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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
(AMENDMENT NO. 4)
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
MEDICAL ASSET MANAGEMENT, INC.
A Delaware Corporation EIN: 33--0359976
4447 E. Broadway, Suite 102
Mesa, Arizona 85206
Telephone: 602-830-7414
Securities to be registered under Section 12(g) of the Act:
Common Shares
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
The Company was incorporated in Delaware on January 23, 1986 as Eagle High
Enterprises, Inc. While under the control of others a blind pool offering was
made and certain business arrangements were undertaken. In June of 1994 the
Company entered into a stock exchange agreement with the shareholders of Medical
Asset Management, Inc., a Delaware corporation incorporated on May 12, 1989.
Pursuant to that agreement a reverse merger took place that included a change
of control in which the shareholders of Medical Asset Management, Inc. became
the controlling shareholders of Eagle High Enterprises, Inc. Thereafter the name
of Eagle High Enterprises, Inc. was changed to Medical Asset Management, Inc.
The assets and liabilities of the original Medical Asset Management, Inc. were
merged into the Company. The "Company" refers to the corporation incorporated on
January 23, 1986 and the "predecessor" refers to Medical Asset Management, Inc.
incorporated on May 12, 1989, which corporation no longer exists. The
predecessor was engaged in business from 1991 until it was merged into the
Company on May 2, 1995. Following the change of control and merger of the
predecessor and the Company the business of the predecessor was conducted by the
Company. For accounting purposes the former Medical Asset Management, Inc. is
considered to be the acquiror and the former Eagle High Enterprises, Inc. is
considered to be the acquiree. The change in control and reverse merger was
treated as a pooling of interests for accounting purposes.
Due to changes in health care delivery systems the management of a medical
practice has become a complex and time consuming enterprise. The Company
provides management expertise, liquidity for the value of the medical practice
and a transition strategy for a mature medical practice. Liquidity is provided
in the sense that a portion of the assets are represented by stock in a public
company rather than medical assets that would have a limited market.
The Company assists physicians by providing professional business
management services to assist in increasing the value of the medical practice
subject to the physician's control of the delivery of medical services. In
addition the Company provides a method for a practicing physician to approach
retirement keeping the value of his practice as a going concern to the greatest
extent possible. The Company through its management services assists physicians
with maximizing financial values of medical practices and clinics. The level of
direct management involvement depends on the particular needs of the contracting
physician.
Under long term management contracts the Company is responsible for the
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administration and management of the non-medical aspects of the physician's
practice, including billings and collections. The Company pays the physician a
contractually stipulated percentage of net billings as an independent
contractor. The Company pays the operational expenses of the practice itself.
The Company has the right to receive a management fee that ranges between 10% to
30% of net billings. During the first year of the agreement, at the election of
the physician, the transaction can be reversed with only the loss of the
management and accounting fees paid by the physician to the Company during this
time. During the next three years the physician may terminate the management
agreement with the Company with partial loss of benefits. After four years
termination will result in further restrictions, such as a covenant not to
compete with the location of the practice.
The Company is totally dependent on the operation of the managed medical
clinics with respect to earning and collecting its management fees. The majority
of the income received from the practices relates to the collection of
receivables for medical services on an ongoing basis. The payors of these
receivables range from private insurance, government programs and claims
dependent on litigation such as worker's compensation and liens for treatment
for auto accidents. The Company does not anticipate any unusual collection
problems with any of its accounts that would have a materially adverse impact on
the operation of the medical practices or collection of the medical receivables.
Neither the Company or its predecessor has undergone any bankruptcy,
receivership or similar proceeding. The only material reorganization was in
connection with the change of control of the Company in June of 1994 as
described above.
There are numerous competitors in the medical management field. Competition
is expected to increase. The Company is aware of other public companies which
engage in physician practice management. Other health care companies may enter
the field in the future. Many of these companies have greater capital,
management resources and experience than the Company. The Company believes it is
competitive with other management companies of comparable size. The Company
believes it is at a disadvantage in competing with management companies of
larger size as those companies possess greater financial resources with which to
assist their clients. The Company allocates certain of its resources to finding
and securing new clients for which management services may be provided.
The Company provides its management services to physicians by means of long
term management contracts (typically twenty-five years) which may include
purchase of accounts receivable and assets relating to the medical practice. The
Company does not furnish any medical services. Medical services are furnished
entirely by the physicians under management. The Company supervises the billing
and collection of the medical receivables generated by the managed clinics.
Persons involved in billing and collection
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of accounts become employees of the Company and are under the direct supervision
of the Company. The agreement provides that the physician is paid a negotiated
percentage of collections for his services. The medical income is collected by
the Company and from that amount it pays the physician his share of the income
as a consulting fee. The administrative expenses, costs of billing and
collection become a part of the overhead expense.
The Company charges a minimum management fee of which 5% must be paid in
cash. The accounts for the practice are reviewed quarterly and if necessary the
consulting fee to the physician is reduced by an amount to provide the payment
of the minimum management fee to the Company. If there is insufficient cash to
pay the management fee the difference between what has been paid and what is due
is charged to management fees receivable. The Company has title to all medical
receivables generated by the managed medical practice to permit control of cash
flow and payment of obligations as agreed under the management contract. The
Company has no control over the type or quality of such medical services. The
practice of medicine is regulated on many levels. State, federal and local
agencies all supervise the providing of medical services. These regulators
affect the operations of the Company and its physicians under contract.
The Company relies on a small number of physicians or group of physicians
to provide services. As the number of managed practices grows the Company will
be less dependent on any particular practice or clinic. The Company intends to
provide management services to medical practices located in the United States.
As of June 30, 1996 the Company provided management services in Alaska, San
Jose, CA Los Angeles, CA, Denver, CO, Stockton, CA, Seattle, CA, Memphis TN,
Pittsburgh, PA, Tucson, AZ and Ft. Meyers, FL..Management services are also
provided in Ohio and West Virginia through HPM, the Company's wholly owned
subsidiary. In the future consideration may be given to providing services to
overseas clients. The Company is dependent on its long term management contracts
for the majority of its income. These contracts normally have a twenty-five year
term. The Company is unaware of any federal of state requirement requiring
licensing of the business of the Company. The managed physicians must at all
times comply with applicable laws relating to the providing of medical services.
Reductions in the federal budget may adversely affect the business of the
Company in the future. The extent to which this may occur is difficult to
predict.
The Company does not engage in research and development. The Company does
not need to comply with environmental laws as it is only engaged in providing
management services. In the future the Company may be required to comply with
environmental laws in connection with the acquisition of real estate related to
managed medical practices.
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In December of 1995 the Company acquired Healthcare Professional
Management, Inc. (HPM) of Pittsburgh, PA. HPM became a wholly owned subsidiary
of the Company by way of acquiring all of the stock of HPM from its
shareholders. HPM provides management, billing and collections services to
physicians located in Pittsburgh, PA, West Virginia and Ohio. The acquisition of
that subsidiary was accounted for a pooling of interests basis.
