number)
1300 West Walnut Hill Lane
Suite 275
Irving, Texas 75038
(214) 751-1900
(Address and telephone number, principal executive offices and principal
place of business)
Dr. J. W. Stucki
President and Chief Executive Officer
1300 West Walnut Hill Lane
Suite 275
Irving, Texas 75038
(214) 751-1900
(Name, address, and telephone number, of agent for service)
Copies to:
Joshua S. Kanter, Esq.
Barack, Ferrazzano, Kirschbaum & Perlman
333 West Wacker Drive, Suite 2700
Chicago, Illinois 60606
-------------------------
Approximate date of proposed sale to the public: From time to time after
the effective date of this Registration Statement as determined by market
conditions.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Shares Amount to be Aggregate Offering Aggregate Amount of
to be Registered Registered Price Per Share(1) Offering Price(1) Registration Fee
<S> <C> <C> <C> <C>
Common Stock, $.001 par value . . . 1,503,902 $9.1875 $13,817,099 $4,765
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) based on the arithmetic average of the high
and low reported sales prices on the Nasdaq SmallCap Market System on
July 26, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE> 2
PROSPECTUS
1,503,902 SHARES OF COMMON STOCK
AMERICAN HEALTHCHOICE, INC.
This Prospectus relates to the offer and sale from time to time of up to
1,503,902 shares of common stock, $.001 par value per share (the "Common
Stock"), of American HealthChoice, Inc., a New York corporation (the
"Company"), by the holders thereof (collectively, the "Registered Stock"). The
holders of the Registered Stock shall sometimes be collectively referred to as
the "Selling Shareholders." The Company has registered the Registered Stock to
permit the holders thereof to sell such shares without restriction in the open
market or otherwise, but the registration of the Registered Stock does not
necessarily mean that any of the Registered Stock will be offered or sold by
the Selling Shareholders.
The Common Stock is registered and sold on the Nasdaq SmallCap Market
System under the symbol "AHIC."
SEE "RISK FACTORS" FOR CERTAIN FACTORS RELATING TO AN INVESTMENT IN THE
COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The Selling Shareholders from time to time may offer and sell the
Registered Stock held by them directly or through agents or broker-dealers on
terms to be determined at the time of sale. To the extent required, the names
of any agent or broker-dealer and applicable commissions or discounts and any
other required information with respect to any particular offer will be set
forth in the section of this Prospectus entitled "Plan of Distribution" or an
accompanying Prospectus Supplement. Each of the Selling Shareholders reserves
the sole right to accept or reject, in whole or in part, any proposed purchase
of the Registered Stock to be made directly or through agents.
The Company will not receive any of the proceeds from the sale of any
Registered Stock by the Selling Shareholders, but has agreed to bear certain
expenses of registration of the Registered Stock under Federal and state
securities laws.
The Selling Shareholders and any agents or broker-dealers that participate
with the Selling Shareholders in the distribution of Registered Stock may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), and any commissions received by them and any
profit on the resale of the Registered Stock may be deemed to be underwriting
commissions or discounts under the Securities Act.
THE DATE OF THIS PROSPECTUS IS JULY ___, 1996
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), pursuant to the Exchange
Act. Such reports, proxy statements and other information filed by the Company
may be examined without charge at, or copies obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and are also
available for inspection and copying at the regional offices of the Commission
located at Seven World Trade Center, New York, New York 10048 and at 500 West
Madison Street, Chicago, Illinois 60661-2511.
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form SB-2 under the
Securities Act, and the rules and regulations promulgated thereunder, with
respect to the Registered Stock offered pursuant to this Prospectus. This
Prospectus, which is part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto. For further information concerning the Company and the Registered
Stock offered hereby, reference is made to the Registration Statement and the
exhibits filed therewith, which may be examined without charge at, or copies
obtained upon payment of prescribed fees from, the Commission and its regional
offices at the locations listed above. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
Copies of all documents which are incorporated by reference (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such document) will be provided without charge to
each person, including any shareholder, to whom this Prospectus is delivered,
upon written or oral request. Requests should be directed to American
HealthChoice, Inc., 1300 West Walnut Hill Lane, Suite 275, Irving, Texas
75038, Attention: Randy Johnson (telephone number: (214) 751-1900).
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
descriptions and the financial information and statements, and the notes
thereto, appearing elsewhere and incorporated by reference in this Prospectus.
As used herein, the term "Company" includes American HealthChoice, Inc. and
those entities owned or controlled by American HealthChoice, Inc.
(collectively, the "Subsidiaries"), unless the context indicates otherwise.
THE COMPANY
The predecessor of American HealthChoice, Inc., a New York corporation
(together with its subsidiaries, the "Company"), was formed in 1993 to organize
and acquire multi-disciplinary primary care medical clinics and to provide, on
an on-going basis, comprehensive management and marketing services to such
clinics. The Company currently owns and/or provides broad-based management and
marketing services to 25 clinics, located in Texas, Louisiana and Georgia. The
Company is developing primary care networks to serve the San Antonio, Houston,
New Orleans and Atlanta metropolitan areas as well as the Rio Grande Valley
and southern Florida. The Company is seeking to expand its business by
acquiring existing primary care medical clinics, developing and opening new
primary care medical facilities in medically under-served markets and entering
into management contracts with independent physician groups. See "THE
COMPANY--Business Strategy." The Company believes that profitable operations
will occur as a result of (i) the integration of ancillary medical services
(such as mammography, ultrasound and other diagnostic procedures), (ii)
centralized marketing both to the public and to institutional health care
providers which, in turn, results in securing additional and more favorable
managed care contracts, (iii) more effective billing and administration,
(iv) overall cost containment and cost reduction procedures, and (v) the
addition of full risk managed care contracts from health maintenance
organizations ("HMOs").
RECENT DEVELOPMENTS
Since March 31, 1996, the Company's most recently completed fiscal
quarter, the Company has opened three new clinics in Texas. The Company is
also actively negotiating the acquisition of over 20 additional clinics in
Houston, San Antonio, Dallas-Ft. Worth, Atlanta and south Florida and is
continuing to pursue additional acquisitions; however, there can be no
assurance that any of such acquisitions will be successfully consummated.
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED
UNDER "RISK FACTORS" PRIOR TO MAKING AN INVESTMENT DECISION REGARDING THE
REGISTERED STOCK OFFERED BY HEREBY.
SECURITIES TO BE OFFERED
This Prospectus relates to the offer and sale from time to time of up to
(i) 711,113 shares of Common Stock issued in the Company's 1996 Private
Placement (as hereinafter defined) (the "Private Placement Stock"); (ii) 56,890
shares of Common Stock issued by the Company to G-V Capital Corp. ("G-V
Capital"), the Company's exclusive placement agent in connection with the 1996
Private Placement (the "Placement Agent Stock"); (iii) 100,000 shares of Common
Stock issued by the Company to Pangloss International, S.A. ("Pangloss") in a
transaction intended to comply with Regulation S under the Securities Act of
1933, as amended (the "Securities Act") (the "Pangloss Stock"); (iv) 246,601
shares of Common
3
<PAGE> 5
Stock issued by the Company to certain officers, directors and founders (or
affiliates thereof) of the Company (the "Founder Stock") in connection with the
formation of the Company and its predecessors; (v) 333,333 shares of Common
Stock issued by the Company upon the exercise of certain options granted by the
Company (the "Option Stock") to the holders thereof (the "Option Holders");
(vi) 8,041 shares of Common Stock (the "Acquisition Stock") issued by the
Company to Dr. Malcolm Dulock ("Dulock") in lieu of a payment of principal and
interest owing by the Company to Dulock; and (vii) 54,000 shares of Common
Stock (the "Acquisition Stock") issued by the Company in connection with an
acquisition of one of its clinics. The registration of the Registered Stock
does not necessarily mean that any of the Registered Stock will be offered or
sold by the Selling Shareholders. The Company will not receive any proceeds
from the sale of any Registered Stock.
SUMMARY CONSOLIDATED FINANCIAL DATA (1)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
September 30, March 31,
------------------------- --------------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net Patient Revenues $ 5,237,817 $ 6,168,110 $ 2,971,939 5,684,187
Operating Expenses 3,995,333 3,889,606 1,908,459 4,490,947
----------- ----------- ----------- ---------
Income Before Income Taxes
and Pro Forma Income Taxes 1,242,484 2,278,504 1,063,480 1,193,240
Income Taxes 260,800 1,074,959 782,757 660,961
----------- ----------- ----------- ---------
Net Income Before Pro Forma
Income Taxes 981,684 1,203,545 280,723 532,279
Pro Forma Income Taxes 205,131 (220,520) (383,952) (213,496)
Net Income After Pro Forma
Income Taxes $ 776,553 $ 1,424,065 $ 664,675 745,775
=========== =========== ========== =========
Net Income Per Share After
Pro Forma Income Taxes $ .14 $ .25 $ .11 .12
=========== =========== ========== =========
<CAPTION>
September 30, March 31,
1995 1996
------------- -----------
<S> <C> <C>
Balance Sheet Data:
Working Capital $ 3,811,287 $ 5,011,964
Total Assets 8,695,890 13,033,657
Long Term Debt 585,171 1,628,463
Stockholders' Equity 4,578,777 6,753,765
=========== ============
</TABLE>
(1) The summary financial information for the years ended September 30, 1994
and 1995, and for the six month periods ended March 31, 1995 and 1996,
set forth above is derived from and should be read in conjunction with
the Company's Consolidated Financial Statements and accompanying notes
appearing elsewhere in this Prospectus. The financial information for the
six month periods ended March 31, 1995 and 1996, in the opinion of
management of the Company, includes all adjusts necessary for a fair
presentation of such information. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Consolidated Financial Statements".
4
<PAGE> 6
RISK FACTORS
There are substantial risk factors involving investment in the Common
Stock offered hereby. The following lists certain of those risk factors, but
does not purport to set forth every risk factor associated with such
investment. Potential investors who wish to do so should discuss the potential
benefits and associated risks of such investment with their investment, tax and
legal advisors.
CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL FUNDING
The Company is dependent on the revenues from its existing clinics to fund
the Company's working capital requirements, including the payment of
approximately $2.3 million of installment financing associated with the
acquisition of its existing clinics and the payment of officer and other
employee salaries. In the event of unanticipated problems, including higher
than expected costs of operation of the Company-owned clinics, the Company
would be required to raise additional equity, engage in debt financing or cease
or curtail its activities. The Company at times experiences shortages of cash
due to delayed collection of accounts receivable. Approximately ____% of the
Company's accounts receivable are related to the provision of medical,
chiropractic or rehabilitative services in connection with personal injuries.
The Company must often wait to be paid until a personal injury claim or lawsuit
is settled. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS FROM OPERATION." In addition, the Company plans to incur
indebtedness from time to time and to issue additional debt or equity
securities, including the issuance of Common Stock, in connection with the
acquisition of clinics.
The Company recently received net proceeds of approximately $1.4 million
in connection with a private placement of 711,113 shares of Common Stock to
accredited investors (the "1996 Private Placement") and an additional $850,000
in gross proceeds in connection with its transactions with the Option Holders.
In general, there are no assurances that any subsequent equity or debt
financing could be successfully completed in whole or in part, or on terms
acceptable to the Company. Such issuances may be at values significantly less
than the price investors may pay for the Common Stock offered hereby.
Additional equity financing may involve substantial dilution to the then
existing shareholders of the Company, including purchasers of the Registered
Stock.
NEED TO INCREASE REVENUES OR REDUCE COSTS OF ACQUIRED CLINICS
The Company often acquires clinics through installment purchase financing.
The Company then relies on a significant increase in the revenues or decrease
in the operating costs of such acquired clinics, or a combination thereof, in
order to repay such installment financing of these clinics from cash flow.
There is no assurance that the Company will be able to achieve these goals or
that the cash flow generated from the acquired clinics will be sufficient to
meet the installment financing requirements, including the repayment of
principal upon maturity. In the event that revenues were not sufficient to
make the required payments, the Company would be required to raise additional
equity or borrow funds from banks or other lenders or risk defaulting on its
installment financing obligations.
ABILITY TO CONTINUE GROWTH
The Company's continued growth is dependent upon its ability to achieve
significant consolidation of multi-disciplinary primary care medical clinics
and to sustain and enhance the profitability of those clinics. Clinic
operations require intensive management in a dynamic marketplace increasingly
subject to cost containment pressures. The process of identifying clinics
suitable for acquisition and proposing, negotiating and implementing an
acquisition of a particular clinic is lengthy and complex. In
addition, there is increasing competition among health care companies for
attractive acquisitions. See "RISK FACTORS--Competition." There can be no
assurance that the Company will be able to sustain its recent rapid rate of
growth.
5
<PAGE> 7
COMPETITION
The health care industry in general is highly competitive. Many companies
have been organized to pursue the acquisition of medical clinics, manage such
clinics, employ clinic physicians or provide services to practice associations.
Large hospitals, other multi-disciplinary clinics and health care companies,
HMOs, and insurance companies are also engaged in activities similar to those
of the Company. The industry is also subject to continuing changes regarding
how services are provided and how care providers are selected. Patients have
many choices of primary care providers and the primary care providers at the
Company's clinics represent only a small percentage of the providers in a given
geographical area. In addition, potential patients may be required to see
physicians which have contracts with particular managed care companies. The
Company's clinics do not have contracts with all managed care companies and,
accordingly, the Company's clinics may not be a viable option for some
patients. There can be no assurance that the Company will be able to compete
effectively in this market, particularly as additional competitors enter the
market, or that such competition will not impact the Company's ability to
acquire additional clinics on terms acceptable to the Company.
CONFLICTS OF INTEREST
Dr. Stucki, the President and Chief Executive Officer of the Company,
currently owns and operates six other medical clinics, none of which compete
with the Company's clinics. Dr. Stucki intends to divest ownership of such
clinics. In addition, Dr. Stucki owns United Health Services ("UHS"), a
provider of management services to chiropractors throughout the United States.
Dr. Stucki and UHS are currently under investigation by the Lubbock Regional
Office of the Texas Attorney General (the "Attorney General") in connection
with UHS' relationship with United States Automobile Negligence Information
Network ("USANIN") and suspected payments to USANIN for referral of personal
injury patients to UHS owned clinics. A per patient referral fee or
advertising fee may violate Chapter 17, Subchapter E of the Business and
Commerce Code and Section 161.091(a) of the Texas Health and Safety Code. Dr.
Stucki, UHS and the Attorney General are currently discussing a settlement of
this matter.
GOVERNMENT REGULATION
The provision of health care services is subject to numerous Federal,
state and local laws, regulations and rules. Because such laws, regulations
and rules are subject to change and because of the ambiguity of many applicable
legal standards, and the fact that many of them have seldom or never been
interpreted authoritatively by courts or administrative agencies, there can be
no assurance that situations will not arise in which a third party or
government agency argues that some aspect of the Company's operations or
procedures is not in compliance with applicable laws, regulations or rules.
The penalties for non-compliance could include denial of the right to conduct
business in the jurisdiction or other significant civil or criminal penalties.
The laws of a number of states prohibit a corporation from engaging in the
practice of medicine or otherwise exercising control over professionals who are
engaged in the practice of medicine or other disciplines. Certain state laws
also prohibit "fee splitting" between physicians and non-physicians. Federal
law prohibits the offer, payment, solicitation or receipt of any form of
remuneration in return for the referral of Medicare or state health program
patients or patient care opportunities, or in return for the purchase, lease or
order of items or services that are covered by Medicare or state health
programs. The Company believes that neither the ownership of a clinic nor the
provision of equipment, space or managerial, administrative and
non-medicine support services to a clinic constitutes the practice of medicine
so long as licensed physicians exercise complete control over the provision of
all medical services. All medical services performed in the Company-owned
clinics are and will be conducted or supervised by licensed physicians who will
have sole control over and be solely responsible for the treatment of patients.
See "THE COMPANY--Government Regulation."
6
<PAGE> 8
IMPACT OF HEALTH CARE REFORM AND CHANGES IN PAYMENT FOR MEDICAL SERVICES
In addition to extensive existing governmental regulation relating to the
health care industry, there are numerous initiatives at the Federal and state
levels for comprehensive reforms affecting the payment for and availability of
health care services. Certain of these health care proposals, such as further
reductions in Medicare and Medicaid payments and additional prohibitions on
physician ownership, directly or indirectly, of facilities to which they refer
patients, if adopted, could adversely affect the Company. See "THE
COMPANY--Government Regulation." The reform movement may also effect cost
containment decisions of third party payors and other payment factors over
which the Company has no control. Because the Company derives its revenues
from the revenues generated by its clinics, further reductions in payments to
physicians generally or other changes in payment for health care services could
have an adverse effect on the Company. Concern about the potential effect of
the proposed reform measures has contributed to the volatility of stock prices
of companies in health care and related industries and may similarly affect the
price of the Common Stock following this Offering. See "RISK FACTORS--Possible
Volatility of Stock Price."
CAPITATED FEE REVENUE
As an increasing percentage of patients are coming under the control of
managed care entities, the Company believes its success will, in part, be
dependent on the Company's ability to negotiate, on behalf of its clinics,
contracts with HMOs, employer groups, and other private third-party payors
pursuant to which services will be provided on a risk-sharing or capitated
basis by some or all of the physicians affiliated with the Company's clinics.
Under some agreements, the healthcare provider accepts a pre-determined amount
per month per patient (a capitated fee) in exchange for providing all necessary
covered services to the patients covered under the agreement. Such contracts
pass much of the risk of providing care from the payor to the provider. The
proliferation of such contracts in markets served by the Company should result
in greater predictability in revenue, but greater unpredictability of expenses.
