U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-26740
AMERICAN HEALTHCHOICE, INC.
(Exact name of small business issuer as specified in its charter)
New York 11-2931252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 W. Walnut Hill Lane, Suite 275, Irving, TX 75038
(Address of principal executive offices) (Zip Code)
(972) 751-1900
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of December 31, 1999, there were outstanding 28,144,259 shares
of the issuer's Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
<PAGE>
AMERICAN HEALTHCHOICE, INC.
INDEX TO FORM 10-QSB
For the Quarter Ended December 31, 1999
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet ..................... 2
Consolidated Statement of Operations ........... 3
Consolidated Statement of Cash Flows ........... 4
Notes to Consolidated Financial Statements ..... 5
Item 2. Management's Discussion and Analysis or
Plan of Operation ............................. 6
Part II Other Information
Item 1. Legal Proceedings........................ 7
Item 2. Changes in Securities and Use of Proceeds 7
Item 3. Defaults upon Senior Securities.......... 7
Item 4. Submission of Matters to a Vote of Security
Holders ....................................... 8
Item 5. Other Information........................ 8
Item 6. Exhibits and Reports on Form 8-K......... 8
Signatures_ ......................................... 8
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1999
ASSETS
<S> <C>
Current Assets:
Cash $ 24,400
Accounts receivable, less allowance for doubtful
accounts of $7,119,266 5,201,330
Advances and notes receivable 199,524
Other current assets 47,965
---------
Total current assets 5,473,219
Property and equipment, net 746,387
Other assets 19,345
---------
Total assets $ 6,238,951
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of notes payable $ 437,715
Current portion of capital lease obligations 141,067
Accrued payroll and payroll taxes 382,437
Accounts payable and accrued expenses 1,363,156
---------
Total current liabilities 2,324,375
Convertible debentures 3,385,000
Capital lease obligations, less current portion 160,510
---------
Total liabilities 5,869,885
Commitments
Stockholders' Equity:
Preferred stock, $.001 par value; 5,000,000 shares
authorized; none issued -
Common stock, $.001 par value; 115,000,000 shares
authorized 28,144,259 shares issued and outstanding 28,144
Options to acquire common stock 200,104
Additional paid-in capital 13,363,290
Accumulated deficit (13,222,472)
---------
Total stockholders' equity 369,066
---------
Total liabilities and stockholders' equity $ 6,238,951
=========
See accompanying notes to these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31,
1998 1999
---------- ----------
<S> <C> <C>
Net Patient Revenues $ 1,531,047 $ 1,014,685
Operating Expenses:
Compensation and benefits 1,201,065 641,138
Depreciation and amortization 55,772 24,000
General and administrative 408,638 254,085
Rent expense 156,256 78,900
---------- ----------
Total operating expenses 1,821,731 998,123
Other Income (Expense):
Gain on disposition of clinic - 29,000
Interest expense and other costs
of borrowing (14,513) (18,012)
Other income 3,231 -
---------- ----------
Total other income (expenses) (11,282) 10,988
---------- ----------
Net Income (Loss) $ (301,966) $ 27,550
========== ==========
Basic and Diluted Net Income
(Loss) Per Share $ (0.02) $ -
Weighted Average Common Shares Outstanding 14,519,632 28,144,259
See accompanying notes to these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended December 31,
1998 1999
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (301,966) $ 27,550
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Allowance for doubtful accounts 675,480 386,600
Gain on disposition of Conyers clinic assets - (29,000)
Depreciation and amortization 55,772 24,000
Change in operating assets and liabilities, net:
Accounts receivable-trade (686,500) (517,450)
Other current assets (16,315) (3,000)
Accounts payable and accrued expenses (37,060) 106,503
--------- ---------
Net cash used in operating activities (310,589) (4,797)
Cash Flows From Investing Activities:
Advances and notes receivable, net 27,318 -
Property and equipment, net (965) (5,000)
Deposit received on sale of assets 150,000 -
--------- ---------
Net cash provided by (used in) investing 176,353 (5,000)
Cash Flows From Financing Activities:
Proceeds from notes payable 25,000 25,000
Payments on notes payable and capital leases (36,023) (19,665)
--------- ---------
Net cash provided by (used in) financing (11,023) 5,335
--------- ---------
Net Decrease in Cash (145,259) (4,462)
Cash At Beginning Of Year 169,895 28,862
--------- ---------
Cash At End Of Period $ 24,636 $ 24,400
========= =========
Supplemental Disclosure Of Cash Flow
Income taxes paid $ - $ -
Interest paid 14,500 -
Supplemental Disclosure Of Non-Cash
Offset notes payable against accounts - 294,034
See accompanying notes to these consolidated financial statements.