The Company presently employs about 75 full and part time employees. It
manages approximately thirty medical practices that have about fifty physicians
associated with them.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
RESULTS OF OPERATIONS
Over the past three years, the Company has experienced the following
changes in the key indicators of its general financial condition:
Selected Financial Indicators 1994 to 1995 1993 to 1994
Revenue 13,076,078 3,783,608
Other Income (Expense) (288,777) 147,390
Taxes on Income 540,000 227,800
Net Income 883,113 380,213
Net Income Per Share .09 .04
Total Assets 7,288,338 9,798,827
Total Liabilities 4,554,735 3,860,661
Shareholder Equity 5,938,166 2,733,603
The increase in Revenue, Assets and Shareholder Equity from 1993 to 1995
was the result of acquiring additional medical related assets and executing
management agreements with new medical groups or physicians. The decrease in
Other Income and (Expense) was due chiefly to the interest on the Convertible
Debenture Offering that was offered in mid 1995. The Increase in Taxes on Income
was due to increased income.
INCREASE (DECREASE) FROM: 1994 TO 1995 1993 TO 1994
Revenue 245% 29%
Net Income 132% 39%
Net Income Per Share 125% 33%
Total Assets 34% 44%
Total Liabilities (15%) 45%
Shareholder Equity 117% 41%
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There has been an improvement in all categories of the financial condition
of the Company during the last three years as the Company has continued to
implement its business plan of medical practice asset acquisitions and executing
additional management agreements. In December of 1995 the Company acquired
Healthcare Professional Management, Inc. (HPM) of Pittsburgh, PA. This Company
became a wholly owned subsidiary of the Company by way of acquiring all of the
stock of HPM from its shareholders. HPM provides management, billing and
collections services to physicians located in Pittsburgh, PA, West Virginia and
Ohio. The acquisition of that subsidiary was accounted for a pooling of
interests basis.
Company growth during this period was financed through the sale of
approximately $ 762,000.00 of convertible subordinated debentures, and
$ 979,214.00 raised through private placements of equity, and the
conversion of certain debt to equity. Growing revenues and bank credit
also contributed financial fuel in these periods.
An analysis of the changes to specific indicators of the financial
condition of the Company follows:
ASSETS:
Cash Cash increased by 161% from 1994 to 1995 primarily
as a result of the fund raising activity and
revenue growth referenced above. This compares to
a reduction of cash by 49% between 1993 and 1994.
In 1995, the Company continued to invest in
revenue growth as evidenced by the increased
investment in accounts receivable and fixed
assets. As the current trend of rapid expansion
continues, the Company expects to use cash,
together with equity shares, to acquire revenue
generating business.
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Accounts Receivable The overall growth in accounts receivable from
1994 to 1995 was 8.8%, compared to 73% in the
previous two-year comparison. The relatively slow
growth in receivables is attributable to three
major factors: First, the Company's ability to
accelerate collections through the consolidation
of billing and collection functions in certain
markets; second, a concerted effort by the billing
and collection departments to eliminate over
billing and subsequent write offs; and three, a
trend in certain markets toward "capitation" in
which services are paid for in advance thus
eliminating accounts receivable. Going forward,
the Company will take steps to reduce accounts
receivable to a 90 day turnover from the December
31, 1995 level of 145 days.
Management Fee The 295% increase in Company compensation
Receivable receivable from its managed practices shown
between 1994 to 1995 compares to a 26% increase
between 1993 and 1994. This reflects the overall
growth of the Company through acquisitions and the
enhancement of current revenue-generating assets.
EIGHTY-FIVE PERCENT (85%) OF THE INCREASE IS
ATTRIBUTABLE TO NEW BUSINESS; THE BALANCE OF
FIFTEEN PERCENT (15%) IS ATTRIBUTABLE TO INCREASES
IN EXISTING MANAGEMENT SITUATIONS. As new
management agreements are signed [practices are
acquired], the Company can generate higher levels
of compensation that generally will be collected
in the same twelve month period in which such fees
are earned. As long as the Company continues to
expand, management fees will grow.
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Other Assets The combined other assets of the Company consist
primarily of goodwill, franchise fees and property
plant and equipment. Goodwill is a function of the
issuance of common stock, at an independently
negotiated price, in exchange for the value of the
assets of a going concern medical practice and the
right to manage that practice and collect fees
over a 25 year period. This common stock is issued
over the first four years of the term of a
management agreement subject to certain
performance requirements on the part of the
practice. The Company expects to continue to use
its common stock to acquire medical assets, and
thus goodwill is likely to increase over time and
will be amortized over time. The franchise fee is
related to a series of Occu-Med franchises that
are being amortized over a twenty-five year
period. No additional franchise acquisition is
planned at this time.
LIABILITIES:
Accounts Payable The 10% increase from 1994 to 1995 was slower than
the 1993 to 1994 increase of 35%. Greater cash
availability allowed faster payment of suppliers,
and there was intentional centralization of
certain accounting functions. As the Company
continues to grow this category will increase.
Accrued Payroll Tax The overall reduction is a result of the repayment
of back taxes owed. On a going forward basis this
item will increase as a result of the growth in
the Company payroll resulting from additional
employees.
Income Taxes Reporting earnings on an accrual basis results in
Payable a large tax liability that will be due and payable
as the cash collected as a result of the accrued
income is received. Higher taxes are a function of
higher earnings.
Related Party Debt The increase of 10% from 1994 to 1995 reflects
amounts due as a result of interest accrual on
amounts owing to John Regan and Dennis Calvert,
officers and directors of the Company, resulting
from past advances or expense payment deferrals.
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Convertible During 1995 the Company issued $782,000.00 of 12%
Subordinated Series B Convertible Redeemable Secured
Debenture Subordinated Debentures. The terms of the
debentures and rights of conversion are noted in
the audited financial statements which are a part
of this report. With accrued interest, the total
due on the debentures at December 31, 1995 is
$808,095.00. The Company is not planning any
further debt offerings in the future.
Notes Payable A decrease of 68% from 1994 to 1995 is a result of
repayment of certain liabilities along with the
retirement of approximately $1,940,000.00 as a
result of reevaluation of the underlying
collateral agreements surrounding the obligation.
The reevaluation occurred due to renegotiations of
certain management agreements. The balance is due
on asset purchase agreements. These obligations
will be repaid through a temporary credit
facility, the raising of capital through an equity
offering or cash flow from operations.
INCOME STATEMENT:
Management Fees The increase of 245% from 1994 to 1995 compares to
29% in the 1993-1994 comparison. the growth is a
result of the continued expansion through
acquisition of revenue generating assets and the
success of the Company's business plan.
Operating Expenses The increase from 1994 to 1995 of 24% compares to
an increase of 25% between 1993 and 1994. The
growth in expenses reflects the overall revenue
growth of the Company and increasing demands of
management travel and professional services. There
will always be a close relationship between
expenses and revenues until such time as
management relationships mature and consolidate,
when the overall expense increases will slow in
relation to revenue growth. Within the specific
expense categories the increases from 1994 to 1995
were as follows:
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Salaries up 71%
Consulting Fees up 767%
Operating Expenses up 288%
Salaries increase at a lower rate than overall expense as a
result of the ability of the corporate staff to handle additional
volume of management arrangements.