There can be no assurance that the Company will be able to negotiate, on behalf
of its clinics, satisfactory arrangements on a risk-sharing or capitated basis.
In addition, to the extent that patients or enrollees covered by such contracts
require more frequent or extensive care than is anticipated, operating margins
may be reduced, or in the worst case, revenues derived from such contracts
may be insufficient to cover the costs of the services provided. As a result,
the Company's clinics may incur additional costs, which would reduce or
eliminate anticipated earnings under such contracts. Any such reduction or
elimination of earnings could have a material adverse effect on the Company.
RISKS ASSOCIATED WITH MEDICAL SERVICES
The Company's clinics are involved in the delivery of health care services
to the public and, therefore, the individual physicians are exposed to the risk
of professional liability claims. Claims of this nature, if successful, could
result in substantial damage awards to the claimants which may exceed the
limits of any applicable insurance coverage. The Company does not control the
practice of medicine by individual physicians affiliated with its clinics or
the compliance with certain regulatory and other requirements directly
applicable to physicians. The physicians at the Company's clinics are not
obligated to indemnify the Company in the event of any loss sustained by the
Company in connection with such physicians' malpractice or other liability.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its future success will depend to a significant
extent on the efforts and abilities of certain senior management, in particular
Dr. J. W. Stucki, Chairman of the Board of Directors, Chief Executive Officer
and President of the Company and Jon A. Sommerhauser, Executive Vice President
of Operations of the Company. The loss of the services of any or all of its
key personnel could have a material adverse effect on the Company. The Company
has entered into an Employment Agreement with each of Dr. Stucki and Mr.
Sommerhauser, although Dr. Stucki may terminate his employment at any time
without penalty.
CONTROL BY PRESENT SHAREHOLDERS
Neither the Company's Certificate of Incorporation (as amended, the
"Certificate") nor its Bylaws (the "Bylaws") provides for cumulative voting.
The Company's Directors are elected by a majority vote of holders of the
Company's Common Stock. Investors who purchase Common Stock in this Offering
will collectively hold less than 50% of the then issued and outstanding shares
of the Company's Common Stock, and therefore will not have the power to elect
any Directors. The Company's present shareholders will control the Company
through their ownership of a majority of the Company's outstanding shares of
Common Stock and, thus, will have the ability to elect all of the Company's
Directors. See "DESCRIPTION OF CAPITAL STOCK--Common Stock."
AUTHORIZATION OF PREFERRED STOCK
The Company's Certificate authorizes the issuance of up to 5,000,000
shares of "blank check" preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or
other rights superior to the Common Stock, which could adversely affect the
relative voting power or other rights of the holders of the Company's Common
Stock. In the event of
7
<PAGE> 9
issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. As of the date hereof, there is no preferred stock
issued or outstanding and the Company has not made any designations as to the
rights or preferences of any preferred stock.
NO DIVIDENDS
Since its formation, the Company has not paid any cash dividends on its
Common Stock. The Company intends to retain earnings, if any, to help fund the
operations and finance future growth of its business and, accordingly, does not
anticipate paying any cash dividends in the foreseeable future.
POSSIBLE VOLATILITY OF STOCK PRICE
To date, there has been only limited public trading of the Company's
Common Stock. The Common Stock is currently traded on the Nasdaq SmallCap
Market System under the symbol "AHIC." Sales of a substantial number of shares
of Common Stock, or the perception that such sales could occur, could adversely
affect prevailing market prices for Common Stock. No prediction can be made
regarding the effect that future sales of Common Stock will have on the market
price of shares. Various factors, such as the Company's operating results,
introduction of products or services by competitors, or changes in laws, rules
or regulations, may have a significant impact on the market price of the
Company's securities. Further, the market prices for the securities of public
companies often experience wide fluctuations which are not necessarily related
to the operating performance of such public companies.
SHARES AVAILABLE FOR RESALE PURSUANT TO RULE 144
After giving effect to the Registration Statement of which this Prospectus
is a part, approximately 5,174,625 shares of the outstanding Common Stock will
continue to be deemed to be "restricted securities" as such term is defined in
Rule 144 ("Rule 144") promulgated under the Securities Act. In general, under
Rule 144, if adequate public information is available with respect to the
Company, a person, who is not an affiliate of the Company and who has satisfied
a two-year holding period, may sell, within any three month period, a number of
that company's shares which does not exceed the greater of one percent of the
then outstanding shares of the class of securities or the average weekly
trading volume of such class of securities during the four calendar weeks prior
to such sale. Sales of restricted securities by a person who is not an
affiliate of the Company (as defined in the Securities Act) and who has
satisfied a three-year holding period may be made without any volume
limitation. The Company is unable to predict the effect that sales made
pursuant to Rule 144 or other exemptions under the Securities Act may have on
the market price of the Common Stock (if, at the time of such sales, there is
an existing market price for the Common Stock, of which there can be no
assurance) or when such sales may begin under Rule 144.
EFFECTS OF FUTURE SALES
The Company has currently outstanding options or warrants to purchase
1,127,517 shares of Common Stock in the aggregate at exercise prices ranging
from $2.00 to $5.00 per share. The Company is obligated to register, under
certain circumstances, approximately 459,183 of the shares of Common
Stock issuable upon the exercise of certain of the options. Although the
Company cannot predict when or if the SEC will declare such registration
statement effective, the effectiveness of such registration statement would
result in such shares of Common Stock becoming freely transferable. As a
result, large amounts of Common Stock will be available for resale without
restriction. Sales of a substantial number of shares of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for Common Stock. No prediction can be made regarding the effect
that future sales of Common Stock will have on the market price of shares.
8
<PAGE> 10
LIMITATION ON OFFICER AND DIRECTOR LIABILITY
As permitted by, and subject to the limitations set forth in, the New York
Business Corporation Law (the "New York Corporation Law"), the Company's Bylaws
provide that the Company may, at the discretion of the Board of Directors,
indemnify the directors and officers to the Company against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred as a result of any action or proceeding,
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, domestic or foreign, which any director or
officer of the Company served in any capacity at the request of the Company, by
reason of the fact that he was a director or officer of the Company, or served
such other corporation in any capacity. In addition, the Company may, at the
discretion of the Board of Directors, pay, in advance of final disposition of
any such action or proceeding, expenses incurred by such person in defending
such action or proceeding.
THE COMPANY
GENERAL
Pursuant to an Agreement and Plan of Reorganization entered into on
March 31, 1995, all of the assets of American HealthChoice (Delaware), Inc., a
Delaware corporation ("AHI"), were acquired in a tax-free reorganization by
Paudan, Inc., a New York corporation which had been traded on a limited public
basis ("Paudan"). As a result of such reorganization, Paudan issued 4,982,000
shares of Paudan's common stock, representing approximately 91.6% of the then
outstanding Paudan common stock, to AHI. AHI was subsequently liquidated. AHI
was incorporated on December 30, 1993 to organize and acquire
multi-disciplinary primary care medical clinics and to provide, on an on-going
basis, comprehensive management and marketing services to such clinics. After
the reorganization transaction and the liquidation of AHI, Paudan changed its
name to "American HealthChoice, Inc." and has continued the business of AHI.
The Company is an integrated provider network with an emphasis on
non-invasive, primary care and rehabilitative services. The Company acquires,
organizes and manages clinics or other physician groups into cost-effective
delivery systems which respond to the economic imperative to control
and reduce health care expenditures. The Company, together with its several
operating subsidiaries, currently owns and provides broad-based management and
marketing services to 23 clinics, located in Texas, Louisiana and Georgia. The
Company also provides management services to, but does not own, an additional
clinic in Brownsville, Texas and an additional clinic in Corpus Christi, Texas.
The Company is developing primary care networks to serve the San Antonio,
Houston, New Orleans and Atlanta metropolitan areas as well as the Rio Grande
Valley and southern Florida. The Company will continue seeking acquisitions in
its existing and expanding regional markets. In addition, the Company plans to
continue 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, insurance carriers, hospitals, health care alliances and
other health care providers for the purposes of maximizing revenues and
services to the health care markets. Management believes that being able to
supply more services in a given market provides the Company with a strong
competitive
9
<PAGE> 11
edge when bidding on a contract basis. The Company focuses on
providing improved health care at reduced costs, and ensuring that each patient
receives appropriate and necessary quality care.
The address of the Company's principal office is 1300 West Walnut Hill
Lane, Suite 275, Irving, Texas 75038. The Company's telephone number is
214-751-1900 and its telecopy number is 214-751-1901.
RECENT DEVELOPMENTS
Since March 31, 1996, the Company opened three new clinics: (i) University
MediClinic, a primary medical care clinic in College Station, Texas; (ii)
Valley Medical Health Center, a primary medical care clinic in Weslaco, Texas;
and (iii) ACME Brownsville Chiropractic Clinic, a chiropractic clinic in
Brownsville, Texas.
PENDING ACQUISITIONS
As of the date hereof, the Company is actively negotiating the acquisition
of over 20 additional clinics, providing an array of primary care services.
The Company has signed a letter of intent to acquire substantially all of the
assets of seven clinics in the Houston metropolitan area. The letter of intent
provides that the total consideration to be paid by the Company will be
approximately $1.8 million. Such letter of intent is subject to significant
contingencies, including certain revenue requirements to be obtained by the
clinics; accordingly, there can be no assurance that the Company will
successfully complete such acquisition. The Company has not entered into any
written agreements with respect to the other clinics for which it is
negotiating.
BUSINESS STRATEGY
The Company's business strategy is to: (i) become one of the largest
providers of primary medical care and related ambulatory rehabilitative care in
each of its market areas by increasing its penetration of HMOs, PPOs,
government-sponsored programs, commercial employer groups and individuals; (ii)
expand into new geographic markets through a combination of development
projects and acquisition efforts, thus providing a cluster of clinics and
related services that provide a single network of primary care and the related
ambulatory rehabilitative care for such market areas; (iii) continue its
expansion and development of its physician base thereby creating an integrated
provider network with a specialty in primary care and ambulatory rehabilitative
care; (iv) continue vertical integration of medical services and
multi-specialty practices to deliver an increasing proportion of covered
benefits; and (v) emphasize the use of primary care physicians and
Company-owned clinics as critical determinants in providing improved access to
cost-effective, quality health care services in its market areas.
The Company's management believes that, in consideration of the federal
government's emphasis on primary care, the demand for doctors who specialize in
general medicine practice, family practice, pediatrics, obstetrics, internal
medicine, chiropractic services and physical rehabilitation will
significantly increase the business opportunities for the Company. This
opportunity, combined with cost containment efforts and quality of care
standards, should enable the Company to position itself as a leader in the
managed care marketplace.
A key component to the success of the Company's acquisition strategy is
the ability of management to successfully integrate an acquired practice into
the corporate structure. A key change that the Company makes after acquiring a
practice is to implement its proven medical management systems, including its
unique physician compensation system, which essentially motivates the
physicians to increase productivity. Also, the Company institutes internal
peer-review quality and utilization management systems, which encourages
teamwork and high performance, and discourages unnecessary referrals. These
support systems enable the Company to maintain strong working relationships
with physicians and staff and enables them to focus solely on providing high
quality care, rather than on administrative functions.
10
<PAGE> 12
THE CONSOLIDATION OF THE HEALTH CARE INDUSTRY
Concerns over the accelerating cost of health care have resulted in the
increasing prominence of managed care. Managed care involves a third party
assuming responsibility for ensuring that health care is provided in a high
quality, cost effective manner. The focus on cost-containment has placed small
to mid-sized groups and sole medical practices at a significant disadvantage
because they typically have higher operating costs and little purchasing power
with suppliers, and must spread overhead costs over a relatively small revenue
base. In addition, these practices often lack both the capital to purchase new
technologies that can improve quality and reduce costs and the accounting and
quality management systems necessary to allow these physicians to enter into
sophisticated risk-sharing contacts with payors. Additionally, small to
mid-sized groups and sole medical practices often do not have formal ties with
other medical providers nor the ability to offer coordinated care across a
variety of specialties, thus reducing their competitive position relative to
larger provider organizations.
As a result of these changes in the marketplace, physicians are
increasingly abandoning traditional private practice in favor of affiliations
with larger organizations, such as the Company, which offer skilled management,
information systems and the integration of ancillary medical services. Many
payors and their intermediaries, including governmental entities, HMOs and
PPOs, are increasingly looking to outside providers of physician services to
develop and maintain quality management programs and patient care data. In
addition, such payors and intermediaries look to share the risk of providing
services through arrangements which provide for fixed payments for patient care
over a specified period of time.
The Company believes that there are several principal benefits to
practitioners which may result from the Company's acquisition of their
practices. An acquisition will relieve a practitioner from the administrative
burdens of a sole practice, including marketing, payroll, insurance carrier and
client billing, property leasing and equipment purchasing. Management believes
that physicians who are sole practitioners or owners of primary care clinics
spend approximately one-third of their time on administrative matters,
resulting in lack of time to provide patient care. By providing these
services, the Company allows practitioners to use more of their time for
patient care or other activities.
Participation in a regional group network, such as those formed by the
Company, can result in cost savings by volume purchases of equipment and
supplies not available to the single clinic. A network may also be able to
absorb, as a group, losses which might be beyond the means of a sole
practitioner or clinic.
Of significant appeal is the ability of a network to become a provider of
services to a HMO or PPO. These organizations will often wish to contract with
groups which are capable of providing services over a geographical area rather
than at a single site. In addition, a group may be better able than a single
practitioner or clinic to negotiate more favorable economic terms with an HMO,
PPO or other managed care organization.
Of equal importance is the intention that, due to the benefits of
participation in a group network, the practitioners which become part of the
Company's network may receive more income as a result and that such increase,
over time, could be significant.
Nevertheless, there can be no assurance that all, or any, of these
benefits of acquisition will occur in any particular case or that practitioners
will perceive that these benefits are attractive enough to them to be acquired
by the Company or to be acquired by the Company on terms which would be
acceptable to it. In addition, there are other entities in competition with
the Company which may offer benefits of association which are better, or
perceived to be better, than those offered by the Company. See "THE
COMPANY--Competition."
11
<PAGE> 13
MANAGEMENT AND MARKETING SERVICES
The management and marketing services offered by the Company are designed
to assist physicians and clinics in managing, promoting and containing the
costs of practices. The Company provides advice and assistance regarding
office design, equipment acquisition, marketing and advertising, office
management, assistance training, accounting and billing procedures, standardized
correspondence and signage.
The Company believes that the importance of marketing, finance, office
administration and other non-medical activities to the successful practice of
medicine has greatly increased in recent years. As a result, the Company
believes that the multiple-clinic or cluster form of operation ("network") has
substantial competitive advantages over autonomous clinics operated by
individuals or unrelated groups. This is particularly true in heavily
populated areas where television and other effective forms of advertising are
so costly that their use may be feasible only when the cost can be spread over
a number of clinics having the same name and the capacity to handle a large
volume of patients. The Company's proposed clinic program is based upon and
intended to implement these views.
The Company provides a wide range of services to the primary care clinics
which it owns. These services include providing professional equipment,
computer hardware and software to help effectively manage the clinics,
advertising, marketing, the coordination and integration of ancillary medical
services (such as mammography and ultrasound), and equipment-lease brokerage
services.
GOVERNMENT REGULATION
As a participant in the health care industry, the Company's operations are
subject to extensive and increasing regulation by a number of governmental
entities at the federal, state and local levels. The Company is also subject
to laws and regulations relating to business corporations in general. The
Company believes its operations are in material compliance with applicable
laws. Nevertheless, because of the uniqueness of the structure of the
Company's relationship with physicians and clinics, many aspects of the
Company's business operations have not been the subject of state or federal
regulatory interpretation and there can be no assurance that the health care
regulatory environment will not change so as to restrict or otherwise adversely
affect the Company's or the affiliated physician's existing operations or
possible expansion.
The laws of many states prohibit business corporations such as the
Company from practicing medicine and employing physicians to practice medicine.
The Company performs only non-medical administrative services, does not
represent to the public or its clients that it offers medical services, and
does not exercise influence or control over the practice of medicine by the
physicians with whom it contracts. Accordingly, the Company believes that it
is not in violation of applicable state laws relating to the practice of
medicine. The laws in most states regarding the corporate practice of medicine
have been subjected to limited judicial and regulatory interpretation and,
therefore, no assurance can be given that the Company's activities will be
found to be in compliance, if challenged. In addition to prohibiting the
practice of medicine, numerous states prohibit entities like the Company from
engaging in certain health care related activities such as fee-splitting with
physicians. For example, Florida enacted its Patient Self-Referral Act in
April 1992 that severely restricts patient referrals for certain services,
prohibits mark-ups of certain procedures, requires disclosure of ownership in
businesses to which patients are referred and places other regulations on
health care providers. The Company believes it is likely that other states
will adopt similar legislation. Accordingly, expansion of the Company's
operations into such states could lead to structural and organizational
modifications of the Company's form of relationships with physician groups.
Such changes, if any, could have an adverse effect on the Company.