</TABLE>
<PAGE>
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 eleven clinics providing medical, physical
therapy, and chiropractic services in San Antonio, McAllen, and
Houston, Texas, and New Orleans, Louisiana. 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.
2. Basis of Presentation
The accompanying unaudited interim consolidated financial statements of
the Company have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information in
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to these rules and regulations. The
accompanying unaudited interim consolidated financial statements
reflect all adjustments which the Company considers necessary for a
fair presentation of the results of operations for the interim periods
covered and for the financial condition of the Company at the date of
the interim balance sheet. All such adjustments (except as otherwise
disclosed herein) are of a normal recurring nature.
The results of operations for the three months ended December 31, 1999
are not necessarily indicative of the results to be expected for the
full year. It is suggested that the December 31, 1999 financial
information be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-KSB dated September 30,
1999.
3. Summary of Significant Accounting Policies
Consolidation policy - The accompanying condensed consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All material inter-company 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
patient insurance settlements, claims filed on major medical policies,
worker's compensation policies, Medicare, and 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 charge-off
experience and other factors deemed pertinent by management.
<PAGE>
Property and equipment, net - Property and equipment are stated at cost
less accumulated depreciation. Depreciation is provided over the
estimated useful lives of the related assets, primarily using the
straight-line method. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful lives of the
improvements.
Earnings per share - Basic earnings per share are computed using the
weighted-average number of common shares outstanding. Diluted earnings
per share are computed using the weighted-average common shares
outstanding after giving effect to potential common stock from stock
options based on the treasury stock method, plus other potentially
dilutive securities outstanding. If the result of assumed conversions
is dilutive, net earnings are adjusted for the interest expense on the
convertible debt, while the average shares of common stock outstanding
are increased.
4. Reorganization
On October 19, 1999, American HealthChoice, Inc., the parent company,
and AHC Physicians Corporation, Inc., a subsidiary that owns the
Georgia clinics, filed Chapter 11 Bankruptcy Petitions with the United
States Bankruptcy Court, Northern District of Texas, Dallas Division
(Case No. 99-37314). The Company elected to file the petitions for two
primary reasons. First, it was unable to restructure terms of the
September 1997 and August 1998 Debenture Agreements, which would have
allowed for new funding to acquire profitable clinics. Second, in
early October 1999, the Company received an adverse ruling on a
lawsuit. On December 6, 1999, the Bankruptcy Court granted the Company
authority to continue operating under a cash collateral budget through
February 29, 2000. The Company forecasts positive cash flow for the
approved budget period including sufficient cash to pay professional
fees approved by the Bankruptcy Court. The Company intends to file a
Plan of Reorganization and Disclosure Statement on February 15, 2000.
5. Disposition of Clinic
On December 3, 1999 an order was entered by the Bankruptcy Court to
return the Conyers Georgia clinic to the previous owner in settlement
of a lawsuit. In compliance with the order, the Company recorded an
asset writeoff of accounts receivable and equipment of $130,000, and
un-amortized goodwill of $130,000. In return, the previous owner
agreed to cancellation of a note payable in the amount of $291,000. As
a result, the Company recognized a gain on disposition of $29,000.
6. Subsequent Events
On February 4, 2000, the Bankruptcy Court approved the sale of the
McDonough Georgia clinic assets, excluding accounts receivable, for
$67,500 as of January 31, 2000. The sales price approximates the book
value of the clinic equipment.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and Notes thereto, and is
qualified in its entirety by the foregoing and by other more detailed
financial information appearing elsewhere.
Three Months Ended December 31, 1999 Compared to Three Months Ended
December 31, 1998
Net Patient Revenues. For the three months ended December 31,
1999, net patient revenues decreased from $1,531,000 for the same
period in 1998 to $1,015,000 in 1999. Approximately $424,000 of the
decrease was attributable to net patient revenue for the Norcross
clinic in the 1998 period, which was sold as of December 31, 1998.
Compensation and Benefits. For the three months ended December
31, 1999, compensation and benefits decreased from $1,201,000 in 1998
to $641,000 in 1999. Approximately $400,000 of the decrease was
attributable to compensation and benefits for the Norcross clinic in
the 1998 period. The remainder of the decrease was due to fewer clinic
employees and salary reductions taken by clinic physicians and
executive officers in 1999.
General and Administrative. For the three months ended December
31, 1999, general and administrative decreased from $409,000 for fiscal
year 1998 to $254,000 in 1999. Approximately $125,000 of the decrease
was attributable to general and administrative expenses for the
Norcross clinic in the 1998 period. The remainder is due to overall
reductions at the clinics and corporate office.
Rent. For the three months ended December 31, 1999, rent
decreased $77,000 from $156,000 in 1998 to $79,000 in 1999. The
decrease was primarily due to rent for the Norcross clinic in the 1998
period.