Consulting fees represent the compensation paid to the physicians
for the services rendered to the practices managed by the
Company. On a going forward basis this expense should represent
approximately 29% to 35% of the operating revenue. As the
management arrangements mature, the relative impact of this cost
should decrease.
Operating expenses continued to increase at a rate management
believes to be consistent with revenue growth. As the Company is
able to regionalize its management operations to achieve
economies of scale, this expense category could decrease as a
percentage of revenue.
MANAGEMENT OF GROWTH
In December 1995 the Company acquired a management company, Healthcare
Professional Management (HPM), located in Pittsburgh, Pennsylvania. The Company
acquired HPM through a tax free stock exchange. HPM is involved in all phases of
practice management and health care consulting, and is expected to take a
prominent role in the general operation of the Company. Revenues from HPM's
current clients are in the $1,000,000.00 to $1,500,000.00 range annually with an
expected net to the Company in the range of $50,000.00 to $75,000.00 per year.
The acquisition of HPM allowed the Company to consolidate operations and create
a presence in the Eastern United States. In this regard, the benefits of the HPM
acquisition exceed its revenue contribution.
In December of 1995 the Company acquired assets from and signed a
management agreement with a Denver based medical practice, OBGYN Associates
(OBGYN). The materiality of this transaction is [in] the size of OBGYN. On
an annual basis OBGYN's revenues are approximately $5.2 million. As of
December 31, 1995 OBGYN represented approximately 20% of the Company's
annualized revenue.
The Company's ongoing transition from a small regional operating company to
a national medical practice management company, with a growing number of
practices owned and managed in diverse parts of the country places a growing
strain on the Company's management and financial resources. The Company's
decision to acquire other management companies as well raises challenges to
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effectively integrate these separate management companies into a single
management delivery system. Differing historical management styles and systems
must be integrated, while at the same time the Company continues to seek out
additional management opportunities throughout the country. There is no
assurance that the Company will be able to successfully manage and finance its
transition to a large national public company. Its failure to do so would have a
materially adverse impact on the Company's business and results of operations.
RELIANCE ON KEY PERSONNEL: NEED FOR EXPANDED MANAGEMENT
The Company is currently dependent on a small group of highly skilled and
hard-working managers to plan, implement and control the Company's current and
expected growth. Were the Company to lose the services of John Regan, its
President, or of Dennis Calvert, its Senior Vice President, the Company would be
seriously delayed and adversely affected in the implementation of its business
plan. The Company is also engaged in a nationwide search for additional
experienced financial and business managers to share the management load and to
make possible the planned expansion of the Company. There is no assurance as to
the timing or availability of the needed talent.
COMPETITION AND DYNAMIC INDUSTRY
The business of the Company is generally referred to as Physician Practice
Management. A number of other companies are already active in this field, most
of which are larger than the Company. Other firms appear to be in the process of
becoming involved, or have announced plans to do so. Competition in the
acquisition and consolidation of the medical services delivery system in the
United Sates is, and is expected to remain, intense.
Competitors range from new, start-up entries in the field to major
well-financed competitors who are either hospital-based regional or national
companies, or practice and clinic acquisition-based regional and national
companies. Many of these companies have greater depth of financial and
management capability than does the Company. Most of the larger competitors
focus on the acquisition of larger group practices. Management has determined
that the Company's acquisition format is best suited to a niche in the market
place consisting of a multi-specialty grouping based upon primary care
physicians, but with emphasis on the management of smaller practices not already
associated with larger groups. Management believes this particular area of the
industry is still relatively free of competition; however, no assurance can be
given that such circumstances will continue. If larger companies presently
engaged in the field determine to move into the Company's area of the market, it
would be difficult for the Company to compete as effectively as it does now with
the more substantial financial and management resources of these firms.
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At present, the Company's most significant competition comes from hospitals
seeking to acquire or contract with practices which otherwise would be viable
candidates for management by the Company. In addition, management has found that
in some markets physicians seek to organize themselves into groups resembling
HMO's, thereby providing themselves with an alternative to affiliation with the
Company or one of its competitors. Most of the smaller competitors focus on one
particular specialty, such as oncology. These groups could elect to expand into
more direct competition with the Company.
While the Company has been successful in pursuing its business plan over
the last several years, as measured by the growth in revenues and assets shown
in the financial statements, there is no assurance that larger competitors will
not adversely impact the Company's continued growth, or that changes in the
ongoing paradigm of what the American health care delivery system should look
like will not adversely impact the Company and its operations.
Under the management agreements executed to date three have been terminated
due to mutual agreement of the parties. It is possible that other existing
agreements may be terminated in the future. As the contracts are for twenty five
year terms the Company establishes a goodwill asset account where the excess of
purchase price over the book value of tangible assets is credited. The amounts
credited to goodwill are amortized over a twenty five year period as that is the
length of the term of the contract that gives rise to the goodwill account.
LIQUIDITY
At the end of the First Quarter of 1996 $ 86,814.00 was used by operations.
The major changes occurred in the acquisition of accounts receivable of $
867,518.00 during the first quarter accompanied by an increase in management
fees receivable of $ 180,622.00. Reductions of accrued liabilities of
$ 303,657.00 and loans payable of $ 209,783.00 were recorded in the first
quarter of 1996. Property, plant and equipment during the same period increased
$ 336,500.00 through cash and stock payments during the first quarter. The
Company issued stock to purchase assets during the first quarter in the amount
of $ 457,931.00. The Company plans to continue to acquire assets by the issuance
of stock and cash.
The cash on hand of the Company, combined with the expected additions to
cash from operations during 1996 is forecast to be sufficient to repay the
current portion of the Company's indebtedness and to finance the planned
expansion of the Company during the same time period. A private offering of
common stock which closed May 31, 1996 raised $ 8,000,000 in gross proceeds. The
expenses of the private placement were $ 835,000.00 leaving net proceeds of
$ 7,165,000.00. From the net proceeds the Company paid about $ 1,500,000.00 to
retire short term debt consisting of receivable loans and fixed asset
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purchase obligations. About $ 655,000.00 was used to reduce current liabilities
and provide operational capital. As of June 30, 1996 the Company had remaining
about $ 5,000,000.00 in cash.
The Company is exploring a larger public offering of its common stock in the
third or fourth quarter. Market conditions may or may not allow the raising of
this additional equity in 1996 at reasonable pricing and levels of funding. Were
the Company to be excluded from the market for additional equity funding during
1996, some cutbacks in the current business plan might be needed. The Company is
currently negotiating with Northern Trust Bank of Phoenix, Arizona for a
revolving line of credit of $ 2,500,000.00. The Company has no other bank lines
of credit.
ITEM 3. DESCRIPTION OF PROPERTY.