12
<PAGE> 14
Certain provisions of the Social Security Act, commonly referred to as
the "Anti-Kickback Statute," prohibit the offer, payment, solicitation, or
receipt of any form of remuneration in return for the referral of Medicare
state health program patients or patient care opportunities, or in return for
the recommendation, arrangement, purchase, lease or order of items or services
that are covered by Medicare or state health programs. The Anti-Kickback
Statute is broad in scope and has been broadly interpreted by courts in many
jurisdictions. Read literally, the statute places at risk many legitimate
business arrangements, potentially subjecting such arrangements to lengthy,
expensive investigations and prosecutions initiated by federal and state
governmental officials. Many states have adopted similar prohibitions against
payments intended to induce referrals of Medicaid and other third party payor
patients. The Company believes that it is not in a position to make or
influence the referral of patients of services reimbursed under government
programs to the physician groups and, therefore, believes its operations do not
violate the Anti-Kickback Statute. The Company also is not a separate provider
of Medicare or state health program reimbursed services. To the extent the
Company is deemed to be either a referral source or a separate provider and to
receive referrals from physicians, the financial arrangements under these
agreements could be subject to scrutiny and prosecution under the Anti-Kickback
Statute. A violation of the Anti-Kickback Statute is a felony, punishable by
fines up to $25,000 per violation and imprisonment for up to five years. In
addition, the federal Department of Health and Human Services may impose civil
penalties excluding violators from participation in Medicare or state health
programs.
In July 1991, in part to address concerns regarding the Anti-Kickback
Statute, the federal government published regulations that provide exceptions,
or "safe harbors," for transactions that will be deemed not to violate the
Anti-Kickback Statute. Among the safe harbors included in the regulations were
provisions relating to the sale of practitioner practices, management and
personal services agreements, and employee relationships. Additional safe
harbors were published in September 1993 offering new protections under the
Anti-Kickback Statute to eight activities, including referrals within group
practices consisting of active investors. Proposed amendments to clarify these
safe harbors were published in July 1994 which, if adopted, would cause
substantive retroactive changes to the 1991 regulations. Although the Company
believes that it is not in violation of the Anti-Kickback Statute, its
operations do not fit within any of the existing or proposed safe harbors.
Significant prohibitions against physician referrals were enacted by
Congress in the Omnibus Budget Reconciliation Act of 1993. These prohibitions,
commonly know as "Stark II," amended prior physician self-referral legislation
know as "Stark I" by dramatically enlarging the field of physician owned or
physician interested entities to which the referral prohibitions apply.
Effective January 1, 1995, Stark II prohibits, subject to certain exemptions, a
physician or a member of his immediate family from referring Medicare or
Medicaid patients to an entity providing "designated health services" in which
the physician has an ownership or investment interest, or with which the
physician has entered into a compensation arrangement including the physician's
own group practice. The designated health services include radiology
and other diagnostic services, radiation therapy services: physical and
occupational therapy services, durable medical equipment, parenteral and
enteral nutrients, equipment, and supplies, prosthetics, orthotics, outpatient
prescription drugs, home health services, and inpatient and outpatient hospital
services. The penalties for violating Stark II including a prohibition on
payment by these government programs and civil penalties of as much as $15,000
for each violative referral and $100,000 for participation in a "circumvention
scheme." The Company believes that its activities are not in violation of
Stark I or Stark II. However, the Stark legislation is broad and ambiguous.
Interpretative regulations clarifying the provisions of Stark II have not been
issued. While the Company believes it is in compliance with the Stark
legislation, future regulations could require the Company to modify the form of
its relationships with physicians and clinics. Moreover, the violation of Stark
I or II by the Company's affiliated physician groups could result in
significant fines and loss of reimbursement which would adversely affect the
Company.
There are also state and federal civil and criminal statutes imposing
substantial penalties, including civil and criminal fines and imprisonment, on
health care providers which fraudulently or wrongfully bill governmental or
other third party payors for health care services. The federal law prohibiting
false billings allows a private person
13
<PAGE> 15
to bring a civil action in the name of the United States government for
violations of its provision. The Company believes it is in material compliance
with such laws, but there is no assurance that the Company's activities will
not be challenged or scrutinized by governmental authorities. Moreover,
technical Medicare and other reimbursement rules affect the structure of
physician billing arrangements. The Company believes it is in material
compliance with such regulations, although regulatory authorities may differ
and in such event the Company may have to modify its relationship with
physicians and clinics.
COMPETITION
Health care, in particular HMOs and PPOs, is an evolving business. A
recent trend in health care is the acquisition of existing medical practices
with the purpose of securing HMO and PPO contracts for such acquired medical
practices. Companies, such as PhyCor, Inc., Coastal Health Care and Pacific
Physician Services, have shown revenue growth of 30% or more per year through
such acquisitions. In 1995, several physician-practice companies, including
FPA Medical Management and InPhyNet, have become publicly traded.
The experience of these companies cannot be taken as any assurance of
success by the Company. The Company's strategic focus differs from a
traditional managed care company. The Company seeks to reduce costs through
integration and coordination of primary care services with ancillary medical
services, while leaving the physicians generally in control of their individual
practices. Managed care companies have sought to achieve certain economics of
scale through overall control of physicians' practices. Although the Company
believes that its strategic focus and the services and benefits it offers to
physicians make the Company an attractive purchaser of such physicians'
practices, the Company will continue to face competition in the acquisition of
clinics from other managed care companies, such as HMOs and MCOs. The
Company's clinics also face competition from other medical care providers who
are not affiliated with the Company. See "RISK FACTORS--Competition."
PROPERTY
The Company leases approximately 3,500 square feet in an office building
in Irving, Texas at a monthly rent $3,571.25 for use as its principal
headquarters. In addition, the Company leases approximately _____ square feet
in an office building in Roswell, Georgia at a monthly rent of $_______ for use
as the corporate offices of AHC Physicians Corporation, a subsidiary of the
Company which operates five clinics in Georgia. The Company currently owns a
parcel of land in San Antonio, Texas, on which the Company's Southcross clinic
is located. The Company anticipates that it may purchase real property
incident to the acquisition of clinics in the future.
As a result of its acquisition of medical clinics, the Company also
leases, subleases or occupies such clinic facility for its affiliated
physicians. The leases have varying terms ranging from month to month to five
(5) years with monthly rents from $1,100 to $17,500. The Company believes that
as affiliated practices grow and add services, expanded facilities may be
required.
EMPLOYEES
As of June 30, 1996,the Company employed 123 people on a full time basis.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings and has no knowledge
of any material legal proceedings contemplated to be brought by or against it.
14
<PAGE> 16
USE OF PROCEEDS
All of the Registered Stock being offered hereunder is being sold by the
Selling Shareholders and not the Company. Accordingly, the Company will not
receive any proceeds from the Offering.
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 consolidated financial statements and notes thereto for the six
months ended March 31, 1996 and the six months ended March 31, 1995 included
elsewhere in this Prospectus.
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 consumated
three acquisitions, of which one was 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 interests in Valley Family. The acquisition closed during the first
quarter of fiscal 1996 and has been accounted for using the pooling of interests
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).
15
<PAGE> 17
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 $1,029,000
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. In connection with its management of the clinic in
Brownsville, Texas and the clinic in Corpus Christie, Texas, the Company does
receive compensation, however, equal to 70% and 75% of such clinics' net
revenues, respectively.
As of July 26, 1996, the Company owned 23 clinics located in Texas,
Louisiana and Georgia. The following chart details the clinics' locations,
metropolitan areas served, services provided and date acquired by the Company.
<TABLE>
<CAPTION>
Metropolitan Area
Clinic Location Served Services Provided Date Acquired
----------------- --------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C>
North East MediClinic San Antonio, TX San Antonio primary medical care 12/95
Nationwide Sports &
Injury Katy, TX Houston physical therapy 10/94
United Health Services Katy, TX Houston chiropractic 10/94
Nationwide Sports &
Injury Bandera, TX San Antonio physical therapy 07/94
United Health Services Bandera, TX San Antonio chiropractic 07/94
Nationwide Sports &
Injury San Pedro, TX San Antonio physical therapy 10/94
United Health Services San Pedro, TX San Antonio chiropractic 10/94
Nationwide Sports &
Injury Wurzbach, TX San Antonio physical therapy 10/94
United Health Services Wurzbach, TX San Antonio chiropractic 10/94
Peachtree Corners primary medical
Medical Center Norcross, GA Atlanta care, urgent care 09/95
San Pedro MediClinic San Antonio, TX San Antonio primary medical care 10/94
South Bexar MediClinic San Antonio, TX San Antonio primary medical 01/95
care, urgent care
South Cross MediClinic San Antonio, TX San Antonio urgent care, 12/95
primary medical
care
United Chiropractic
New Orleans East New Orleans, LA New Orleans chiropractic 07/94
United Chiropractic
Uptown New Orleans, LA New Orleans chiropractic 07/94
</TABLE>
16
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
Peachtree Medical
Center of Northside Atlanta, GA Atlanta internal medicine 02/96
Peachtree Medical
Center of Windy Hill Marietta, GA Atlanta internal medicine 02/96
Peachtree Medical
Center of Conyers Conyers, GA Atlanta primary medical care 02/96
Peachtree Medical
Center of McDonough McDonough, GA Atlanta primary medical care 02/96
Valley Family Health
Center McAllen, TX McAllen chiropractic 01/96
Valley Family Health
Center Weslaco, TX Weslaco primary medical care 7/96
University MediClinic College Station, TX College Station primary medical care 7/96
ACME Brownsville
Chiropractic Brownsville, TX Rio Grande Valley chiropractic 7/96
</TABLE>
RESULTS OF OPERATIONS
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 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 compared to $2,115,466 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 6 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
17
<PAGE> 19
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 $515,700, for the
six months ended March 31, 1995 to $2,004,994 for the six months ended March
31, 1996. As a percentage of net patient revenues, general and administrative
expense increased from 17.3% for the six months ended March 31, 1995 to 35.3%
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.
Comparison of fiscal year ended September 30, 1995 to fiscal year ended
September 30, 1994
For the fiscal year ended September 30, 1995, net revenues were
$6,168,110 compared to $5,237,817 for fiscal 1994. Substantially all of the
Company's revenues during fiscal 1995 and 1994 represented the delivery of
chiropractic services. During fiscal 1995, there was a reduction in operations
at the United Chiropractic New Orleans East clinic because of changes in the
clinic's market demographics and reimbursement policies of third-party payors.
In fiscal 1995, this clinic had net revenues of $452,453 compared to net
revenues of $950,213 for the fiscal year ended September 30, 1994. The Company
was able to replace some of such lost revenues by establishing two new clinics
in fiscal 1995; namely, a mobile diagnostic, CAT scan center and a medical
clinic in San Antonio, which produced net revenues of $496,397 in 1995. The
net revenues produced for all other clinics in fiscal 1995 were substantially
the same as produced by such clinics in fiscal 1994. During the fiscal year
ended September 30, 1995, the provision for write-off on accounts receivable
and discounts on services provided was reduced to 26.0% from 31.0% in fiscal
1994. This improvement was the result of changing collection policies and
clinic treatment protocols. Net revenues were reduced from approximately
$4,500 per patient in fiscal 1994 to approximately $3,500 per patient in fiscal
1995. These reductions have resulted in less amounts written off in the
settlement of accounts receivable and discounts on services provided on
personal injury matters.
Compensation and benefits increased by approximately $319,000 (14%) during
fiscal 1995 as compared to fiscal 1994. This increase reflects the additional
clinics operated during fiscal 1995 and the acquisition of the Valley Family
Health Center, L.L.C. which had no operations during fiscal 1994.
General and administrative expenses decreased by approximately $251,000
(20%) during fiscal 1995 as compared to fiscal 1994. This reduction is
primarily the result of the cessation of the management fee paid to an
affiliate during fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had cash and working capital of $402,166
and $5,011,964. 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
18
<PAGE> 20
Company's clinics or the Company is unable to expand the revenues, and
ultimately the cash flow of the clinics acquired, the Company would be required
to raise additional equity, engage in debt financing or cease or curtail its
activities. See "RISK FACTORS--Capital Requirements; Need for Addition
Funding" and "--Need to Increase Revenues or Reduce Costs of Acquired Clinics."
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 (4)
options to acquire the Common Stock under the following summarized terms:
<TABLE>
<CAPTION>
Non-Refundable
Payable 10 Days Option Fee, Total Exercise Lowest Possible
from Closing and 90 Credited to Price Price (i.e., before Exercise
Days Each Upon Exercise credit) Price/Share
- -------------------- -------------------- -------------------- ----------------
<S> <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
========= ==========
Totals $400,000 $3,000,000
</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 payments 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.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth information regarding the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
Name Age Position Since
- ---------------------- --- --------------------------------------- ----------
<S> <C> <C> <C>
Joseph W. Stucki, D.C. 38 President, March 1995
Chief Executive Officer, and Chairman
of the Board of Directors
Jon A. Sommerhauser 47 Executive Vice President of Operations June 1996
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
Name Age Position Since
- ---------------------- --- --------------------------------------- ----------
<S> <C> <C> <C>
Jeffrey Jones, D.C. 35 Director March 1995
Ronald Potts Director June 1996
</TABLE>
Joseph W. Stucki, D.C., 38, is Chairman of the Board of Directors, Chief
Executive Officer and President of the Company. Dr. Stucki has been a licensed
chiropractor for 14 years and is currently licensed in four states. During
this period he founded United Chiropractic Clinics, Inc. and, as its Chairman
and President, purchased or developed and opened approximately 84
multi-disciplined (chiropractor, physical therapist, massage therapist, etc.)
clinics over a ten-year period. Dr. Stucki has served as Chairman and Chief
Executive Officer of United Health Services and acted as a consultant to
various health care organizations. Also, during 1992 and 1993, he was
associated with CliniCorp, Inc. as an independent contractor with
responsibilities as a mergers and acquisitions consultant. From 1987 through
1989, Dr. Stucki was a board member of the Chiropractic Association of
Louisiana, and he is a Diplomate of the National Board of Chiropractors. He is
also a member of the American Chiropractic Association, the International
Chiropractic Association, and various other state and local associations. Dr.
Stucki maintains an investment apart from the Company in six chiropractic
clinics that do not compete with the Company's clinics. Dr. Stucki intends to
divest ownership of such clinics.
Jon A. Sommerhauser, 47, became Executive Vice President Operations in
June 1996. Mr. Sommerhauser received his Masters Degree in Business
Administration in 1982 from the University of Dallas Graduate School of
Management in Dallas, Texas. Mr. Sommerhauser has over 20 years of experience
in direct sales and operations in a wide range of businesses, including,
primarily, those related to the health care industry. From 1995 through May
1996 Mr. Sommerhauser held the position of Director of Operations for the
Princeton Medical Group. From 1993 through 1995 Mr. Sommerhauser served as the
Executive Director of Phycor IPA Management, LLC, and from 1984 through 1993 he
was the President of Emergency Care Centers.
Jeffrey Jones, D.C., 35, is a Director of the Company. He is the
Clinic Director of the United Chiropractic Uptown clinic. He obtained his
Louisiana Doctor of Chiropractic license in July 1985, Clinic and began
working with United Chiropractic shortly thereafter. From August 1985 to the
present, he has continued practicing at his Uptown, New Orleans location. He
has acted as Regional Manager of other United Clinics in the greater New
Orleans area. He is a member of the Chiropractic Association of Louisiana, The
Union of Chiropractic Physicians and the American Chiropractic Association.
Ronald Potts became a director of the Company in June 1996.
There are no family relationships among the executive officers and
directors.
Members of the Company's Board are elected to hold office until the next
meeting of shareholders and until their successors are elected and qualified.
Officers are elected to service subject to the discretion of the Board of
Directors until their successors are appointed and have qualified. There are
no committees of the Company's Board of Directors.
EXECUTIVE COMPENSATION
The following tables set forth information concerning all cash and
non-cash compensation awarded to, earned by, or paid to the Company's Chief
Executive Officer. No other executive officer of the Company who was serving
at the end of fiscal year 1995 earned more than $100,000 of annual compensation
for services in all capacities to the Company and its subsidiaries.
20
<PAGE> 22
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Fiscal Compensation
Name and Year Ending Annual Compensation/ Awards/Securities
Principal Position September 30, Salary Underlying Options
- ------------------ ------------- ------------------- ------------------
<S> <C> <C> <C>
Joseph W. Stucki(1)
Chairman of the Board, 1995 $192,000.00 150,000
President and Chief 1994 $317,822.00 --
Executive Officer 1993 $319,091.00 --
</TABLE>
(1) The Company is party to an employment agreement with Dr. Stucki. See
"Employment and Consulting Agreements."
STOCK OPTION AND STOCK PURCHASE PLANS
OPTION/SAR GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 1995
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Percent of Total
Number of Options/SARs
Securities Granted to
Underlying Option/ Employees In Fiscal Exercise or Base
Name SARs Granted (#) Year Price ($/Sh) Expiration Date
- ----------------- ------------------ ------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Joseph W. Stucki 150,000 $2.00 8/15/98
</TABLE>
During the fiscal year ended September 30, 1995, there were 150,000 stock
options granted to named executive officers. The number of options granted
since that date to all employees and directors is 20,000 and the exercise price
ranges between $2.00 and $5.00 per share.
In August 1995 the Company adopted its 1995 Employee Stock Option Plan
(the "Employee Plan") under which options to purchase shares of Common Stock may
be issued to employees and consultants of the Company. The Company reserved
1,000,000 shares of Common Stock for issuance under the Employee Plan. Also in
August 1995, the Company adopted the 1995 Non-Employee Director Stock Option
Plan (the "Director Plan") which provides for the grant of options that do not
qualify as "incentive stock options" under the Internal Revenue Code of 1986.