Through the closure of unprofitable clinics and an overall reduction in
operating expenses, the Company has achieved profitability for the
three months ended December 31, 1999 compared to a loss of $300,000 for
the three months ended December 31, 1998.
Liquidity and Capital Resources
For the three months ended December 31, 1999, net cash used in
operating activities was $5,000 compared to $311,000 for the three
months ended December 31, 1998. The decrease of $306,000 is primarily
attributable to net income of $27,000 in 1999 compared to a $300,000
loss in the 1998 period.
<PAGE>
During the last six months of fiscal year 1999, the Company was able to
reduce its monthly cash loss to approximately $40,000 and had
identified profitable acquisitions, which would have been funded by an
equity infusion. However, the Company was unable to restructure terms
of the September 1997 and August 1998 debenture agreements, which would
have allowed for new funding under terms satisfactory to the Company
and the prospective seller. Also, in early October 1999, the Company
received an adverse ruling on a lawsuit. As a result of these two
events, the Board of Directors elected on October 19,1999 to file
individual voluntary bankruptcy petitions under Chapter 11 of the
United States Bankruptcy Code for American HealthChoice, Inc., the
parent company, and its subsidiary, AHC Physicians Corporation Inc.,
the owner of the Georgia medical clinics. The Company has prepared a
Disclosure Statement and Plan of Reorganization, which it intends to
file on February 15, 2000.
Since the bankruptcy petition filing on October 19, 1999, the Company
has been operating under a cash receipts and disbursement budget
approved by the Bankruptcy Court. Cash receipts from collections of
accounts receivable should be sufficient to satisfy all obligations
incurred since the filing date.
Forward-Looking Information
This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company's
management as well as assumptions made by and information currently
available to the Company's management. When used in the report, words
such as "anticipate," "believe," "estimate," "expect," "intend,"
"should," and similar expressions, as they relate to the Company or its
management, identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events
and are subject to certain risks, uncertainties, and assumptions
relating to the operations, results of operations, liquidity, and
growth strategy of the Company, including competitive factors and
pricing pressures, changes in legal and regulatory requirements,
interest rate fluctuations, and general economic conditions, as well as
other factors described in this report. Should one or more of the
risks materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described
herein as anticipated, believed, estimated, expected, or intended.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 19, 1999, American HealthChoice, Inc., the parent company,
and AHC Physicians Corporation, Inc., a subsidiary that owns the
Georgia clinics, filed Chapter 11 Bankruptcy Petitions with the United
States Bankruptcy Court, Northern District of Texas, Dallas Division
(Case No. 99-37314).
The Company was served a complaint on December 7, 1999 alleging
unspecified damages arising from an alleged contract breach concerning
the purchase of the McAllen Texas clinic in 1996. Since all causes of
action arose before October 19, 1999 bankruptcy filing, the Company
will assert the automatic stay provision of the Bankruptcy Code. The
case is filed in the 16th District Court, of Denton County, Texas.
Any further actions in the legal proceedings disclosed in the 1999
Form 10-KSB filed January 13, 2000, have been stayed by the Chapter 11
Bankruptcy Petition filed by the Company on October 19, 1999.
<PAGE>
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults upon Senior Securities
The Chapter 11 Bankruptcy Petitions have created technical defaults
under various notes and other obligations.
Item 4. Submission of matters to a vote of security holders
None to report
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27- Financial data schedule
(b) On November 5 1999, a Form 8-K Report was filed regarding the
Chapter 11 Bankruptcy Filing on October 19, 1999.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN HEALTHCHOICE, INC.
Date: February 14, 2000 By: /s/ Dr. J.W. Stucki
Dr. J.W. Stucki, Chief Executive
Officer and President
Date: February 14, 2000 By: /s/John C. Stuecheli
John C. Stuecheli, Chief Financial
Officer and Vice President - Finance
(Principal Financial and Accounting
Officer) American HealthChoice, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 24,400
<SECURITIES> 0
<RECEIVABLES> 12,320,596
<ALLOWANCES> 7,119,266
<INVENTORY> 0
<CURRENT-ASSETS> 5,473,219
<PP&E> 746,387<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,238,951
<CURRENT-LIABILITIES> 2,324,375
<BONDS> 0
0
0
<COMMON> 28,144
<OTHER-SE> 340,922
<TOTAL-LIABILITY-AND-EQUITY> 6,238,951
<SALES> 1,014,685
<TOTAL-REVENUES> 1,014,685
<CGS> 0
<TOTAL-COSTS> 998,123
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,012
<INCOME-PRETAX> 27,550
<INCOME-TAX> 0
<INCOME-CONTINUING> 27,550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,550
<EPS-BASIC> .00
<EPS-DILUTED> .00
<FN>
<F1>Property and equipment, net
</FN>
</TABLE>