The principal assets of the Company consist of accounts receivable that
have been generated by the medical clinics managed by the Company. The Company
owns no real estate. The Company may acquire real estate in the future in
connection with managed medical practices. The Company's headquarters are in
leased facilities in Mesa, Arizona. The Company maintains offices in leased
facilities in Seattle, Washington and Pittsburgh, Pennsylvania to assist with
operations of medical practices located in those states.
The Company leases office facilities under operating leases which expire at
various dates through the year 2005. The accompanying financial statement of
operations includes expenses from operating leases of $ 908,961.00 for 1995.
Future minimum lease payments, due under noncancellable operating leases as of
December 31, 1995 are as follows:
1996 $ 931,600
1997 601,056
1998 601,056
1999 414,566
2000 383,352
2001 148,632
2002 148,632
2003 56,460
2004 56,460
2005 56,460
----------
Total $3,398,274
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At the present time these leased facilities are adequate for the needs of
the Company.
The Company finances various equipment purchases under capital lease
agreements. The leases require monthly payments over a sixty month period.
The following is an analysis of the book value of the leased assets
included in property and equipment.
1995 1994
------- -------
Cost $ 85,617 $ -
Accumulated depreciation (7,603) -
---------- -------
$78,014 $ -
The future minimum lease payments under capitalized leases and the present
value of the net minimum lease payments as of December 31, 1995 are as
follows:
1996 $ 29,224
1997 22,092
1998 22,092
1999 22,092
2000 24,314
--------
Total payments 119,814
Less amount representing
interest (30,977)
88,837
Less current portion of
capital leases (18,950)
--------
$ 69,887
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Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS.
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AS OF 12/31/95.(1)
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature Percent of Class
of Beneficial of Beneficial Owner
Owner
<S> <C> <C> <C>
Common Shares John Regan 5,145,094 54%
4447 E. Broadway
Suite 102
Mesa, AZ 85206
Dennis Calvert 1,184,096 12%
4447 E. Broadway
Suite 102
Mesa, AZ 85206
Total(1) 6,329,190 66%
</TABLE>
- ------
(1) This total includes all executive officers and directors as a group.
It does not include any options to convert to common stock as no options
are outstanding.
(B) SECURITY OWNERSHIP OF MANAGEMENT AS OF 12/31/95.(1)
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature Percent of Class
of Beneficial of Beneficial Owner
Owner
<S> <C> <C> <C>
Common Shares John Regan 5,145,094 54%
4447 E. Broadway
Suite 102
Mesa, AZ 85206
President, Director
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dennis Calvert 1,184,096 12%
4447 E. Broadway
Suite 102
Mesa, AZ 85206
Senior Vice President
Secretary, Director
Michael Zaic -0- 0%
4447 E. Broadway
Suite 102
Mesa, AZ 85206
Vice-President
Director
---------- ----
Total 6,329,190 66%
</TABLE>
- ------
(1) This total does not include any options to convert to common stock as no
options are outstanding.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Prior to its merger with Eagle High Enterprises, Inc. in June of 1994
the Company was engaged in business beginning with the acquisition of the
Carson Medical Plaza Clinic in 1991. The officers and directors of Medical
Asset Management, Inc. (the predecessor) prior to the merger with Eagle High
Enterprises, Inc. were John Regan, Dennis Calvert and Michael Zaic.
In June of 1994 the shareholders of Medical Asset Management, Inc.
exchanged all of their common shares for 6,960,000 common shares of Eagle
High Enterprises, Inc. in a reverse merger. The preferred shareholders of
Medical Asset Management, Inc. exchanged all of their preferred shares for
preferred shares of Eagle High Enterprises. After the reverse merger the
original corporation changed its name to Medical Asset Corporation and Eagle
High Enterprises, Inc. changed its name to Medical Asset Management, Inc.
After the exchange of stock the holdings of securities of the officers
and directors of the present Company were:
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Title of Class Name and Address Amount and Nature Percent of Class
of Beneficial of Beneficial Owner
Owner
Common Shares John Regan 5,145,094 54%
4447 E. Broadway
Suite 102
Mesa, AZ 85206
Dennis Calvert 1,184,096 12%
4447 E. Broadway
Suite 102
Mesa, AZ 85206
Michael Zaic 0 0%
4447 E. Broadway
Suite 102
Mesa, AZ 85206
---------- ----
Total (1) 6,329,190 66%
</TABLE>
(1) total of all executive officers and directors as a group.
The following are the Directors and Officers of the Company:
John Regan, age 47, is the President and a director of the Company. Mr.
Regan was the President and a director of the predecessor corporation (Medical
Asset Management, Inc.) since 1989. Mr. Regan was elected a director following
the change of control of Eagle High Enterprises, Inc. and change of name in June
of 1994. During the last five years Mr. Regan had been involved in the business
of providing management services to medical clinics through the Company and its
predecessor of the same name.
Dennis Calvert, age 33, is the Secretary and a director of the Company. Mr.
Calvert was the Treasurer and a director of the predecessor Medical Asset
Management, Inc. corporation since 1990. Mr. Calvert was elected a director
following the change of control of Eagle High Enterprises, Inc. and change of
name in June of 1994. During the last three years Mr. Calvert had been involved
in the business of providing management services to medical clinics through the
Company and Medical Asset its predecessor of the same name.
Michael Zaic, age 39, is the Vice President and a director of the Company.
Mr. Zaic was the Secretary and a director of the predecessor corporation of the
same name since 1994. Mr. Zaic was elected a director following the change of
control of Eagle High
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Enterprises, Inc. and change of name in June of 1994. During the last five years
Mr. Zaic had been involved in the business of providing management services to
medical clinics through the Company. Prior to being associated with the Company
Mr. Zaic was a manager with Merritt, Hawkins & Associates, a physician
recruitment firm.
None of the directors or officers are officers or directors of other
reporting companies. There are no family relationships between the officers and
directors. None of the officers and directors have been involved in any
significant legal proceedings in the last 5 years.
ITEM 6. EXECUTIVE COMPENSATION.
Name Year Salary Bonus Other
Position Compensation*
John Regan 1995 96,000 0 0
President
1994 96,000 0 0
1993 73,000 0 0
Dennis Calvert 1995 72,000 0 0
Vice President
1994 72,000 0 0
1993 48,000 0 0
Michael Zaic 1995 36,000 0 0
Vice President
1994 36,000 0 0
*Other compensation includes any long term compensation and all other
compensation.
The above officers also serve as directors of the Company. They receive no
additional compensation for acting as directors.
The above officers have employment agreements with the Company for three years
beginning January 1, 1995. These agreements provide for the employee to devote
100% of his time to the business of the Company. In addition to salary the
Company agrees to
17
<PAGE>
reimburse each employee for all authorized actual travel, promotion and
entertainment expenses incurred in connection with performance of duties. The
Employee is entitled to any Employer-paid benefits. At the present time the
Company is not offering any Employer-paid benefits. Employees are entitled to
sick leave and paid holidays as per the Company policy. If an Employee is
terminated through no cause or fault of his own he will receive the balance of
the then base salary due until through the ending date of the employment
agreement.