Pursuant to the Director Plan, an option to purchase 10,000 shares of Common
Stock is granted to each non-employee director upon their election to the Board
and an option to purchase 5,000 shares every year thereafter is granted to such
directors so long as they are re-elected to the Board of Directors. As of June
30, 1996, options to purchase 220,000 shares of Common Stock have been granted
under the Employee Plan and options to purchase 10,000 shares of Common Stock
have been granted under the Director Plan.
The Company adopted a stock purchase plan entitled 1995 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), effective October 1, 1995, which
allows employees to acquire Common Stock of the Company at 85% of its fair
market value from payroll deductions received from the employees. The
Company has reserved a total of 250,000 shares of its Common Stock to be sold
to eligible employees in the plan. As of June 30, 1996, no shares of Common
Stock have been purchased by employees under the Stock Purchase Plan.
21
<PAGE> 23
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into three year employment contracts with Messrs.
Stucki, Jones and Sommerhauser.
The agreement with respect to Dr. Stucki commenced October 1, 1994.
While it provides for annual compensation of $180,000, the agreement provides
that the Board of Directors may adjust the base level of compensation after the
first year of the term. The agreement also provides for an automobile
allowance of $1,000.00 per month. The agreement further provides for a
bifurcated severance pay schedule. If Dr. Stucki's employment is terminated
without a change in control, then the Company will be obligated to pay
severance in an amount equal to six months of base salary. However, if Dr.
Stucki's employment is terminated by Dr. Stucki within 120 days following a
change in control, then the Company will be obligated to pay an amount equal to
three times Dr. Stucki's annual base salary. A change in control, for the
purpose of determining severance pay, is defined as the acquisition of a
beneficial ownership of 25% or more of the Company's voting securities or the
election, at an annual election of a class of directors, of persons who are not
nominated by the Board of Directors and who comprise more than one-half of the
class of Directors so elected. Finally, the agreement provides that Dr. Stucki
may terminate his employment at any time without penalty. Pursuant to various
stock purchase agreements whereby Dr. Stucki sold to the predecessor of the
Company various clinics, Dr. Stucki agreed not to compete within a 15-mile
radius of any of the Company's clinics for a period of 3 years from October
1997.
The agreement with respect to Mr. Sommerhauser commenced on June 10,
1996. It provides for annual compensation of $84,000. The Board of Directors
may adjust the base level of compensation after the first year of the term.
Furthermore, Mr. Sommerhauser will receive a minimum yearly increase based upon
the consumer price index for all urban consumers. Mr. Sommerhauser received a
bonus of 1,000 shares of Common Stock upon signing of the employment contract.
He will also receive bonus' of (a) 1,000 shares of Common Stock 90 days
following the signing of the employment contract and (b) $12,000.00 at the end
of each year's employment if the Company meets corporate performance goals as
established between Mr. Sommerhauser and the Company at the beginning of each
employment year. Mr. Sommerhauser received stock options for the purchase of
10,000 shares of Common Stock upon signing of the employment contract. Such
options vest after 12 months of employment. Mr. Sommerhauser will
also receive options to acquire 20,000 and 40,000 shares of Common Stock after
each of the second and third years of employment upon the achievement of certain
established performance goals.
Dr. Jones is employed by a subsidiary of the Company as a clinic director
providing chiropractic services at the New Orleans Uptown clinic. Dr. Jones'
contract provides for a salary of $265,000.00, $325,000.00 and $375,000.00 in
the first, second and third contract years, respectively.
COMPENSATION OF DIRECTORS
Directors receive no compensation for their services as directors except
that non-employee directors will be paid $250.00 for each Board meeting
attended and receive options pursuant to the Director Plan. All directors are
reimbursed for their expenses actually incurred in connection with attending
Board meetings.
22
<PAGE> 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has an unsecured 90-day bridge loan payable to Pangloss
International, S.A. in the principal amount of $500,000. Mr. Ronald Potts, a
director of the Company, owns a _____% interest in Pangloss International, S.A.
The note bears interest at 10% and is due, along with the principal amount
outstanding, on August 2, 1996.
The Company has an unsecured note payable to Dr. Stucki in the principal
amount of $153,753. The note bears interest at 7.5% and was due, along with
the principal amount outstanding, on January 31, 1996. The note originated
in _______ as a result of the acquisition of equipment by certain of the
Company's clinics from Dr. Stucki for common stock and a note of $125,067.
Subsequent advances increased the note to $153,753. No interest was paid on
this note during fiscal 1994 or fiscal 1995.
Certain stockholders of the Company had advances totalling $201,587 and
$147,094 outstanding from the Company at September 30, 1995 and March 31,
1996, respectively. Additionally, certain stockholders had amounts due to the
Company at September 30, 1995 and March 31, 1996 totalling $320,963 and
$_________, respectively. All of these amounts are unsecured, non-interest
bearing and have no defined repayment terms.
AHC Chiropractic Clinic, Inc. has a note payable to _______________, a
stockholder of the Company. The note payable originated in connection with the
purchase of clinic assets. The note payable is due in monthly principal and
interest installments of $2,669, bears interest at 12%, matures in November
1994 and is collateralized by certain trade accounts receivable. The note
payable balance at September 30, 1994 was $22,966 and interest expense was
$1,317 and $-0- for the years ended September 30, 1994 and 1995, respectively.
23
<PAGE> 25
In January 1996, the Company acquired all of the membership interests of
Valley Family in exchange for 360,000 shares of Common Stock. Dr. Stucki owns a
50% membership interest in an entity which owned a 50% membership interest in
Valley Family. Thus, Dr. Stucki received 90,000 shares of the Company's Common
Stock in connection with the Valley Family transaction.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the ownership of the
Company's Common Stock as of July 26, 1996, by (i) each beneficial owner of
more than 5% of the outstanding Common Stock, (ii) each director, (iii) The
Chief Executive Officer and the four most highly compensated other executive
officers, and (iv) the executive officers and directors as a group. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned. The Company had 7,036,377
shares of Common Stock outstanding at July 26, 1996.
<TABLE>
<CAPTION>
Name of Owner of Number of Shares Percent of
Identity of Group Options(1) Total Outstanding
- ----------------- ---------- ----- -----------
<S> <C> <C> <C>
Dr. J.W. Stucki
1300 W. Walnut Hill Lane
Suite 275
Irving, Texas 75038 150,000 2,635,368 38.76%
Dr. W. Nelson
6416 Bandera Rd.
Suite B
San Antonio, Texas 78238 ___ 610,700 8.67%
Dr. J. Jones
807 S. Carrollton Avenue
New Orleans, LA 70118 60,000 1,142,928 16.95%
Jon A. Sommerhauser
1300 W. Walnut Hill Lane
Suite 275
Irving, Texas 75038 ___ ___ ___
Ronald Potts ___ ___ ___
Officers and Directors, as a
group (4 persons) 210,000 3,778,296 55.03%
</TABLE>
* less than 1%
(1) includes company stock options issued October 1995 exercisable over
three(3) year period at an exercise price of $2.00 to $2.20 per share.
24
<PAGE> 26
DESCRIPTION OF CAPITAL STOCK
The summary of the terms of the shares of Common Stock of the Company set
forth below does not purport to be complete and is subject to and qualified in
its entirety by reference to the Company's Certificate and the Bylaws of the
Company (the "Bylaws), copies of which are exhibits to the Registration
Statement of which this Prospectus is a part and which are incorporated herein
by reference.
GENERAL
The Certificate provides that the Company may issue up to 120,000,000
shares of capital stock, consisting of 115,000,000 shares of Common Stock,
$.001 par value per share, and 5,000,000 preferred shares of preferred stock,
$.001 par value per share ("Preferred Stock"). As of July 26, 1996, 7,036,377
shares of Common Stock were issued and outstanding pursuant to the records of
the Company's transfer agent. As of July 26, 1996, the Company had no shares
of Preferred Stock outstanding.
COMMON STOCK
All shares of Common Stock offered hereby have been duly authorized, fully
paid and nonassessable. Subject to the preferential rights of any other
capital stock of the Company (of which, as of the date hereof, there are none),
holders of Common Stock are entitled to receive distributions if, as and when
authorized and declared by the Board of Directors out of assets legally
available therefor and to share ratably in the assets of the Company legally
available for distribution to its shareholders in the event of its liquidation,
dissolution or winding-up after payment of, or adequate provision for, all
known debts and liabilities of the Company.
Each outstanding Common Share entitles the holder to one vote on all
matters submitted to a vote of shareholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any other class or series of shares of capital stock, the holders of
such Common Stock will possess the exclusive voting power. There is no
cumulative voting in the election of directors, which means that the holders of
a majority of the outstanding shares of Common Stock can elect all of the
directors then standing for election and the holders of the remaining shares of
capital stock, if any, will not be able to elect any directors.
Holders of Common Stock have no conversion, sinking fund, redemption or
preemptive rights to subscribe for any securities of the Company.
All shares of Common Stock have equal dividend, distribution, liquidation
and other rights, and have no preference, exchange or, except as expressly
required by the New York Corporation Law, appraisal rights.
Pursuant to the New York Corporation Law, a corporation generally cannot
dissolve, amend its declaration of trust or merge, unless approved by the
affirmative vote or written consent of shareholders holding at least two-thirds
of the shares entitled to vote on the matter unless a lesser percentage (but
not less than a majority of all of the votes entitled to be cast on the matter)
is set forth in the corporation's certificate of incorporation. The
Certificate does not provide for a lesser percentage in such situations.
LOCKUPS OF CERTAIN OF THE REGISTERED STOCK
Each holder of the Private Placement Stock has entered into an agreement
(a "lockup") whereby such holder agreed not to sell or offer for sale into the
public market any of its Common Stock for a period of 12 months following the
effective date of the Registration Statement of which this Prospectus is a
part, without the prior consent of G-V Capital. The purpose of the lockup is
to ease selling pressure on the trading price of the Common Stock following
registration. In addition, the 27,000 shares offered by James Carter, the
13,500 shares offered by David Voracek and 13,500 of the shares offered by
Dr. Stucki are subject to a lockup which expires 180 days after the effective
date of the Registration Statement of which this Prospectus is a part.
25
<PAGE> 27
PREFERRED STOCK
The authorized Preferred Stock of the Company consists of 5,000,000
shares, $.001 par value. There are currently no issued and outstanding shares
of Preferred Stock nor any existing options or rights to purchase Preferred
Stock. The Company may issue Preferred Stock from time to time upon action of
the Board of Directors without further shareholder action. The Board of
Directors may approve the issuance of Preferred Stock in series and has the
right to establish the number of shares to be included in each such series, and
to fix the designation, powers, preferences and rights of each such series and
the qualifications, limitations or restrictions thereof. Under the Company's
Certificate, the Board of Directors is authorized to provide that Preferred
Stock, when and if issued, would receive dividends and share in the assets of
the Company upon liquidation or distribution ahead of the rights of holders of
the Common Stock to share in such dividends and assets. It is possible that
such preferences of the Preferred Stock, if and when issued, will be such that
any dividends, if and when paid, would only be paid to shareholders of
Preferred Stock and that upon the liquidation or dissolution of the Company,
whether voluntary or involuntary, only holders of Preferred Stock would share
in such assets.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is Corporate Stock
Transfer, Inc., Denver, Colorado.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of July 26, 1996, there were 7,036,377 shares of Common Stock
outstanding, held by approximately 35 holders of record.
Prior to February 1, 1996, the Common Stock was quoted in the National
Quotation Bureau's interdealer system through the Nasdaq "Bulletin Board" under
the symbol [AHIC]. From February 1, 1996, the Common Stock has been listed on
the Nasdaq SmallCap Market System under the symbol AHIC. The following table
shows the high and low quotations for Common Stock for each quarter for the
period October 1, 1993 through June 30, 1996 based upon information received
from the National Quotation Bureau or the Nasdaq Stock Market, Inc. On July
26, 1996, the high and low prices per share of Common Stock were $9.25 and
$9.125, respectively, as reported by the Dow Jones News Retrieval Service .
Such quotations may represent prices between dealers and may not necessarily
include retail markups, markdowns or commissions, and do not represent actual
transactions.
26
<PAGE> 28
<TABLE>
<S> <C> <C>
BID PRICE BID PRICE
QUARTER ENDED HIGH LOW
--------------------------- --------- ----------
December 31, 1993
March 31, 1994
June 30, 1994
September 30, 1994
December 31, 1994
March 31, 1995
June 30, 1995
September 30, 1995
December 31, 1995
March 31, 1996 $10-5/8 $5-5/8
June 30, 1996 $11-1/4 $9-3/8
September 30, 1996 (through $10-5/8 $8-5/8
July 24, 1996)
</TABLE>
DIVIDENDS
The Company has paid no cash dividends since its inception and it is
unlikely that any cash dividend will be paid in the future. The declaration in
the future of any cash or stock dividends will be at the discretion of the
Board depending upon the earnings, capital requirement and financial position
of the Company, general economic conditions and other pertinent factors.
SHARES AVAILABLE FOR FUTURE SALE
Of the 7,036,377 outstanding shares of Common Stock as of July 26, 1996,
approximately 357,850 shares of Common Stock other than any shares held by
affiliates, are tradeable without restriction under the Securities Act. The
Registered Stock being offered and sold pursuant to this Prospectus and any
applicable Prospectus Supplement will be tradeable without restriction under
the Securities Act pursuant to the Registration Statement of which this
Prospectus is a part. Approximately 5,174,625 shares of Common Stock (not
including the Registered Stock) cannot be resold without registration or an
exemption therefrom.
The holders of Registered Stock may also be able to sell their shares
without registration in accordance with the exemptions provided by Rule 144
under the Securities Act. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated in accordance with the Rule) who
has beneficially owned his shares for at least two years, as well as any
persons who may be deemed "affiliates" of the Company (as defined in the
Securities Act), would be entitled to sell within any three month period a
number of Common Shares that does not exceed the greater of one percent of the
then outstanding number of shares or the average weekly trading volume of the
shares during the four calendar weeks preceding each such sale. After shares
are held for three years, a person who is not deemed an "affiliate" of the
Company is entitled to sell such shares under Rule 144 without regard to the
volume limitations described above. Sales of shares by affiliates will
continue to be subject to the volume limitations. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly,
through the use of one or more intermediaries, controls, or is controlled by,
or is under common control with, such issuer.
27
<PAGE> 29
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares for future sale, will
have on the market price prevailing from time to time. Sales of substantial
amounts of shares of Common Stock (including Common Stock issued upon the
exercise of Options), or the perception that such sales could occur, could
adversely affect prevailing market price of the Common Stock.
SELLING SHAREHOLDERS
As described elsewhere herein, "Selling Shareholders" are (i) the holders
of the Private Placement Stock, (ii) G-V Capital, (iii) Pangloss, (iv) those
officers, directors and founders of the Company (or affiliates thereof) who
hold the Founder Stock, (v) the Option Holders, (vi) Dr. Dulock and (vii) the
holders of the Acquisition Stock.
The following table provides, with respect to each Selling Shareholder,
the name, the number of shares of Common Stock owned, the number of shares of
Common Stock offered hereby and the percentage ownership after completion of
the offering.