The base salary for each officer is:
John Regan, President, Chief Executive Officer
12 months ending December, 1995 $ 150,000.00
12 months ending December, 1996 200,000.00
12 months ending December, 1997 250,000.00
Dennis Calvert, Senior Vice-President, Secretary
12 months ending December, 1995 $ 112,500.00
12 months ending December, 1996 150,000.00
12 months ending December, 1997 187,500.00
Michael Zaic, Vice-President
12 months ending December, 1995 $ 56,250.00
12 months ending December, 1996 75,000.00
12 months ending December, 1997 93,750.00
Additional terms of employment are set forth in the respective employment
agreements which are attached to this Form as Exhibits under Part One.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Name Number of % of Total Exercise or Market Value Expiration
Securities Options/SARs Base Price When Date
Underlying Granted to ($/Sh) Granted
Options/SARs Employees in
Granted (#) Fiscal Year
<S> <C> <C> <C> <C> <C>
Michael Zaic(1) 150,000 100% $.001 $200,000.00 11/1/98
</TABLE>
- --------------------
(1) The Stock Option to Michael Zaic was canceled in March of 1996. No
options/SARs were outstanding as of June 30, 1996.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The officers and directors of the Company have from time to time deferred
their compensation or reimbursement of expenses. This has given rise to the item
shown as loans to shareholders in the financial statements. Other than this
matter there are no reportable transactions. At the end of 1995 there was
outstanding shareholder loans of $ 5,912.00 to Dennis Calvert and $ 177,449.00
to John Regan. As of June 30, 1996 there was a shareholder loan only to John
Regan payable in the amount of $121,810.00
18
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue 50,000,000 common shares and 10,000,000
preferred shares. The holders of common shares (i) have equal ratable rights to
dividends from funds legally available thereof, when, as and if declared by the
Board of Directors of the Company; (ii) are entitled to share ratably in all the
assets of the Company available for distribution to holders of common shares
upon liquidation, dissolution or winding up of the affairs of the Company; and
(iii) do not have pre-emptive or redemption provisions applicable thereto. All
common shares are fully paid and non-assessable with no personal liability to
the ownership thereof. The holders of common shares of the Company do not have
cumulative voting rights, which means that the holders of more than 50% of such
outstanding shares, voting for the election of directors, can elect all of the
directors of the Company if they so choose and, in such event, the holders of
the remaining shares will not be able to elect any of the Company's directors.
As of March 20, 1995 affiliates, officers and directors of the Company owned
about 66% of the then outstanding common shares of the Company.
The Company has designated one class of Preferred Stock entitled Class A
consisting of 5,000,000 shares. Three Million Class A Preferred Shares are
issued and outstanding. The characteristics of the Class A Preferred Shares are:
(1) the shares carry no voting rights; (2) the shares may be converted into
common shares on the basis of one share of Class A Preferred for one share of
common subject to the limitation that no more than twenty five percent (25%) may
be converted into common in any one calendar year and at no time may the holders
of the Class A Preferred Stock hold directly or indirectly more than 4.9% of the
common shares outstanding; (3) the shares carry no dividend rights except in
liquidation; and (4) the shares have no redemption rights. In any liquidation
the Class A Preferred Shares share ratably in any liquidating dividends with the
holders of common shares. To the extent that the Company was liquidated the
existence of issued and outstanding Class A Preferred Shares would decrease the
amount of liquidating dividends that the common shareholders would be entitled
to receive.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The Company's stock is not listed on any exchange and is traded over the
counter.
19
<PAGE>
The range of the bid prices of the common stock is as follows:
Quarter High Bid Low Bid
second /96 8.50 3.37
first /95 5.50 1.92
fourth /95 4.75 1.75
third /95 5.375 4.75
second /95 6.25 5.00
first /95 6.43 5.37
fourth /94 6.25 5.87
The above prices reflect inter-dealer prices, without retail mark-up, mark-down
or commissions and may not represent actual transactions. The above price
information was received from IDD Information Services/Tradeline.
There was no market activity prior to June of 1994.
There is no market for the Preferred Stock of the issuer and none is likely
to develop.
As of December 31, 1995 there were approximately 100 shareholders of
record. Additional shares are held in "street name" and the Company estimates
that the actual number of shareholders exceeds 200. There are less than 5
shareholders of record of Class A Preferred stock.
The Company has paid no dividends in the past on any class of stock. There
are no restrictions that limit the payment of future dividends on common stock.
No dividends are payable on the Class A Preferred Stock except in the event of
liquidation.
ITEM 2. LEGAL PROCEEDINGS.
The following is a brief description of legal proceedings pending:
1. Worker's compensation claim by Carl Cantrell. This case has been heard
before the California Worker's Compensation Appeals Board but no decision has
been rendered. Recent developments in the case indicate that the potential
liability will be around $ 75,000.00. Part of the liability will be borne by the
California State Compensation Insurance Fund. The actual allocation of damages
to the Company will be determined later. It appears $ 15,000.00 (20%) is the
current portion.
20
<PAGE>
2. Worker's compensation claim by Barbara Berryman. This case is pending
before the California Worker's Compensation Appeals Board. No trial date has
been set. The applicant was examined by an Agreed Medical Examiner. The
liability appears to be not more than $ 25,000.00. Part of the liability will be
borne by the California State Compensation Insurance Fund. It appears $ 5,000.00
(20%) is the current portion.
3. Norman Cohen v. MAM. The plaintiff alleges breach of contract and related
causes of action in three actions in courts in Washington, California and
Florida. The allegations are by a physician for payment of wages, interference
with business opportunity and related causes of action. No estimate of liability
can be made at this time.
4. MAM v. Peterson. Superior Court for El Dorado County, Calif. The Company
has received a cross-complaint in this case claiming damages of $ 20,000.00.
This involves an accounting between a medical practice and successor physician.
It appears there will be no liability in this case except attorney's fees. These
fees may be recovered from the defendant in the future.
5. Lifestyle Academy v. MAM. This is a breach of contract action filed in the
State of Washington and a related action in the State of California filed by a
shareholder of Lifestyle Academy. No estimate of liability can be made at this
time.
6. Onslow Limited and Johannesburg Management, Ltd. v. MAM. These off-shore
entities previously lent money to MAM. These entities have agreed to accept
shares of MAM common stock in full payment of the loan obligation and any other
claim. An agreement settling the matter is being drafted but has not yet been
signed.
7. Pico Rivera Hospital. In June of 1995 the Company entered into an agreement
to purchase a hospital in Pico Rivera, California subject to obtaining suitable
financing and clearance of title problems. The title problems could not be
resolved and suitable financing was not found. A claim has been asserted against
the Company for specific performance but no lawsuit has been filed. The Company
believes it has no liability in the matter.
None of the litigation set forth above is expected to have any significant
effect on the operations of the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
No response required.
21
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In June of 1994 Eagle High Enterprises, Inc. sold 6,960,000 of its common
shares for all issued and outstanding shares of Medical Asset Management, Inc.
in a reverse merger transaction. Thereafter the name of Eagle High Enterprises,
Inc. was changed to Medical Asset Management, Inc. and the name Medical Asset
Management, Inc. was changed to Medical Asset Corporation. This exchange of
stock was pursuant to an agreement between the fifteen shareholders of Medical
Asset Management, Inc. and Eagle High Enterprises, Inc. in connection with a
reverse merger and change of control of the Company in June of 1994. Prior to
the exchange John Regan owned 1,077,730 common shares of the predecessor
corporation (69%) and Dennis Calvert owned 256,100 common shares (16%). These
represented 85% of voting stock of the predecessor and 62% of the voting shares
of Eagle High Enterprises, Inc. following the reverse merger. The 6,960,000
shares were issued, pro-rata to the shareholders of the predecessor Medical
Asset Management, Inc. Prior to the reverse merger these shareholders owned
100% of voting stock of the predecessor. After the reverse merger these
shareholders owned 80% of the voting stock of Eagle High. These shares were
issued to the shareholders of the predecessor to the Company in reliance on the
exemption of Section 4(2) of the Securities Act of 1933.
In addition the Company sold for cash at the rate of $ 2.50 per share
21,400 shares of restricted common shares in private transactions to accredited
investors. The Company issued 366,478 restricted common shares to approximately
12 physicians for assets with a net book value of $ 370,432.00. The Company
issued 354,286 restricted shares pursuant to Regulation S to overseas investors
in cancellation of promissory notes of $ 550,000.00. With respect to other
private sales the Company claims exemption under Section 4(2) of the Securities
Act of 1933. No underwriter was used in connection with any of these
transactions.
During the first nine months of 1995 the Company sold $ 800,000.00 of
Convertible Redeemable Secured Subordinated Debentures, Series B, Due April 28,
2000 through Global Securities Corporation of Vancouver, B.C. Said Debentures
are convertible into common shares of the Company under certain terms and
conditions. The sale of said Debentures is limited to non-residents of the
United States. The Company has been advised that the sale of such securities is
not required to be registered under Regulation S.
During the third and fourth quarters of 1995 the Company sold common shares
to 8 accredited investors (as defined in Regulation D) pursuant to Regulation
504(b).
On May 31, 1996 the Company sold 2,000,000 shares of restricted common
stock to a group of 30 accredited investors for $ 8,000,000.00. The gross
proceeds less selling expenses will be used to reduce indebtedness and increase
working capital. Cruttenden Roth Incorporated of Irvine, California was the
selling agent. The total
22
<PAGE>
number of issued and outstanding shares of common stock prior to the private
placement as of May 30, 1996 was 11,343,132. These shares were issued in
reliance upon the exemption provided under Section 4(2) of the Securities Act of
1933. On August 1, 1996 the Company filed a Registration Statement under the
Securities Act of 1933 on Form SB-2 with respect to registration of said
2,000,000 shares. Said Registrations Statement is pending.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Articles of Incorporation the directors and officers of the
Company are indemnified from expenses, amounts paid on judgments, counsel fees
and amounts paid in settlement against them for any claim asserted against them
by reason of their having been an officer or director of the Company except in
matters in which the director or officer is adjudged liable for his own
negligence or misconduct in the performance of his duty.
Under Delaware law the officers and directors are entitled to be
indemnified by the Company for any claim arising out of their performing the
duties of their position except for matters in which the officers and directors
may be found to have been guilty of gross negligence.
PART F/S
Attached are audited financial statements for the Company as of 12/31/95
and unaudited financial statements for the Company as of 6/30/96.
23
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.,
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
----
Independent Auditor's Report ........................................... 3
Balance Sheets ......................................................... 4
Statements of Operations ............................................... 7
Statements of Changes in Stockholders' Equity .......................... 8
Statements of Cash Flows ............................................... 9
Notes to Financial Statements .......................................... 10
F-2
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Stockholders of
Medical Asset Management, Inc.
Mesa, Arizona
We have audited the consolidated balance sheets of Medical Asset Management,
Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
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 audits.
We conducted our audits 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 that our audits provide 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 Medical Assets Management,
Inc. as of December 31, 1995 and 1994, and the results of it's operations and
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ HARLAN & BOETTGER
May 1, 1996
F-3
<PAGE>
MEDICAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------
1995 1994
---------- ----------
ASSETS
CURRENT ASSETS:
Cash $ 131,873 $ 50,382
Accounts Receivable,
less $715,962 and $633,705
(Note C) of allowance for
doubtful accounts 5,213,803 4,797,809
Management Fee Receivable
(Note D) 913,828 231,570
Other Receivable 99,841 3,942
----------- ---------
TOTAL CURRENT ASSETS 6,359,345 5,083,703
PROPERTY AND EQUIPMENT, NET
(Note E) 528,409 435,418
INTANGIBLE ASSETS, NET (Note F) 2,895,231 1,761,084
OTHER ASSETS 15,842 8,133
----------- ---------
$ 9,798,827 $7,288,338
----------- ----------
----------- ----------
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
MEDICAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
December 31,
--------------------------
1995 1994
---------- ----------
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 308,555 $ 281,398
Accrued payroll taxes 105,553 146,509
Accrued expenses 10,266 -
Income taxes payable 966,888 426,888
Related party debt (Note G) 183,361 166,049
Current portion of noteS payable
(Note H) 1,047,676 1,090,000
Current portion of obligations
under capital leases 18,950 22,113
--------- ---------
TOTAL CURRENT LIABILITIES 2,641,249 2,132,957
--------- ---------
LONG TERM DEBT:
Notes Payable, less Current
Portion (Note H) 341,430 2,414,646
Obligations Under Capital
Leases, less Current Portion 69,887 7,132
Convertible Subordinated Debt
(Note I) 808,095 -
--------- ---------
TOTAL LONG-TERM DEBT 1,219,412 2,421,778
--------- ---------
TOTAL LIABILITIES 3,860,661 4,554,735
--------- ---------
STOCKHOLDERS' EQUITY
Preferred Stock - $.001 par
value - 10,000,000 shares
authorized;
Class A - 3,000,000 shares
issued and outstanding at
December 31, 1995, and 1994. 3,000 3,000
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
MEDICAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
December 31,
--------------------------
1995 1994
------ ------
Common Stock - $.001 par value-
50,000,000 shares authorized, 10,701,514
issued and outstanding at December 31,
1995- 9,521,210 issued and outstanding at
December 31, 1994 10,701 9,520
PAID IN CAPITAL 4,140,881 1,820,612
RETAINED EARNINGS 1,783,584 900,471
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 5,938,166 2,733,603
---------- ----------
$9,798,827 $7,288,338
---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
MEDICAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31,
-----------------------------------
1995 1994
---------- ----------
REVENUES:
Management fees $13,076,078 $3,783,608
------------ -----------
OPERATING EXPENSES:
Salaries - wages 2,647,528 1,548,263
Consulting fees 3,959,907 456,768
General and administrative 4,522,304 1,165,704
Amortization 86,400 86,436
Depreciation 148,049 65,814
------------ -----------