<TABLE>
<CAPTION>
PERCENTAGE OWNED
NAME AND POSITION WITH COMPANY, NUMBER OF SHARES NUMBER OF SHARES AFTER COMPLETION OF
IF APPLICABLE BENEFICIALLY OWNED OFFERED HEREBY OFFERING
- ------------------------------- ------------------ ----------------- -------------------
HOLDERS OF PRIVATE PLACEMENT STOCK
- ----------------------------------
<S> <C> <C> <C>
Hal and Barbara Elman 7,000 7,000 0%
Vincent and Louise Ferrante 20,000 20,000 0%
Edwin and Linda Green 10,000 10,000 0%
Beverly Hoffman 4,300 4,300 0%
Robert Leffler 5,000 5,000 0%
Barry and Lisa Siegel 5,000 5,000 0%
Michael Miller 44,450 44,450 0%
Andrew Kaplan 8,889 8,889 0%
Eileen Kaplan 8,889 8,889 0%
Stanley A. Kaplan 26,666 26,666 0%
Lawrence and Helaine Kaplan 44,444 44,444 0%
Universal Partners, L.P. 45,000 45,000 0%
Ken and Lori Bernstein 10,000 10,000 0%
Lawrence Fleischman 5,000 5,000 0%
Capital Vision Group Pension 5,000 5,000 0%
Steven D. Goodman 5,000 5,000 0%
Michael Karpoff and Patricia
Rothbardt 2,500 2,500 0%
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
PERCENTAGE OWNED
NAME AND POSITION WITH COMPANY, NUMBER OF SHARES NUMBER OF SHARES AFTER COMPLETION
IF APPLICABLE BENEFICIALLY OWNED OFFERED HEREBY OF OFFERING
- ------------------------------- ------------------ ---------------- -------------------
<S> <C> <C> <C>
Christian and Theresa Lange 10,000 10,000 0%
Francis X. Murphy 5,000 5,000 0%
Neil Ragin 10,000 10,000 0%
Abraham H. Rosenberg 10,000 10,000 0%
Seymour Zwickler Revocable Trust 5,000 5,000 0%
Jasminville Corp. NV 10,000 10,000 0%
Wellington Corp. NV 10,000 10,000 0%
Delaware Charter Trust IRA for
Ron Heller 25,000 25,000 0%
Bette Nagelberg 25,000 25,000 0%
Walnut Capital Corp. 45,000 45,000 0%
Alfred Romano 18,000 18,000 0%
Sheldon Erdman 2,500 2,500 0%
Herbert and Janice Donica 5,000 5,000 0%
Bruce Wallach 2,500 2,500 0%
Jay M. Haft 5,000 5,000 0%
Steven Finkelstein 11,000 11,000 0%
Jerry Kaplan 18,000 18,000 0%
Loretta DeMilt 4,445 4,445 0%
Windy City, Inc. 20,000 20,000 0%
Vincent D'Andrea 5,000 5,000 0%
Paul D'Andrea 10,000 10,000 0%
Joseph Costa 5,000 5,000 0%
Robert Harries 5,000 5,000 0%
Alliance Capital Investments Corp. 87,327 87,327 0%
Jerry Kaplan 5,000 5,000 0%
Frederick and Claire Modlin 2,500 2,500 0%
Craig and Debbie Kadamian 2,500 2,500 0%
Andre J. Menard 4,445 4,445 0%
Paul M. and Brenda Brandoff 4,445 4,445 0%
Frank J. Faltus 4,445 4,445 0%
Stanley Snyder 11,000 11,000 0%
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
PERCENTAGE OWNED
NAME AND POSITION WITH COMPANY, NUMBER OF SHARES NUMBER OF SHARES AFTER COMPLETION OF
IF APPLICABLE BENEFICIALLY OWNED OFFERED HEREBY OFFERING
- ------------------------------ ------------------ ----------------- -------------------
<S> <C> <C> <C>
John A. Bencivenga 4,445 4,445 0%
Edmond O'Donnell 29,000 29,000 0%
Andrew Ruotolo 5,000 5,000 0%
Kenneth S. Roth 8,000 8,000 0%
Brian Forberg/Charles Smith 2,489 2,489 0%
Ron and Judith Filosa 2,489 2,489 0%
Melvin and Marian Lax 5,000 5,000 0%
Kiawah Capital Partners 5,000 5,000 0%
PANGLOSS
- --------
Pangloss International, S.A. 100,000 100,000 0%
G-V CAPITAL
- -----------
G-V Capital Corp. 56,890 56,890 0%
HOLDERS OF FOUNDER STOCK
- ------------------------
Richard Purcell(1) 47,331 2,367 *
Ricky L. Hanks 67,036 3,712 *
James T. Bryant 74,236 3,712 *
Robert Stewart 41,857 2,093 *
Joseph Nelson 610,700 30,535 8.25%
David Voracek 109,928(2) 14,496(2) 1.36%
Milan Felt 16,441 822 *
Jay Stucki 9,938(3) 4,545(3) *
Charles Webb 136,514 6,826 *
J. W. Stucki, Chief Executive
Officer, President and Director 2,745,368(4) 145,716(4) 36.95%
Jeffrey Jones, Director 1,142,928 57,146 15.43%
OPTION HOLDERS
- --------------
Jerry D. Kennett 346,726 145,833 2.86%
John A. Crouch 264,146 111,100 1.92%
Merlin Kirby 90,822 38,200 *
H. Jerry Murrell 90,822 38,200 *
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
PERCENTAGE OWNED
NAME AND POSITION WITH COMPANY, NUMBER OF SHARES NUMBER OF SHARES AFTER COMPLETION OF
IF APPLICABLE BENEFICIALLY OWNED OFFERED HEREBY OFFERING
- -------------------------------- ------------------ ---------------- --------------------
HOLDERS OF PRIVATE PLACEMENT STOCK
- ----------------------------------
<S> <C> <C> <C>
DULOCK
- ------
Malcolm Dulock 33,041 8,041 *
HOLDERS OF ACQUISITION STOCK(5)
- -----------------------------
James Carter 180,000 27,000 2.17%
====================
TOTAL 1,503,902
</TABLE>
- -------------------------
* Less than one percent.
(1) Mr. Purcell was the Secretary and Treasurer of the Company for the period
from 1993 through March 1996.
(2) Includes 90,000 shares of Acquisition Stock, 13,500 shares of which are
being offered hereby.
(3) Includes 4,445 shares of Private Placement Stock owned by Mr. Stucki's
individual retirement account and offered hereby and 1,993 shares of
Founder Stock, of which 100 shares are being offered hereby.
(4) Includes 110,000 shares owned by Dr. Stucki's spouse and includes 90,000
shares of Acquisition Stock, of which 13,500 shares are being offered
hereby.
(5) Dr. Stucki and Mr. Voracek also hold Acquisition Stock. Their
holdings are listed under "Holders of Founder Stock."
PLAN OF DISTRIBUTION
The Prospectus relates to (i) the offer and sale from time to time of up
to 711,113 shares of Private Placement Stock by the holders thereof; (ii) the
offer and sale from time to time of up to 56,890 shares of Placement Agent
Stock by G-V Capital; (iii) the offer and sale from time to time of up to
100,000 shares of Pangloss Stock by Pangloss; (iv) the offer and sale from time
to time of up to 246,601 shares of Founder Stock by the holders thereof; (v)
the offer and sale from time to time of up to 333,333 shares of Option Stock by
the Option Holders; (vi) the offer and sale from time to time of up to 8,041
shares of Common Stock by Dr. Dulock; and (vii) the offer and sale from time to
time of up to 54,000 shares of Acquisition Stock by the holders thereof. The
Company has registered the Registered Stock for sale to permit the holders
thereof to sell such shares without restriction on the open market or
otherwise, but registration of the Registered Stock does not necessarily mean
that any of the Registered Stock will be issued by the Company or offered or
sold by the Selling Shareholders.
The Company will not receive any proceeds from the offering by the Selling
Shareholders.
The distribution of Registered Stock may be effected from time to time in
one or more underwritten transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Any such
underwritten offering may be on a "best efforts" or a "firm commitment" basis.
In connection with any such underwritten offering, underwriters or
agents may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders or from purchasers of Registered
Stock for whom they may act as agents. Underwriters may sell Registered Stock
to or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents.
31
<PAGE> 33
Under agreements that may be entered into by the Company, underwriters,
dealers, and agents who participate in the distribution of Registered Stock may
be entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such underwriters, dealers or agents may be required to make
in respect thereof.
The Selling Shareholders and any underwriters, dealers or agents that
participate in the distribution of Registered Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of Registered Stock by them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act.
At a time a particular offer of Registered Stock is made, a Prospectus
Supplement, if required, will be distributed that will set forth the name and
names of any underwriters, dealers or agents and any discounts, commissions and
other terms constituting compensation from the Selling Shareholders and any
other required information.
The sale of the Registered Stock by the Selling Shareholders may also be
effected from time to time by selling Registered Stock directly to purchasers
or to or through broker-dealers. In connection with any such sale, any such
broker-dealer may act as agent for the Selling Shareholders or may purchase
from the Selling Shareholders all or a portion of the Registered Stock as
principal, and may be made pursuant to any of the methods described below.
Such sales may be made on the Nasdaq SmallCap Market System or other
exchanges on which the Common Stock is then traded, in the over-the-counter
market, in negotiated transactions or otherwise at prices and at terms then
prevailing or at prices related to the then-current market prices or at prices
otherwise negotiated.
The Registered Stock may also be sold in one or more of the following
transactions: (a) block transactions (which may involve crosses) in which a
broker-dealer may sell all or a portion of such shares as agent but may
position and resell all or a portion of the block as principal to facilitate
the transaction; (b) purchases by any such broker-dealer as principal and
resale by such broker-dealer for its own account pursuant to a Prospectus
Supplement; (c) a special offering, an exchange distribution or a secondary
distribution in accordance with applicable Nasdaq or other stock exchange or
market rules; (d) ordinary brokerage transactions and transactions in which any
such broker-dealer solicits purchasers; (e) sales "at the market" to or through
a market maker or into an existing trading market, on an exchange or otherwise,
for such shares; and (f) sales in other ways not involving market makers or
established trading markets, including direct sales to purchasers. In
effecting sales, broker-dealers engaged by the Selling Shareholders may arrange
for other broker-dealers to participate. Broker-dealers will receive
commissions or other compensation from the Selling Shareholders in amounts to
be negotiated immediately prior to the sale that will not exceed those
customary in the types of transactions involved. Broker-dealers may also
receive compensation from purchasers of the Registered Stock which is not
expected to exceed that customary in the types of transactions involved.
In order to comply with the securities laws of certain states, if
applicable, the Registered Stock may be sold only through registered or
licensed brokers or dealers. In addition, in certain states, the Registered
Stock may be not be sold unless they have been registered or qualified for sale
in such state or an exemption from such registration or qualification
requirement is available and is complied with.
All expenses incident to the offering and sale of the Registered Stock,
other than commissions, discounts and fees of underwriters, broker-dealers or
agents, shall be paid by the Company.
The Acquisition Stock cannot be sold by the holders thereof until 180 days
after the effective date of the Registration Statement of which this Prospectus
is a part. The Private Placement Stock cannot be sold for a period of 12
months after the effective date of the Registration Statement.
32
<PAGE> 34
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
I N D E X
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS:
American Health Choice, Inc.
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets - September 30, 1995 and March 31, 1996 (unaudited) . . . . . . . . . F-3
Consolidated Statements of Income - Years Ended September 30, 1994 and 1995 and
Six Months Ended March 31, 1995 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statement of Stockholders' Equity - Years Ended
September 30, 1994 and 1995 and Six Months ended March 31, 1996 (unaudited) . . . . . . . . . F-5
Consolidated Statements of Cash Flows - Years Ended September 30, 1994 and 1995 and
Six Months Ended March 31, 1995 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
VALLEY FAMILY HEALTH CENTER, L.L.C.:
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-20
Balance Sheet - September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-21
Statement of Income - Year Ended September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . F-22
Statement of Members' Equity - Year Ended September 30, 1995 . . . . . . . . . . . . . . . . . . F-23
Statement of Cash Flows - Year Ended September 30, 1995 . . . . . . . . . . . . . . . . . . . . F-24
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
</TABLE>
F-1
<PAGE> 35
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
American HealthChoice, Inc.
We have audited the accompanying consolidated balance sheet of American
HealthChoice, Inc. and subsidiaries as of September 30, 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the two years in the period ended September 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American HealthChoice, Inc. and subsidiaries as of September 30, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended September 30, 1995, in conformity with generally accepted
accounting principles.
HEIN + ASSOCIATES LLP
Certified Public Accountants
Houston, Texas
January 9, 1996
F-2
<PAGE> 36
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
--------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
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
COMMITMENTS (Note 8)
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 CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE> 37
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended
Years Ended September 30, March 31,
--------------------------------- -----------------------------
1994 1995 1995 1996
------------- -------------- ------------ -----------
(unaudited)
<S> <C> <C> <C> <C>
NET PATIENT REVENUES $ 5,237,817 6,168,110 $ 2,971,939 $ 5,684,187
OPERATING EXPENSES:
Compensation and benefits 2,248,483 2,567,038 1,237,312 2,115,466
Advertising 442,895 233,453 112,524 323,028
Depreciation and amortization 51,802 81,221 39,148 47,459
General and administrative,
including management fees
and other expenses paid to related
parties of $523,156, $65,000,
$65,000 and none, respectively 1,250,836 1,000,062 515,700 2,004,994
Other expense, net 1,317 7,832 3,775 -
------------- ------------ ----------- -----------
Total operating expenses 3,995,333 3,889,606 1,908,459 4,490,947
------------- ------------ ----------- -----------
Income before income taxes
and pro forma income taxes 1,242,484 2,278,504 1,063,480 1,193,240
INCOME TAXES:
Current 85,781 92,396 43,125 (133,000)
Deferred 175,019 982,563 739,632 793,961
------------- ------------ ----------- -----------
260,800 1,074,959 782,757 660,961
------------- ------------ ----------- -----------
NET INCOME BEFORE PRO FORMA
INCOME TAXES 981,684 1,203,545 280,723 532,279
Pro forma income tax expense (benefit) 205,131 (220,520) (383,952) (213,496)
------------- ------------ ------------ -----------
NET INCOME AFTER PRO FORMA
INCOME TAXES $ 776,553 $ 1,424,065 $ 664,675 $ 745,775
============= ============ =========== ===========
NET INCOME PER SHARE AFTER
PRO FORMA INCOME TAXES $ .14 $ .25 $ .11 $ .12
============= ============ =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,437,000 5,797,000 5,797,000 6,480,654
============= ============ =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 38
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
-------------------------------------------------
Subscription Stock
Shares Amount Payable Option
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
BALANCES, OCTOBER 1, 1993 2,847,000 $ 28,470 - $ -
Issuance of common stock to founders for
services rendered during fiscal 1993 803,000 8,030 - -
Net income - - - -
Dividends - - - -
------------ ------------ ----------- -----------
BALANCES, SEPTEMBER 30, 1994 3,650,000 36,500 - -
Shares issued to acquire Valley Family
Health Center, L.L.C. 360,000 360 - -
Reclassification upon conversion of subsidiaries
from non-taxable to taxable entities - - - -
Exchange of common stock in connection with
the acquisition of Paudan, Inc. 1,787,000 (31,063) - -
Common stock to be issued in connection with the
acquisition of Peachtree Corners Medical Center - - 75,000 -
Distribution to members of Valley Family Health
Center, L.L.C . - - - -
Net income - - - -
------------ ------------ ----------- -----------
BALANCES, SEPTEMBER 30, 1995 5,797,000 5,797 75,000 -
Issuance of common stock in connection with acqui-
sition of Peachtree Corners Medical Center 25,000 25 (75,000) -
Sale of 100,000 shares of common stock at $2.00 100,000 100 - -
Sale of 768,001 shares of common stock at $2.25 768,001 768 - -
Proceeds from sale of option to acquire 333,333
shares of common stock at $2.25 - - - 100,000
Distribution to members of Valley Family
Health Center, L.L.C. - - - -
Net income - - - -
------------ ------------ ----------- -----------
BALANCES, MARCH 31, 1996 6,690,001 $ 6,690 $ - $ 100,000
============ ============ =========== ===========
<CAPTION>
Additional
Paid-in Retained
Capital Earnings Total
------------ ------------ ------------
<S> <C> <C> <C>
BALANCES, OCTOBER 1, 1993 $ 32,780 $ 2,281,330 $ 2,342,580
Issuance of common stock to founders for
services rendered during fiscal 1993 72,416 - 80,446
Net income - 981,684 981,684
Dividends - (356,624) (356,624)
------------ ------------ ------------
BALANCES, SEPTEMBER 30, 1994 105,196 2,906,390 3,048,086
Shares issued to acquire Valley Family
Health Center, L.L.C. 125,785 - 126,145
Reclassification upon conversion of subsidiaries
from non-taxable to taxable entities 1,260,479 (1,260,479) -
Exchange of common stock in connection with
the acquisition of Paudan, Inc. 231,064 - 200,001
Common stock to be issued in connection with the
acquisition of Peachtree Corners Medical Center - - 75,000
Distribution to members of Valley Family Health
Center, L.L.C . - (74,000) (74,000)
Net income - 1,203,545 1,203,545
------------ ------------ ------------
BALANCES, SEPTEMBER 30, 1995 1,722,524 2,775,456 4,578,777
Issuance of common stock in connection with acqui-
sition of Peachtreee Corners Medical Center 74,975 - -
Sale of 100,000 shares of common stock at $2.00 199,900 - 200,000
Sale of 768,001 shares of common stock at $2.25 1,482,709 - 1,483,477
Proceeds from sale of option to acquire 333,333
shares of common stock at $2.25 - - 100,000
Distribution to members of Valley Family
Health Center, L.L.C. - (140,768) (140,768)
Net income - 532,279 532,279
------------ ------------ ------------
BALANCES, MARCH 31, 1996 $ 3,480,108 $ 3,166,967 $ 6,753,765
============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE> 39
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
Years Ended September 30, March 31,
----------------------------- --------------------------
1994 1995 1995 1996
------------ ------------- ------------ -----------
(unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 981,684 $ 1,203,545 $ 280,723 $ 532,279
Adjustments to reconcile net income
to cash from operating activities:
Depreciation and amortization 51,802 81,221 39,148 47,457
Change in assets and liabilities:
Increase in trade accounts
receivable, net (1,230,705) (1,596,268) (872,966) (2,041,827)
Increase in other current assets - (165,701) (245,468) (6,023)
Increase in deferred taxes 175,019 982,563 721,980 793,961
Other, net 96,265 138,774 51,865 (270,875)
------------ ------------- ------------ -----------
Net cash provided by (used
in) operating activities 74,065 644,134 (24,718) (945,028)
------------ ------------- ------------ -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Note receivable from stockholder - - - (270,000)
Cash acquired from acquisitions - 203,978 200,000 99,434
Cash acquired in Peachtree acquisition - - - (234,887)
Amounts paid for acquisitions - (295,745) (58,330) -
Advances to physicians and other
receivables, net - (70,978) (35,489) (33,735)
Purchases of property and equipment (46,820) (215,430) (107,715) (101,136)
Other, net 79,823 - - (207,670)
------------ ------------- ------------ -----------
Net cash provided by (used
in) investing activities 33,003 (378,175) (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 71,145 -
Dividends paid to members of
Valley Family Health Center, L.L.C. - (74,000) - (140,768)
Proceeds from sale and leaseback of fixed
assets - 300,000 - -
Proceeds from note payable to stockholder 26,862 - - -
Cash advances from (to) stockholders, net 39,468 (246,735) (63,711) (54,493)
------------ ------------- ------------ -----------
Net cash provided by (used
in) financing activities 66,330 50,410 7,434 1,511,004
------------ ------------- ------------ -----------
INCREASE IN CASH 173,398 316,369 (18,818) (182,018)
CASH, beginning of period 94,417 267,815 267,815 584,184
------------ ------------- ------------ -----------
CASH, end of period $ 267,815 $ 584,184 $ 248,997 $ 402,166
============ ============= ============ ===========
</TABLE>
- Continued -
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE> 40
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
Years Ended September 30, March 31,
----------------------------- --------------------------
1994 1995 1995 1996
------------ ------------- ------------ -----------
(unaudited)
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Income taxes paid $ 7,480 $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF
NONCASH TRANSACTIONS:
Net assets (liabilities) purchased (See Note 3) $ - $ 368,610 $ - $ (893,931)
Dividend distribution of amounts
due from an affiliate to a stock-
holder $ 356,624 $ - $ - $ -
Common stock issued to founders for
services rendered in fiscal 1993 $ 80,446 $ - $ - $ -
Equipment contributed by stockholders $ - $ 55,000 $ 55,000 $ -
============ ============= ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE> 41
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation - American HealthChoice, Inc. had no substantial
assets or operations prior to its acquisition of three clinics in June
1994 and seven clinics in October 1994. These clinics were acquired in
an exchange of common stock. Pre-existing financial relationships existed
between American HealthChoice and those clinics and the stockholder of
American HealthChoice and those of the clinics, including common
ownership and shared facilities. Accordingly, this acquisition/merger
was accounted for as a reverse acquisition of American HealthChoice, Inc.
on an "as if" pooling of interests basis. The assets and liabilities of
these companies are reflected at their historical costs and the financial
statements reflect the historical financial statements of the various
companies as if the acquisition had occurred on October 1, 1993.