TOTAL OPERATING EXPENSES 11,364,188 3,322,985
------------ -----------
INCOME FROM OPERATIONS 1,711,890 460,623
OTHER INCOME (EXPENSE)
Miscellaneous income 2,880 169,630
Interest income - 3,000
Interest expense (291,657) (25,240)
------------ -----------
TOTAL OTHER INCOME (EXPENSE) (288,777) 147,390
------------ -----------
INCOME BEFORE TAXES ON INCOME 1,423,113 608,013
TAXES ON INCOME 540,000 227,800
------------ -----------
NET INCOME $ 883,113 $ 380,213
------------ -----------
------------ -----------
Earnings per share of Common Stock,
Common Stock Equivalents and Fully
Diluted $ .09 $ .04
------------ -----------
------------ -----------
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
MEDICAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------------ -------------------- Paid In Retained
Shares Amount Shares Amount Capital Earnings Total
-------- -------- -------- -------- --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 9,133,332 $ 9,133 3,000,000 $ 3,000 $1,397,067 $ 520,258 $1,871,494
---------- ---------- ---------- ---------- ---------- ---------- ----------
Sold shares of common stock 21,400 21 53,479 53,500
Issued shares of common stock
for acquisition of assets 366,478 366 370,066 370,432
Net Income 380,213 380,213
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1994 9,521,210 $ 9,520 3,000,000 $ 3,000 $1,820,612 $ 900,471 $2,733,603
---------- ---------- ---------- ---------- ---------- ---------- ----------
Sold shares of common stock 189,000 189 386,661 386,850
Issued shares of common stock
for acquisition of assets 510,135 511 1,220,036 1,220,547
Issued shares of common stock
for fixed assets 142,675 143 105,546 105,689
Issued shares of common
stock for debt 338,494 338 592,026 592,364
Capital contributed 16,000 16,000
Net income 883,113 883,113
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 10,701,514 $ 10,701 3,000,000 $ 3,000 $4,140,881 $1,783,584 $5,938,166
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
MEDICAL ASSET MANAGEMENT INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
-------------------------
1995 1994
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 883,113 $ 380,213
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 234,449 152,250
Changes in operating assets and liabilities:
Accounts receivable (421,994) (1,877,307)
Management receivable (682,258) (48,599)
Other receivables (95,899) 40,500
Other assets (7,709) -
Accounts payable 27,157 71,338
Accrued liabilities 509,310 120,340
---------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 446,169 (1,161,265)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (241,041) (7,969)
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES (241,041) (7,969)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances 982,211 1,567,980
Reduction of debt (1,497,940) (478,061)
Payments under capital lease obligations (10,758) (15,000)
Proceeds from capital contribution 16,000 -
Proceeds from issuances of common stock 386,850 53,500
---------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (123,637) 1,128,419
---------- -----------
NET INCREASE (DECREASE) IN CASH 81,491 (40,815)
CASH, BEGINNING OF YEAR 50,382 91,197
---------- -----------
CASH, END OF YEAR $ 131,873 $ 50,382
---------- -----------
---------- -----------
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION AND NATURE OF OPERATIONS
The consolidated financial statements include the accounts of Medical Asset
Management, Inc. (a Delaware corporation incorporated on January 23, 1986),
its wholly owned subsidiaries, Medical Asset Corporation, Inc., and
Healthcare Professional Management, Inc. (together "the Company"). All
significant intercompany transactions and amounts have been eliminated in
the consolidating process.
The Company and its subsidiary are engaged in the business of meeting the
several urgent needs of practicing physicians and exploiting emerging
opportunities in the practice of medicine through business management
services. Its management services involve the acquisition of assets of
medical practices, which it enhances by increasing patient collections and
lowering costs through its management and marketing expertise and volume
purchasing power.
BASIS OF ACCOUNTING
The Company's policy is to use the accrual method of accounting and to
prepare and present financial statements which conform to generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, and depreciated using the
straight-line method over the estimated useful lives of the assets, which
range from five to ten years. Assets under capital leases are depreciated
by the straight-line method over the shorter of the lease term or the
useful lives of the assets. Maintenance, repairs and minor renewals are
charged to operations as incurred. Major replacements or betterments are
capitalized. When properties are retired or otherwise disposed, the related
cost and accumulated depreciation are eliminated from the respective
accounts and any gain or loss on disposition is reflected as income or
expense.
F-10
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
ACQUIRED MANAGEMENT CONTRACTS
Amounts paid for the acquisition of management contracts in association
with newly-acquired medical clinics in excess of the fair value of the net
assets of such medical clinics have been charged to acquired management
contracts. The contracts are related to revenues the Company anticipates
realizing in future years. Based upon the Company's experience management
has decided to amortize its management contracts over a period of up to 25
years which is the term of the contracts, under the straight-line method.
Accumulated amortization at December 31, 1995 and 1994 was $177,533 and
$139,333, respectively. The Company's policy is to evaluate the periods of
amortization to determine whether later events and circumstances warrant
revised estimates of useful lives. The Company also evaluates whether the
carrying value of the contracts has become impaired by comparing the
carrying value of the management contract to the value of projected
undiscounted cash flows from acquired assets. Impairment is recognized if
the carrying value of the management contracts is less than the projected
undiscounted cash flow from acquired assets.
FRANCHISE FEES
Franchise fees are agreements with certain related parties. Franchise fees
are amortized using the straight-line method over 25 years.
REVENUE RECOGNITION
The Company recognizes revenue as services are provided by the Company over
the terms of the management contracts entered into.
NET INCOME PER SHARE
The net income per share is computed based upon the weighted-average number
of shares of common stock equivalents outstanding during the period. Common
stock issued at prices significantly below the offering price is treated as
outstanding for the entirety of all periods presented. Common stock
equivalents, such as convertible debentures are considered in the earnings
per share calculation.
INCOME TAXES
Income taxes, are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109), "Accounting for Income Taxes." A deferred tax asset or liability is
recorded for all temporary differences between financial and tax reporting.
Deferred tax expense (benefit) results from the net change during the year
of deferred tax assets and liabilities.
F-11
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. ACQUISITIONS:
In June 1994, the Company acquired 100% of the outstanding common stock of
Medical Asset Management, Inc. (MAM) in exchange for 6,960,000 shares of
common stock of the Company along with the right to issue 3,000,000 shares
of the Company's Class A Preferred Stock in exchange for the 1,176,581
shares of MAM's Class A Preferred Stock and the 133,000 shares of MAM's
Class B Preferred Stock. The Company has recorded the transaction under the
Pooling of Interest Method for Business Combinations.
The following represents the results of operations of Medical Asset
Management, Inc., that are included in the current combined net income of
the Company.
1995 1994
------ ------
Revenues $ 11,985,714 $2,658,630
Extraordinary Items - -
Net Income $ 900,383 $ 339,404
Other Changes in Stockholder's Equity - -
Subsequent to this acquisition and pursuant to the approval of a majority
of the Company's common stockholders, the Company changed its name from
Eagle High Enterprises, Inc. to Medical Asset Management, Inc.