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All material intercompany accounts
and transactions have been eliminated in consolidation.
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
discounts on services provided are recognized in the periods the related
revenue is earned. Allowances are maintained at levels considered
appropriate by management based upon historical discount and charge-off
experience and other factors deemed pertinent by management.
Property and Equipment - 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 useful lives of the improvements.
F-8
<PAGE> 42
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Income taxes - Certain of the entities included in the accompanying
consolidated financial statements had elected to be taxed as Subchapter S
corporations or limited liability companies for all or a portion of the
periods presented. As such, federal income taxes relating to these
entities were the responsibility of the stockholders or members for such
periods. Pro forma income taxes have been provided in the accompanying
consolidated financial statements as though these entities had been
taxable entities for all of the periods encompassed by these financial
statements.
The Company accounts for income taxes under the Financial Accounting
Standards Board (FASB) Statement No. 109, Accounting for Income Taxes.
FASB Statement No. 109 requires that deferred income taxes be recorded on
a liability method for temporary differences between the financial
reporting and tax bases of a company's assets and liabilities, as
adjusted when new tax rates are enacted. One of the subsidiaries, which
was previously a nontaxable entity, became a taxable entity upon its
acquisition on June 30, 1994. The remaining nontaxable subsidiaries
became taxable when they were acquired on October 1, 1994. In addition,
Valley Family Health Center, L.L.C. was a non-taxable entity prior to its
acquisition. Accordingly, the Company recorded a deferred tax liability
and a related charge to expense of approximately $527,000 on October 1,
1994, and $285,000 during the second quarter of fiscal 1996, which
represents the tax effect of the difference between the nontaxable
entities' assets and liabilities for tax and financial reporting purposes
on the date of their acquisition.
Goodwill - Goodwill arose from the Company's acquisitions of various
clinics and is being amortized on the straight-line method over 20 years.
Recent Accounting Pronouncements - The Financial Accounting Standards
Board ("FASB") issued SFAS No. 121 entitled, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" which is effective for fiscal years beginning after December 15,
1995. SFAS No. 121 specifies certain events and circumstances which
indicate the cost of an asset or assets may be impaired, the method by
which writedowns, if any, of the asset or assets are to be determined and
recognized. Management does not believe that adoption of this
pronouncement in fiscal 1997 will have a material impact on the Company's
financial condition or operating results.
The FASB also issued SFAS No. 123, "Accounting for Stock Based
Compensation", effective for fiscal years beginning after December 15,
1995. This statement allows companies to choose to adopt the statement's
new rules for accounting for employee stock-based compensation plans.
For those companies who choose not to adopt the new rules, the statement
requires disclosures as to what earnings per share would have been if the
new rules had been adopted. Management intends to adopt the disclosure
requirements of this statement in fiscal 1997.
Use of Estimates - The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting
principles requires the Company's management to make estimates and
assumptions that effect the amounts reported in these financial
statements and accompanying notes. Actual results could differ from
those estimates.
F-9
<PAGE> 43
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Net Income Per Share - Net income per share is based upon the weighted
average number of common shares outstanding during the years presented.
Common stock issued to founders in fiscal 1994 and to acquire Paudan,
Inc. during fiscal 1995 was deemed to be outstanding for all of fiscal
1994 and 1995 for purposes of determining the weighted average common
shares outstanding. Common stock issued to acquire the various clinics
acquired in June and October 1994 was deemed to be outstanding from the
later of October 1, 1993 or the date the entity was acquired. The shares
issued to acquire Valley Family Health Center, L.L.C. were deemed to be
outstanding beginning on October 1, 1994.
Interim Financial Information - The accompanying financial information as
of March 31, 1996 and for the six months ended March 31, 1995 and 1996
has been prepared without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. The financial information
reflects all adjustments, which are, in the opinion of management,
necessary to fairly present such information in accordance with generally
accepted accounting principles.
3. ACQUISITION:
The Company acquired Peachtree Corners Medical Center (Peachtree) on
September 22, 1995 in exchange for cash, common stock, the assumption of
certain liabilities and promissory notes due the seller. Peachtree is a
medical, clinical and urgent care center located in Atlanta, Georgia.
The amount paid for Peachtree totaled $937,000 as follows: Cash -
$100,000; 25,000 shares of common stock - $75,000; liabilities assumed -
$140,000 and notes due the seller totaling $622,000. The acquisition was
accounted for under the purchase method of accounting and resulted in
goodwill of $504,000, which is being amortized over 20 years on the
straight-line method. Because the acquisition occurred eight days before
the Company's fiscal year end, the operations of Peachtree for that eight
day period are not reflected in the accompanying financial statements.
The following unaudited pro forma information is presented as if
Peachtree had been acquired at the beginning of each of the years
presented.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------
1994 1995
------------ ------------
(unaudited)
<S> <C> <C>
Revenues $ 7,919,963 $ 9,377,119
Net income after pro forma income taxes 744,513 1,397,352
------------ ------------
Net income per share after pro forma income taxes $ .14 $ .24
============ ============
</TABLE>
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 interests 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.
F-10
<PAGE> 44
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITION: (continued)
The following is a summary of selected historical operating information
of the Company and Valley Family Health Center, L.L.P. for the year ended
September 30, 1995:
<TABLE>
<CAPTION>
American Valley Family
HealthChoice, Inc. Health Center , LLC Combined
------------------ ------------------- --------------
<S> <C> <C> <C>
Revenues $ 5,247,693 $ 920,417 $ 6,168,110
Income before income taxes $ 1,697,126 $ 581,378 $ 2,278,504
Net income before pro forma
income taxes $ 649,167 $ 554,378 $ 1,203,545
Net income after pro forma
income taxes $ 1,060,704 $ 363,361 $ 1,424,065
=============== ================= ============
</TABLE>
The Valley Family Health Center, L.L.C. was owned by an individual who
became a consultant to the Company and a limited liability company,
equally owned by the Company's chief executive officer and an individual
who became a consultant to the Company (see Note 7).
The Company acquired substantially all of the asset and liabilities of
four medical clinics located in and around Atlanta, Georgia for
$1,616,785, consisting of various trade liabilities notes payable due
physicians assumed by the Company and direct acquisition costs. 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 $1,029,384 which is being
amortized over 20 years. The following is a summary of the assets
acquired and liabilities assumed:
<TABLE>
<S> <C>
Current assets $ 429,901
Furniture, fixtures and equipment 157,500
-------------
587,401
Trade liabilities (377,128)
Notes payable to physicians (1,162,270)
-------------
(1,539,398)
-------------
$ (951,997)
=============
</TABLE>
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:
<TABLE>
<S> <C>
Accounts receivable and inventory $ 45,000
Land and buildings 200,000
Furnitures and fixtures 70,000
-------------
$ 315,000
=============
</TABLE>
F-11
<PAGE> 45
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, March 31,
Useful Life 1995 1996
--------------- ------------- -------------
<S> <C> <C> <C>
Land $ - $ 120,000
Building 20 years - 80,000
Furniture and equipment 5 years 1,160,436 1,538,631
------------- -------------
Less accumulated depreciation
and amortization (508,181) (523,197)
------------- -------------
$ 652,255 $ 1,215,434
============= =============
</TABLE>
The following is a summary of furniture, fixtures and equipment under
capital leases at September 30, 1995, except for the assets sold and
leased back to the Company included in Note 7:
<TABLE>
<S> <C>
Equipment $ 303,500
Less accumulated amortization (142,075)
-------------
$ 161,425
=============
</TABLE>
5. NOTE RECEIVABLE FROM STOCKHOLDER:
The Company has advanced $270,000 to a stockholder who was the former
owner of Peachtree. The note receivable is unsecured and bears interest
at a rate of 10%. Principal payments are due in five equal installments
of $54,000 beginning December 31, 1996. Interest on the note is due with
each principal installment.
6. NOTES PAYABLE:
A summary of notes payable is as follows:
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
------------- -------------
<S> <C> <C>
Note payable to stockholder due November 1994,
collateralized by certain accounts receivable.
Interest on the note is 12%. $ 22,966 $ 22,966
Unsecured note payable to stockholder maturing on
January 31, 1996. Interest on the note of 7.5%
is due upon maturity (see Note 7). 153,753 153,753
</TABLE>
(continued)
F-12
<PAGE> 46
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES PAYABLE: (continued)
<TABLE>
<S> <C> <C>
Unsecured note payable to former stockholder of
Peachtree. Principal on the note, which bears
interest at 8%, is due in four installments, the
first of which is $50,000 due on April 1, 1996 and the
remainder, $100,000, each due in six month intervals
thereafter. Interest on the note is payable
upon the due date of each installment. 350,000 350,000
Unsecured note payable to former stockholder of
Peachtree. Principal on the note, which bears
interest at 10%, is due in five annual installments
of $54,400 beginning December 31, 1996. Interest
on the note is payable upon the due date of each
installment. 272,000 272,000
Notes payable due to physicians in connection with
the Metropolitan acquisition. Interest on the notes
ranges from 8% and 10%. Monthly payments,
including interest, range from $2,133 to $9,161
over periods ranging from four to six years. The
notes are collateralized by accounts receivable
and furniture, fixtures and equipment. - 1,000,098
Note payable to former owner of Metropolitan. Principal
is due in monthly payments of $5,481 through June
1997. This note is collateralized by shares of the
Company's common stock. - 82,215
Unsecured note payable in connection with the Metro-
politan acquisition. The note bears interest at a rate
of 8%. Monthly principal and interest payments
totaling $1,587 begin in June 1996 and continue
for the next 48 months. - 65,000
Note payable due to former owner of Southcross. Interest
on the note is 10% and is due quarterly. Principal is
due in eight quarterly installments of $25,000 beginning
March, 1996. The note is collateralized by the clinic
and an office building. - 175,000
Unsecured note payable assumed in connection with a clinic
acquisition. Principal is due in monthly payments of
$1,000 through October 1997. - 27,000
------------- -------------
798,719 2,148,032
Less current maturities (498,719) (770,485)
------------- -------------
Long-term notes payable $ 300,000 $ 1,377,547
============= =============
</TABLE>
F-13
<PAGE> 47
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES PAYABLE: (continued)
Maturities of notes payable are as follows:
<TABLE>
<CAPTION>
Year ending September 30,
-------------------------
<S> <C>
1996 $ 498,719
1997 200,000
1998 100,000
-------------
$ 798,719
=============
</TABLE>
7. RELATED PARTY TRANSACTIONS:
The Company has an unsecured note payable to a stockholder in the
principal amount of $153,753 (see Note 6). The note bears interest at
7.5% and is due, along with the principal amount outstanding, on January
31, 1996. The note originated as a result of the acquisition of
equipment by Diagnostic Services, Inc. from such stockholder for common
stock and a note of $125,067. Subsequent advances increased the note to
$153,753. No interest was paid on this note during fiscal 1994 or fiscal
1995.
Certain stockholders had advances totaling $201,587 and $147,094
outstanding from the Company at September 30, 1995 and March 31, 1996,
respectfully. Additionally, certain stockholders had amounts due to the
Company totaling $323,463 and $378,709 at September 30, 1995 and March
31, 1996, respectively. All of these amounts are unsecured, non-interest
bearing and have no defined repayment terms.
In January 1993, Atlas Physiotherapy, Inc. entered into an agreement with
an entity owned by a stockholder of the Company to provide management
services through January 1994. This agreement automatically renewed for
a one-year period through January 1995. Payments for the services are
based upon 85% of the net profits of the clinic. Fees paid pursuant to
the agreement totaled $165,991 for the year ended September 30, 1994.
This agreement terminated upon acquisition of the clinic.
In January 1993, Atlas Physiotherapy, Inc. entered into an agreement with
another stockholder of the Company to provide office space and certain
office support services through January 1995. Payments made pursuant to
this agreement totaled $22,525 for the year ended September 30, 1994.
This agreement was terminated during fiscal 1994.
Certain clinics previously rented equipment and office space from United
Chiropractic Clinics of Texas, Inc. (UCC), an entity related to certain
of the clinics through common ownership. UCC's charges to the clinics
were based on actual rental charges paid by UCC. The agreements between
UCC and the clinics were informal and had no defined term. Equipment and
office rent paid to UCC amounted to $87,440 for the year ended September
30, 1994.
Prior to their acquisition on October 1, 1994, six of the clinics were
assessed a monthly administrative fee by United Health Services, Inc.
(UHS), an entity related to certain of the clinics through common
ownership, for performing management services and various accounting
functions. These charges amounted to $240,000 for the year ended
September 30, 1994.
F-14
<PAGE> 48
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. RELATED PARTY TRANSACTIONS: (continued)
Joseph Nelson Chiropractic Clinic, Inc. has a note payable with a
stockholder of the Company. The note payable originated in connection
with the purchase of clinic assets. The note payable is due in monthly
principal and interest installments of $2,669, bears interest at 12%,
matures in November 1994 and is collateralized by certain trade accounts
receivable. The note payable balance at September 30, 1994 was $22,966
and interest expense was $1,317 and $ -0- for the years ended September
30, 1994 and 1995, respectively.
In October 1993, Diagnostics Services, Inc. began to rent equipment from
a stockholder of the Company. There is no formal document relating to
this arrangement. Rent expense was $600 and $7,200 for the years ended
September 30, 1994 and 1995, respectively, and $3,600 for each of the
six-month periods ended March 31, 1995 and 1996.
At September 30, 1993, the Company had advances due from UHS in the
amount of $391,385. The advances were non-interest bearing,
uncollateralized and had no specific repayment terms. Advances totaling
$356,624 were distributed to a stockholder and have been accounted for as
dividends in the accompanying consolidated financial statements.
Valley Family Health Center, L.L.C. was acquired from a group which
included a limited liability company in which the Company's chief
executive office was a 50% owner. This limited liability company owned
50% of Valley Family Health Center, L.L.C. at the time of its
acquisition.
The chief executive officer of the Company placed 5,000 shares of common
stock of the Company as surety for a performance bond issued on behalf of
an unaffiliated ambulatory company. The Company has a consulting
arrangement with this ambulatory company under which it will receive a
fee of one percent of gross revenues of that company for the services
provided. This consulting agreement terminates on January 9, 1998. The
Company's board of directors have agreed to pay the chief executive
officer $10,000 as compensation for placing the shares in escrow.
8. COMMITMENTS:
The Company leases office space for four of its clinics with third party
lessors under noncancellable operating leases which expire during 1999
and the year 2000 (see Note 7 for additional lease information). Rent
expense for the years ended September 30, 1994 and 1995 and for the
six-month periods ended March 31, 1995 and 1996 amounted to approximately
$175,000, $228,000, $114,000 and $406,101 respectively. The Company also
leases furniture, fixtures and equipment under capital leases with
interest rates ranging from 9.60% to 10.00%. Future minimum lease
payments under operating leases with terms in excess of one year and
capital leases are as follows:
F-15
<PAGE> 49
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMITMENTS: (continued)
<TABLE>
<CAPTION>
Year Ended September 30, Operating Capital
------------------------ ------------- -------------
<S> <C> <C>
1996 $ 279,899 $ 144,806
1997 276,069 136,503
1998 271,519 95,047
1999 266,998 90,253
2000 182,016 -
------------- -------------
Total minimum lease payments $ 1,276,501 466,609
=============
Future interest (69,344)
-------------
397,265
Less current maturities (112,094)
-------------
$ 285,171
=============
</TABLE>
The Company has three-year employment agreements with two of its officers
under which the Company must pay any amounts due under the remaining term
of the agreements if they are terminated without cause. In certain other
circumstances they would be due one-year compensation upon termination.
The Company has consulting arrangements with three individuals to provide
assistance in locating acquisition candidates and performing due
diligence in connection with any such acquisitions. Total monthly
payments under these agreements amount to $20,000. Payments under two of
the agreements, which total $15,000, represent advances on finders fees
to be paid the consultants for clinics acquired by the Company. To the
extent these consultants do not earn finders fees at least equal to the
advances made, such amounts are to repaid to the Company. The terms of
these agreements range from 24 to 36 months beginning in January 1996.
9. 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>
F-16
<PAGE> 50
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY: (continued)
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. 711,111 shares were sold at $2.25 per share and another 56,890
were issued to the placement agents 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, is 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.
The holders of any preferred stock which might be issued shall have such
rights, preferences and privileges as may be determined by the Company's
board of directors.
10. CONCENTRATION OF CREDIT RISK:
The Company's trade receivables at September 30, 1994 and 1995 consist
of the following, stated as a percentage of total accounts receivable:
<TABLE>
<CAPTION>
1994 1995
------------- --------------
<S> <C> <C>
Personal injury claims 77% 65%
Medical claims filed with insurance companies 10 20
Workman's compensation claims 5 5
Other 8 10
--------- ----------
100% 100%
========= ==========
</TABLE>
The Company maintains deposits in banks which may exceed the amount of
federal deposit insurance available. The Company believes that the risk
of material loss is minimal.
F-17
<PAGE> 51
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES:
Substantially all of the Company's deferred income tax liability at
September 30, 1994 and 1995 represents temporary differences arising from
the Company reporting on the cash method for income tax reporting
purposes. Income tax expense for the years ended September 30, 1994 and
1995 differed from the expected amounts at the federal statutory rate of
34% because of state income taxes and because certain of the subsidiaries
were nontaxable entities for all or a portion of fiscal 1994 and certain
entities became taxable on the first day of fiscal 1995. As a result,
income tax expense for fiscal 1994 was approximately $205,000 less than
amounts the Company would have provided had all of its subsidiaries been
taxable during fiscal 1994 and was approximately $527,000 higher in
fiscal 1995 because of deferred income taxes recorded when certain
non-taxable entities became taxable on October 1, 1994.
12. STOCK OPTION PLANS:
The Company has a stock option plan under which options to purchase a
maximum of 1,000,000 shares of common stock may be issued employees and
consultants of the Company. The stock option plan provides both for the
grant of options intended to qualify as "incentive stock options" under
the Internal Revenue Code of 1986, as amended (the "Code"), as well as
options that do not so qualify. With respect to incentive stock options,
no option may be granted more than ten years after the effective date of
the stock option plan or exercised more than ten years after the date of
the grant (five years if the optionee owns more than 10% of the common
stock of the Company). The exercise price of incentive stock options may
not be less than 100% of the fair market value of the common stock on the
date of grant (110% if the optionee owns more than 10% of the common
stock of the Company). The exercise price of nonqualified stock options
may not be less than 85% of the fair market value of the Company's common
stock on the date of grant. Subject to certain limited exceptions,
options may not be exercised unless, at the time of exercise, the
optionee is in the service of the Company. The following table is a
summary of stock options the Company's board of directors has authorized
to be granted as of March 31, 1996:
<TABLE>
<CAPTION>
Number Exercise
of Shares Price
----------- ----------
<S> <C>
210,000 $ 2.20
50,000 $ 2.00
10,000 $ 5.00
2,500 $ 2.00
------------
272,500
============
</TABLE>
Substantially all of these options were exercisable at March 31, 1996
under the terms authorized by the board of directors. No options had been
exercised at that date.
F-18
<PAGE> 52
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK OPTION PLANS: (continued)
The Company has a non-employee director stock option plan (the
"Director Plan") which provides for the grant of options that do not
qualify as "incentive stock options" under the Code. Options granted
under the Director Plan are to have an exercise price equal to the fair
market value of the Company's common stock on the date of grant.
Pursuant to the Director Plan, an option to purchase 10,000 shares of
common stock is granted to each non-employee director upon their election
to the Board and an option to purchase 5,000 shares every year thereafter
is granted so long as they are re-elected to the Board of Directors. As
of March 31, 1996, no options have been granted under the Director Plan.
The Company's board of directors authorized the grant of options
to acquire a total of 20,000 shares of its common stock at an exercise
price of $3.00 per shares in connection with the Metropolitan transaction
(see Note 3). These options are to be exercisable for a three-year
period ending February 28,1998. None of these options were executed as
of March 31, 1996.
The Company issued an option to acquire 200,000 shares of its common
stock at an exercise price of $3.00 per share in connection with the
private placement of 100,000 shares of common stock (see Note 9). The
options may be exercised for a period of three years ending on December
15, 1998, provided certain events occur. As of March 31, 1996, these
options are not exercisable.
13. STOCK PURCHASE PLAN:
The Company has a stock purchase plan, which allows employees to acquire
common stock of the Company at 85% of its fair market value from payroll
deductions received from the employees. The Company has reserved a total
of 250,000 shares of its common stock to be sold to eligible employees in
the plan.
14. 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-19
<PAGE> 53
INDEPENDENT AUDITOR'S REPORT
To the Members of
Valley Family Health Center, L.L.C.
McAllen, Texas
We have audited the accompanying balance sheet of Valley Family Health Center,
L.L.C. (a limited liability company) as of September 30, 1995, and the related
statements of income, members' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Valley Family Health Center,
L.L.C. as of September 30, 1995, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Houston, Texas
February 23, 1996
F-20
<PAGE> 54
VALLEY FAMILY HEALTH CENTER, L.L.C.
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 38,496
Accounts receivable, less allowance for doubtful accounts
of $260,756 and $347,965 at September 30, 1995 and
December 31, 1995, respectively 578,090
Other current assets 490
--------
Total current assets 617,076
ADVANCES DUE FROM MEMBERS 2,500
OFFICE AND MEDICAL EQUIPMENT, at cost, less accumulated
depreciation of $15,453 64,211
OTHER ASSETS 2,900
--------
TOTAL ASSETS $686,687
========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $45,895
Accrued payroll and related expenses 7,269
Deferred state income taxes 27,000
--------
Total current liabilities 80,164
COMMITMENTS (Note 3)
MEMBERS' EQUITY 606,523
--------
TOTAL LIABILITIES AND MEMBERS' EQUITY $686,687
========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-21
<PAGE> 55
VALLEY FAMILY HEALTH CENTER, L.L.C.
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1995
-------------
<S> <C>
NET PATIENT REVENUES $920,417
OPERATING EXPENSES:
Advertising 80,522
Compensation and benefits 166,118
Depreciation and amortization 15,563
General and administrative 76,836
--------
Total operating expenses 339,039
--------
INCOME BEFORE INCOME TAXES 581,378
DEFERRED STATE INCOME TAXES 27,000
--------
NET INCOME $554,378
========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-22
<PAGE> 56
VALLEY FAMILY HEALTH CENTER, L.L.C.
STATEMENT OF MEMBERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1995
------------
<S> <C>
MEMBERS' EQUITY, beginning of year $ -
MEMBER CONTRIBUTIONS 126,145
NET INCOME 554,378
MEMBER WITHDRAWALS (74,000)
--------
MEMBERS' EQUITY, end of year $606,523
========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-23
<PAGE> 57
VALLEY FAMILY HEALTH CENTER, L.L.C.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1995
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 554,378
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,563
Changes in operating assets and liabilities:
Accounts receivable, net (578,090)
Accounts payable 45,895
Other current liabilities 34,269
Other (3,500)
---------
Net cash provided by operating activities 68,515
CASH FLOWS FROM INVESTING ACTIVITY -
Purchase of office and medical equipment (24,664)
Advances due from members (2,500)
Member cash contributions (withdrawals), net (2,855)
---------
Net cash used in investing activity (30,019)
---------
INCREASE IN CASH 38,496
CASH, at beginning of year -
---------
CASH, at end of year $ 38,496
=========
SUPPLEMENTAL CASH FLOW INFORMATION -
Equipment contributed by members $ 55,000
=========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-24
<PAGE> 58
VALLEY FAMILY HEALTH CENTER, L.L.C.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Valley Family Health Center, L.L.C. (the Company) is a Texas limited
liability company formed in June 1994. The Company will cease to exist
on June 29, 2023 according to its articles of organization. The Company
owns and operates a chiropractic clinic in McAllen, Texas which began
operations in October 1994. Substantially all of the Company's revenues
are derived from residents in and around the city of McAllen, Texas.
Office and Medical Equipment - Office and medical equipment is stated at
cost less accumulated depreciation. Depreciation of office and medical
equipment is computed using the straight-line method over estimated
useful lives of the assets of five years.
Net Patient Revenue - Revenue is recognized upon performance of medical
services. Substantially all of the Company's revenue is derived from
claims filed under personal injury claims. Allowances for discounts on
services provided are recognized in the periods in which the related
revenues are earned. The allowance for doubtful accounts is maintained
at levels considered appropriate by management based upon industry and
historical charge-off experience and other factors deemed pertinent by
management.
Income Taxes - The Company accounts for income taxes under the liability
method as provided by SFAS No. 109, whereby deferred income taxes are
provided for the difference between the financial reporting and income
tax bases of the Company's assets and liabilities based on tax rates and
laws enacted as of the balance sheet date. Deferred tax expense
represents the change in the deferred tax asset/liability balance.
Federal income taxes have not been provided in the accompanying
financial statements as a limited liability company does not incur
federal income taxes. Instead, income from a limited liability company
is included in the respective member's individual federal income tax
return.
Use of Estimates - The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates.
Certain Significant Estimates - The Company makes significant
assumptions concerning allowances for discounts on services and accounts
doubtful of collection. The allowances are calculated based on
historical experience and industry standards. Due to the uncertainties
inherent in the estimation process, and the significant accounts
receivable balance at September 30, 1995, it is at least reasonably
possible that the ultimate collection of the net accounts receivable
balance could be greater than or less than the recorded estimates and
such revisions could be material.
Concentrations of Credit Risk - The Company's financial instruments
which are exposed to concentrations of credit risk consist primarily of
accounts receivable. Substantially all of the Company's receivables
represent amounts to be paid from personal injury claims of its clients.
F-25
<PAGE> 59
VALLEY FAMILY HEALTH CENTER, L.L.C.
NOTES TO FINANCIAL STATEMENTS
2. RELATED PARTY TRANSACTIONS:
Certain members contributed office and medical equipment to the Company
during fiscal 1995. The contributed office and medical equipment was
assigned an estimated fair value of $55,000.
The Company had advances due from certain members or companies
controlled by certain members totaling $2,500 at September 30, 1995.
These advances are non-interest bearing, uncollateralized and have no
specific repayment terms.
A company owned by the son of a member performed advertising and
telemarketing services for the Company. For the year ended September
30, 1995, charges for these services totaled $62,995.
During fiscal 1995 a company owned by one of the members of the Company
provided accounting and administrative services. Fee paid for these
services totaled $6,750 during fiscal 1995.
3. COMMITMENTS:
Rent expense for office space was $16,905 for the year ended September
30, 1995.
Future minimum lease payments under operating leases with terms in
excess of one year are as follows:
<TABLE>
<CAPTION>
Year Ending September 30,
-------------------------
<S> <C>
1996 $ 17,400
1997 15,950
---------
$ 33,350
=========
</TABLE>
4. INCOME TAXES:
Substantially all of the Company's deferred income tax liability at
September 30, 1995 represents temporary differences arising from the
Company reporting on the cash method for income tax reporting purposes.
Upon the acquisition discussed in Note 5, the Company will become a
taxable entity and deferred federal income taxes will be recorded at the
applicable income tax rate. As of December 31, 1995, the liability to
be recorded would have amounted to approximately $225,000.
F-26
<PAGE> 60
VALLEY FAMILY HEALTH CENTER, L.L.C.
NOTES TO FINANCIAL STATEMENTS
5. SUBSEQUENT EVENT:
Subsequent to September 30, 1995, the members of the Company agreed to
sell their interest in the Company to American HealthChoice, Inc. for
common stock of American HealthChoice, Inc. One of the members of the
Company is the chairman of the board and chief executive officer of
American HealthChoice, Inc.
F-27
<PAGE> 61
<TABLE>
<S><C>
=========================================================== ===========================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS.
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE SELLING SHAREHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE COMMON STOCK, IN ANY JURISDICTION WHERE, OR TO 1,503,902 SHARES
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE ANY SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AMERICAN
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY HEALTHCHOICE, INC.
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT
BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS COMMON STOCK
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
__________________ ------------------
TABLE OF CONTENTS PROSPECTUS
Page
---- ------------------
Available Information.................................
Prospectus Summary....................................
Risk Factors.......................................... JULY ___, 1996
The Company...........................................
Use of Proceeds.......................................
Selected Financial Information........................
Management's Discussion and Analysis of Financial
Condition and Results of Operations...............
Management............................................
Certain Relationships and Related Transactions........
Security Ownership of Beneficial
Owners and Management.............................
Description of Capital Stock..........................
Shares Available for Future Sale......................
Selling Shareholders..................................
Plan of Distribution..................................
UNTIL _____, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
=========================================================== ===========================================================
</TABLE>
<PAGE> 62
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with the New York Business Corporation Law, Articles 9 and
10 of the Registrant's Certificate of Incorporation provide as follows:
NINTH: Except as may otherwise be specifically provided in this
certificate of incorporation, no provision of this certificate of incorporation
is intended by the corporation to be construed as limiting, prohibiting,
denying, or abrogating any of the general or specific powers or rights
conferred under the Business Corporation Law upon the corporation, upon its
shareholders, bondholders, and security holders, and upon its directors,
officers, and other corporate personnel, including, in particular, the power of
the corporation to furnish indemnification to directors and officers in the
capacities defined and prescribed by the Business Corporation Law and the
defined and prescribed rights of said persons to indemnification as the same
are conferred by the Business Corporation Law.
TENTH: No director of this corporation shall be personally liable to the
corporation or any of its shareholders for damages for any breach of duty in
such capacity except if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of the law, or that he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled or that his acts violated Section 719 of the New York Business
Corporation Law.
Article V of the Registrant's Bylaws further provides as follows:
On the terms, to the extent, and subject to the conditions prescribed by
statute any by such rules and regulations, not inconsistent with statute, and
the board may in its discretion impose in general or particular cases or
classes of cases: (a) the corporation shall indemnify any person made or
threatened to be made a party to an action or proceeding, civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, which any director or officer of the corporation
served in any capacity at the request of the corporation, by reason of the fact
that he, his testator or intestate, was a director or officer of the
corporation, or served such other corporation in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees, actually and necessarily incurred as a result of such action
or proceeding or any appeal therein, and (b) the corporation may pay, in
advance of final disposition of any such action or proceeding, expenses
incurred by such person in defending such action or proceeding. The
corporation shall indemnify and make advancements to any person made or
threatened to be made a party to any such action or proceeding by reason of the
fact that he, his testator or intestate, was an agent or employee (other than a
director or officer) of the corporation or served another corporation at the
request of the corporation in any capacity, on the terms, to the extent and
subject to the conditions prescribed by statute, and by any rules and
regulations of the board which would have been applicable if he had been a
director or officer of the corporation.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth those expenses for distribution to be
incurred in connection with the issuance and distribution of the securities
being registered. None of the expenses listed below are being borne by the
Selling Shareholders. All amounts shown are estimates, except the SEC
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee................ $ 4,765.00
Printing and Duplicating Expenses...
Legal Fees and Expenses............. $30,000.00
</TABLE>
<PAGE> 63
<TABLE>
<S> <C>
Accounting Fees and Expenses.............
Blue Sky Fees and Expenses...............
Miscellaneous............................
----------
Total ................................. $
==========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to an Agreement and Plan of Reorganization entered into on
March 31, 1995, all of the assets of American HealthChoice (Delaware), Inc., a
Delaware corporation ("AHI"), were acquired in a tax-free reorganization by
Paudan, Inc., a New York corporation which had been traded on a limited public
basis ("Paudan"). As a result of such reorganization, Paudan issued 4,982,000
shares of Paudan's common stock, representing approximately 91.6% of the then
outstanding Paudan common stock, to AHI. After the reorganization transaction
and the liquidation of AHI, Paudan changed its name to "American HealthChoice,
Inc." and has continued the business of AHI. Also in March 1995, the Registrant
issued 40,000 shares of Common Stock to each of Gro-Vest Management, Inc. and
Harrison Gray as a finders fee in connection with such reorganization.
In January 1996, the Registrant issued 25,000 shares of Common Stock to
Dr. Malcom P. Dulock in connection with the acquisition of the Peachtree
Corners Medical Clinic.
In January 1996, the Registrant issued 5,000 shares of Common Stock to
Dr. Hugh Gibson.
In January 1996, the Registrant acquired all of the membership
interests of Valley Family in a stock-for-stock transaction. In connection with
that transaction, Dr. Stucki was issued 90,000 shares of Common Stock, David
Voracek was issued 90,000 shares of Common Stock and James Carter was issued
180,000 shares of Common Stock.
In February 1996, the Registrant sold 100,000 shares of Common Stock to
Pangloss International, S.A. in a transaction intended to comply with
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act").
From January 1996 through February 1996, the Registrant sold 711,113
shares of Common Stock to the holders of the Private Placement Stock in a
private placement intended to comply with Regulation D under the Securities Act
for a price of $2.25 per share. The Registrant received approximately $1.4
million in connection with such private placement. Also in connection with such
private placement, the Registrant issued 56,890 shares of Common Stock to G-V
Capital Corp. as placement agent compensation.
In May 1996, the Registrant issued 333,333 shares of Common Stock upon
the exercise of options held by [the Kennett Doctor Group]. Such options were
exercised at a price of $2.25 per share.
In May 1996, the Registrant issued 8,041 shares of Common Stock to Dr.
Dulock in lieu of a payment due under a loan.
ITEM 27. EXHIBITS
4.1 - Certificate of Incorporation of American HealthChoice, Inc.
4.2 - Bylaws of American HealthChoice, Inc. (f/k/a Paudan, Inc.)
(incorporated by reference to Exhibit 3(ii) to Form 10-KSB,
filed for the fiscal year ended December 31, 1994)
5.1* - Opinion of Barack, Ferrazzano, Kirschbaum & Perlman regarding
legality
21.1 - List of Subsidiaries of American HealthChoice, Inc.
23.1 - Consent of Hein & Associates
23.2* - Consent of Barack, Ferrazzano, Kirschbaum & Perlman (included
in Exhibit 5.1)
24 - Powers of Attorney (included on Page II-5 of Registration
Statement)
</TABLE>
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change
in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material
information on the plan of distribution.
(2) Determine liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
The undersigned Registrant hereby further undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the small
II-2
<PAGE> 64
business issuer pursuant to the foregoing provisions or otherwise, the
small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer
or controlling person of the small business issuer in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 65
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Irving,
State of Texas, on July 19, 1996.
AMERICAN HEALTHCHOICE, INC.
By: /s/ J.W. Stucki
-----------------------------------------------------------
Dr. J. Wesley Stucki, Chief Executive Officer and President
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Name Title Date
- ---- ----- ----
/s/ J.W. Stucki Chairman of the Board July 19, 1996
- ---------------
J. Wesley Stucki, D.C. Chief Executive Officer, President
and Director
/s/ Jon Sommerhauser Vice President Operations July 19, 1996
- --------------------
Jon Sommerhauser
/s/ Jeffrey Jones Director July 19, 1996
- --------------------
Jeffrey Jones, D.C.
/s/ Ronald Potts Director July 19, 1996
- --------------------
Ronald Potts
<PAGE> 66
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below, hereby constitutes and appoints J. Wesley Stucki, D.C. and Jon
Sommerhauser, or either of them, his attorneys-in-fact and agents, with full
power of substitution and resubstitution for him in any and all capacities, to
sign any or all amendments or post-effective amendments to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith or in connection with the registration of the Common
Shares under the Exchange Act, with the Securities and Exchange Commission,
granting unto each of such attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary in connection with such matters as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
each of such attorneys-in-fact and agents or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Name Title Date
- ---- ----- ----
/s/ J.W. Stucki Chairman of the Board July 19, 1996
- ---------------
J. Wesley Stucki, D.C. Chief Executive Officer, President
and Director
/s/ Jon Sommerhauser Vice President Operations July 19, 1996
- --------------------
Jon Sommerhauser
/s/ Jeffrey Jones Director July 19, 1996
- --------------------
Jeffrey Jones, D.C.
/s/ Ronald Potts Director July 19, 1996
- --------------------
Ronald Potts
II-5
<PAGE> 1
State of New York )
)ss: EXHIBIT-4.1
Department of State)
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on June 5, 1996
STATE OF NEW YORK
[SEAL] J. Clark
Special Deputy Secretary of State
DEPARTMENT OF STATE
<PAGE> 2
CERTIFICATE OF INCORPORATION
OF
PAUDAN, INC.
Under Section 402 of the Business Corporation Law
The undersigned, being a natural person of at least 18 years of age,
acting as the incorporator of the corporation, hereby being formed under the
Business Corporation Law, certifies that:
FIRST: The name of the corporation is PAUDAN, INC.
SECOND: The corporation is formed for the purpose of engaging in any
lawful act or activity for which corporations may be organized pursuant to
Article 4 of the Business Corporation Law in the State of New York. The
corporation will not engage in any act or activity requiring the consent or
approval of any state official, department, board, agency or other body without
such consent or approval first having been obtained.
In furtherance of the corporate purposes, the corporation shall have
all of the powers conferred upon corporations organized under the Business
Corporation Law, subject to any limitations thereof contained in this
certificate of incorporation or in the laws of the State of New York.
<PAGE> 3
THIRD: The office of the corporation is to be located in the county of
Suffolk, State of New York.
FOURTH: The aggregate number of shares which the corporation shall
have authority to issue is 120,000,000, each of which shall have a par value of
$ .001.
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against the corporation may be served. The post
office address within the State of New York to which the Secretary of State
shall mail a copy of any process against the corporation served upon him is:
Padan, Inc., c/o Richard S. Wolfeld, P.C., 6400 Old Country Road, Garden City,
New York, 11530.
SIXTH: The duration of the corporation is to be perpetual.
SEVENTH: The following provisions are inserted for the regulation and
conduct of the affairs of the corporation, and it is expressly provided that
they are intended to be in furtherance and not in limitation or exclusion of
the powers conferred by statue:
(a) Meetings of the shareholders or directors of the corporation for
all purposes may be held at its office or elsewhere within or without the
State of New York, at such place or places as may from time to time be
designated in the by-laws, or by unanimous resolution of the board of
directors.
(b) All corporate powers except those which by law expressly require
the consent of the stockholders shall be exercised by the board of directors.
<PAGE> 4
(c) The board of directors shall have the power from time to time to
fix and determine and vary the amount of the working capital of the
corporation, and to direct and determine the use and disposition of any surplus
or net profits over and above its capital, and in its discretion, the board of
directors may use and apply any such surplus or accumulated profits in
purchasing or acquiring bonds or other obligations of the corporation or its
own capital shares, to such extent and in such manner and upon such terms as
the board of directors shall deem expedient, but any such capital shares so
purchased or acquired may be resold unless such shares shall have been retired
in the manner provided by law for the purpose of decreasing the corporation's
capital.
(d) Any one or more or all of the directors may be removed for or
without cause, at any time, by the vote of the shareholders holding a majority
of the shares of the corporation entitled to vote at any special meeting, and
thereupon the term of such director or directors who shall have been so removed
shall forthwith terminate, and there shall be a vacancy or vacancies in the
board of directors to be filled as provided in the by-laws.
(e) Subject always to by-laws made by the shareholders, the board of
directors may make by-laws and from time to time may alter, amend, or repeal
any by-laws, but any by-laws made by the board of directors may be altered or
repealed by the shareholders.
<PAGE> 5
(f) Any one or more members of the board of directors of the
corporation or of any committee thereof may participate in a meeting of said
board or of any such committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time.
EIGHTH: No holder of any of the shares of any class of the corporation shall
be entitled as of right to subscribe for, purchase, or otherwise acquire any
shares of any class of the corporation which the corporation proposes to issue
or any rights or options which the corporation proposes to grant for the
purchase of shares of any class of the corporation or for the purchase of any
shares, bonds, securities, or obligations of the corporation which are
convertible into or exchangeable for, or which carry any rights, to subscribe
for, purchase or otherwise acquire shares of any class of the corporation; and
any and all of such shares, bonds, securities, or obligations of the
corporation, which now or are hereafter authorized or created, may be issued,
or may be reissued or transferred if the same have been reacquired and have
treasury status, and any and all of such rights and options may be granted by
the Board of Directors to such persons, firms, corporations and associations,
and for such lawful consideration, and on such terms as the board of directors
in its discretion may determine, without first offering the same, or any
thereof, to any said holder. Without limiting the generality of the foregoing
stated denial of any and all preemptive rights, no
<PAGE> 6
holder of shares of any class of the corporation shall have any preemptive
rights in respect of the matters, proceedings, or transaction specified in
paragraphs (1) to (6) inclusive, of paragraph (e) of Section 622 of the
Business Corporation Law.
NINTH: Except as may otherwise be specifically provided in this
certificate of incorporation, no provision of this certificate of
incorporation is intended by the corporation to be construed as limiting,
prohibiting, denying, or abrogating any of the general or specific powers or
rights conferred under the Business Corporation Law upon the corporation, upon
its shareholders, bondholders, and security holders, and upon its directors,
officers, and other corporate personnel, including, in particular, the power of
the corporation to furnish indemnification to directors and officers in the
capacities defined and prescribed by the Business Corporation Law and the
defined and prescribed rights of said persons to indemnification as the same
are conferred by the Business Corporation Law.
TENTH: No director of this corporation shall be personally liable to
the corporation or any of its shareholders for damages for any breach of duty
in such capacity except if a judgment or other final adjudication adverse to
him establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of the law, or that he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled or that his acts violated Section 719 of the New York Business
Corporation Law.
<PAGE> 7
IN WITNESS WHEREOF, I have signed and acknowledged this Certificate,
this 1st day of September, 1988.
Richard A. Friedman
---------------------------------
Richard A. Friedman, Incorporator
600 Old Country Road
Garden City, New York, 11530
<PAGE> 8
STATE OF NEW YORK )
COUNTY OF NASSAU ) ss.:
On this 1st day of September, 1988 before me personally came Richard A.
Friedman, to me known and known to me to be the individual described in and who
executed the foregoing certificate, and duly acknowledged to me that he executed
the same.
Richard S. Wofeld
------------------
RICHARD S. WOFELD
Notary Public, State of New York
No: 30-4327780
Qualified in Nassau County
Commission Expires December 31, 1989
<PAGE> 9
State of New York )
Department of State ) ss:
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on JUN 05 1996
[STATE OF NEW YORK
DEPARTMENT OF STATE SEAL]
J. Clark
Special Deputy Secretary of State
<PAGE> 10
F951016000587
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PAUDAN, INC.
Under Section 805 of the Business Corporation Law
The undersigned, being the president and secretary of Paudan, Inc., a
New York corporation (the "Corporation"), do hereby certify and set forth:
(1) The name of the Corporation is Paudan, Inc.
(2) The date the Certificate of Incorporation was filed by the
Department of State is the 14th day of September, 1988.
(3) The Certificate of Incorporation of the Corporation is hereby
amended as follows:
a. Paragraph FIRST of the Corporation's Certificate of
Incorporation is hereby amended so as to change the name of the
Corporation, to wit:
"FIRST: The name of the corporation is American
HealthChoice, Inc."
b. Paragraph FOURTH of the Corporation's Certificate of
Incorporation is hereby amended so as to provide for (i) two classes of
stock, common stock and preferred stock, the shares of which preferred
stock may be issued in series, (ii) the vesting in the Board of
Directors of the authority to establish and designate series of
preferred stock and to fix the number of shares therein and the
variations in the relative rights, preferences, and limitations as
between such series, and (iii) the designation of each class and a
statement of the relative rights, preferences and limitations of the
shares of each class, to wit:
"FOURTH: The aggregate number of shares which the
corporation shall have authority to issue is 120,000,000, of
which 115,000,000 shares shall be common stock of the par value
of $0.001 per share (the "Common Stock"), and of which 5,000,000
shares shall be preferred stock of the par value of $0.001 per
share ("Preferred Stock").
A description of the respective classes of stock and a
statement of the designations, relative rights, preferences and
limitations of the shares of Preferred Stock and Common Stock
are as follows:
Section A. Preferred Stock.
(1) Shares of Preferred Stock may be issued in one or
more series at such time or times and for such consideration as
the Board of
<PAGE> 11
Directors may determine. Each such series shall be given a distinguishing
designation. All shares of any one series shall have preferences,
limitations and relative rights identical with those of other shares of the
same series and, except to the extent otherwise provided in the description
of such series, with those of other shares of Preferred Stock.
(2) Authority is hereby expressly granted to the Board of Directors
of the corporation, subject to the limitations prescribed by law and the
provisions of this Section A, to adopt one or more resolutions to provide
for the issuance from time to time in one or more series of any number of
shares of Preferred Stock up to a maximum of five million (5,000,000)
shares, and to establish the number of shares to be included in each such
series, and to fix the designation, relative rights, preferences,
qualifications and limitations of the shares of each such series, subject
to the limitation that, if the stated dividends and amounts payable on
liquidation are not paid in full, the shares of all series of the same
class shall share ratably in the payment of dividends including
accumulations, if any, in accordance with the sums which would be payable
on such shares if all dividends were declared and paid in full, and in any
distribution of assets other than by way of dividends in accordance with
the sums which would be payable on such distribution if all sums payable
were discharged in full. The authority of the Board of Directors with
respect to each such series shall include, but not be limited to, a
determination of the following:
(a) The distinctive designation and number of shares
constituting that series, which number may (except where otherwise provided
by the Board of Directors in creating such series) be increased or
decreased (but not below the number of shares then outstanding) from time
to time by action of the Board of Directors;
(b) The rate of dividends, if any, on the shares of that series,
whether dividends shall be non-cumulative, cumulative to the extent earned,
partially cumulative or cumulative (and, if cumulative, from which date or
dates), whether dividends shall be payable in cash, property or rights, or
in shares of the corporation's capital stock, and the relative rights of
priority, if any, of payment of dividends on shares of that series over
shares of any other series or over the Common Stock;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting
rights;
(d) Whether or not the shares of that series shall be
redeemable, and if so, the terms and conditions of such redemption,
including the manner of selecting shares for redemption if less than all
shares are to be redeemed, the date or dates upon or after which they shall
be redeemable, the event or events upon or after which they shall be
redeemable, whether they shall be redeemable at the option of the
corporation, the shareholder or another person, the amount per share
payable in case of redemption (which amount may vary under different
<PAGE> 12
conditions and at different redemption dates), whether such amount shall be a
designated amount or an amount determined in accordance with a designated
formula or by reference to extrinsic data or events and whether such amount
shall be paid in cash, indebtedness, securities or other property or rights,
including securities of any other corporation;
(e) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the terms of and
amounts payable into such sinking fund;
(f) The rights to which the holders of the shares of that
series shall be entitled in the event of voluntary or involuntary dissolution or
liquidation of the corporation, and the relative rights of priority, if any, of
payment of shares of that series over shares of any other series or over the
Common Stock in any such event;
(g) Whether the shares of that series shall be convertible
into or exchangeable for cash, shares of stock of any other class or any other
series, indebtedness, or other property or rights, including securities of
another corporation, and, if so, the terms and conditions of such conversion or
exchange, including the rate or rates of conversion or exchange, and whether
such rate shall be a designated amount or an amount determined in accordance
with a designated formula or by reference to extrinsic data or events, the date
or dates upon or after which they shall be convertible or exchangeable, the
duration for which they shall be convertible or exchangeable, the event or
events upon or after which they shall be convertible or exchangeable, and
whether they shall be convertible or exchangeable at the option of the
corporation, the shareholder or another person, and the method (if any) of
adjusting the rate of conversion or exchange in the event of a stock split,
stock dividend, combination of shares or similar event;
(h) Whether the issuance of any additional shares of such
series, or of any shares of any other series, shall be subject to restrictions
as to issuance, or as to the powers, preferences or rights of any such other
series; and
(i) Any other preferences, privileges and powers and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of such series, as the Board of Directors may deem advisable and
as shall not be inconsistent with the provisions of this Article FOURTH and to
the full extent now or hereafter permitted by the laws of the State of New York.
Section B. Common Stock.
(1) After the requirement with respect to preferential dividends,
if any, on any series of Preferred Stock (fixed pursuant to Paragraph (2)(b) of
Section A, this Article FOURTH) shall have been met, and after the corporation
shall have complied with all requirements, if any,
<PAGE> 13
with respect to the setting aside of sums in a sinking fund for the
purchase or redemption of shares of any series of Preferred Stock
(fixed pursuant to Paragraph (2)(e) of Section A, this Article
FOURTH), then, and not otherwise, the holders of Common Stock shall
receive, to the extent permitted by law and to the extent the Board of
Directors shall determine, such dividends as may be declared from time
to time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any (fixed pursuant to Paragraph (2)(f) of Section A, this Article
FOURTH), to be distributed to the holders of any series of Preferred
Stock, in the event of the voluntary or involuntary dissolution or
liquidation of the corporation, the holders of Common Stock (and the
holders of Preferred Stock, if and to the extent provided pursuant to
Paragraph (2)(f) of Section A, this Article FOURTH) shall be entitled
to receive the net assets of the corporation of whatever kind
available for distribution.
(3) Except as may be otherwise required by law or by this
Certificate of Incorporation, each holder of Common Stock shall have
one vote in respect of each share of such stock held by such holder on
all matters voted upon by the shareholders."
(4) This amendment to the Corporation's Certificate of Incorporation was
authorized, pursuant to Section 803(a) of the Business Corporation Law, by vote
of the Board of Directors of the Corporation, followed by vote of the holders of
at least a majority of all outstanding shares of the Corporation entitled to
vote thereon at a meeting of shareholders.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 11th day of
August, 1995.
Joseph W. Stucki
-------------------------------
Joseph W. Stucki, President
Richard Purcell
-------------------------------
Richard Purcell, Secretary
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
1. AHC Clinic Management, L.L.C., a Texas limited liability company.
2. Nationwide Sports & Injury, Inc., a Texas corporation.
3. Total Medical Diagnostics, Inc., a Delaware corporation.
4. American HealthChoice, Inc., a Texas corporation.
5. AHC Physicians' Corporation, a Texas corporation.
6. Valley Family Health Center, L.L.C., a Texas limited liability company.
7. AHI Management, Inc., a Texas corporation.
8. AHC Physicians Corporation, Inc., a Georgia corporation.
9. AHC Chiropractic Clinics, Inc., a Texas corporation.
10. United Chiropractic Clinic Uptown, Inc., a Louisiana corporation.
11. New Orleans East Chiropractic Clinic, Inc., a Louisiana corporation.
12. United HealthCare Group P.C., Inc. a Texas corporation.
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated January 9, 1996 included herein, and
to the reference to our Firm under the heading "Experts" in the Prospectus and
the Registration Statement on Form SB-2.
/s/ Hein + Associates LLP
- -------------------------
Hein + Associates LLP
Certified Public Accountants
Houston, Texas
July 31, 1996