In December, 1995 the Company acquired 100% of the outstanding common
stock of Healthcare Professional Management, Inc. for 433,332 shares of
common stock. The Company has recorded the transaction under the Pooling of
Interest Method for Business Combinations.
The following represents the results of operations of Healthcare
Professional Management, Inc. that are included in the current combined net
income of the Company.
1995 1994
------ ------
Revenues $1,090,364 $1,124,978
Extraordinary Items - -
Net Income (Loss) (17,270) 40,809
Other Changes in Stockholders' Equity - -
C. ACCOUNTS RECEIVABLE:
Accounts receivable represents amounts due from patients. A portion of the
receivables represent worker's compensation receivables. The Company is not
a party to third-party reimbursement agreements; however, the Company does
have a legal assignment of third-party payments from the physicians and
medical clinics which the Company manages. As a result, all patient
receivables, including those from third-parties, are included on the
Company's balance sheet as accounts receivable. The Company has established
an allowance for doubtful accounts based upon anticipated actual
collections as determined by management in an amount between 10% and 20% of
the gross accounts receivable balance. Management feels that this amount is
reasonable.
F-12
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. MANAGEMENT FEE RECEIVABLE:
Management fee receivable represents the amounts due the Company under
management agreements signed with various physicians. Management of the
Company has determined that the entire amount outstanding at December 31,
1995 is collectible.
E. PROPERTY AND EQUIPMENT:
Property and equipment is summarized as follows:
1995 1994
----------- -----------
Furniture and equipment $1,002,339 $ 761,298
Less accumulated depreciation (473,930) (325,880)
----------- -----------
Property and equipment, net $ 528,409 $ 435,418
----------- -----------
----------- -----------
Depreciation expenses for the years ended December 31, 1995 and 1994 was
$148,049 and $65,814, respectively.
F. INTANGIBLE ASSETS:
Intangible assets consist of the following at December 31, 1995 and 1994:
1995 1994
----------- -----------
Acquired management contracts $2,170,564 $ 950,017
Franchised fees 1,210,000 1,210,000
----------- -----------
3,380,564 2,160,017
Less accumulated depreciation 485,333 398,933
----------- -----------
$2,895,231 $1,761,084
----------- -----------
----------- -----------
G. RELATED PARTY DEBT:
Related party debt consists of 8% demand notes payable to two officers of
the Company as follows:
1995 1994
-------- --------
John Regan $177,449 $160,575
Dennis Calvert 5,912 5,474
-------- --------
$183,361 $166,049
-------- --------
-------- --------
F-13
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. NOTES PAYABLE:
Notes payable are summarized as follows:
1995 1994
---------- ----------
Notes payable to various individuals
in conjunction with asset acquisition,
collateralized with accounts receivable,
interest payable at 10%, matures at
various dates in 1996 and 1997, all
unpaid principal and accrued interest
are due at due date $1,152,243 $1,014,410
Note payable, interest payable at 8%,
principal and any accrued interest
due on demand 236,863 -
Note payable to an individual,
collateralized by accounts receivable,
interest payable at 10%, principal and
interest payable at $45,000 monthly
through December 1996. - 1,940,236
Notes payable, interest payable at 12%,
principal and any accrued interest due on
demand. Notes may be converted into
338,494 shares of the Company's
common stock - 550,000
---------- ----------
Less current portion 1,047,676 1,090,000
---------- ----------
$ 341,430 $2,414,646
---------- ----------
---------- ----------
Aggregate maturities of notes payable as of December 31, 1995 is as
follows:
December 31
-----------
1996 $1,047,676
1997 341,430
-----------
$1,389,106
----------
----------
I. CONVERTIBLE SUBORDINATED DEBT:
During 1995 the Company issued $762,000 of 12% Series B Convertible
Redeemable Secured Subordinated Debentures. Interest payable semi-
annually, principal and any unpaid interest due April 28, 2000. Upon
maturity the holder shall have the right of option, but not the
obligation, to convert all or part of the debt into fully paid shares
of the Company's common stock at the conversion price of $5.00 per share.
Principal and accrued interest at December 31, 1995 was $808,095.
F-14
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. INCOME TAXES:
Income before taxes consist of the following:
1995 1994
---------- --------
$1,423,113 $608,013
Income tax expense consists of the following:
1995 1994
---------- --------
Current $ 540,000 $227,800
- -
Deferred ---------- --------
$ 540,000 $227,800
---------- --------
A reconciliation of the provision for income taxes to the amount
computed by applying the statutory federal income tax rate to income before
taxes is as follows:
1995 1995
Amounts computed at statutory federal ---------- --------
tax rate $ 498,000 $212,800
State income taxes 42,000 15,000
---------- --------
Provision for income taxes $540,000 $227,000
---------- --------
K. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases office facilities under operating leases which expire
at various dates through the year 2005. The accompanying statement of
operations includes expenses from operating leases of $ 908,961 for 1995.
Future minimum lease payments, due under noncancelable operating leases as of
December 31, 1995 are as follows:
1996 $ 931,600
1997 601,056
1998 601,056
1999 414,566
2000 383,352
2001 148,632
2002 148,632
2003 56,460
2004 56,460
2005 56,460
----------
$3,398,274
----------
----------
F-15
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
K. COMMITMENTS AND CONTINGENCIES (CONTINUED):
CAPITAL LEASES
The Company finances various equipment purchases under capital lease
agreements. The leases require monthly payments over a sixty month period.
The following is an analysis of the book value of the leased assets
included in property and equipment.
1995 1994
------- -------
Cost $85,617 $ -
Accumulated depreciation (7,603) -
------- -------
$78,014 $ -
------- -------
------- -------
The future minimum lease payments under capitalized leases and the present
value of the net minimum lease payments as of December 31, 1995 are as
follows:
1996 $ 29,224
1997 22,092
1998 22,092
1999 22,092
2000 24,314
--------
Total payments 119,814
Less amount representing
interest (30,977)
88,837
Less current portion of
capital leases (18,950)
--------
$ 69,887
---------
---------
The Company has been named in some legal proceedings and litigation arising
in the ordinary course of business. In the opinion of management, the
outcome of such proceedings and litigation will not materially affect the
Company's financial position. During the year ended December 31, 1995 and
1994 there were no settlements charged to operations. Based upon the
opinion of legal counsel the Company has charged to operations, and
included in accounts payable $61,000 for the year ended December 31, 1995
to cover any possible loss due to the outcome of the legal proceedings and
litigation.
F-16
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
L. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental disclosures of cash flow information for the years ended
December 31, 1995, 1994 are summarized as follows:
1995 1994
--------- ---------
Cash paid for interest and
income taxes:
Interest $ 291,657 $ 25,240
Noncash investing and
financing activities:
Assets acquired by capital lease $ 85,517 $ -
Assets acquired with stock issuance 1,326,236 370,432
Stock issued for debt 592,364 -
M. CAPITAL STOCK:
In June 1994, the Company's shareholders approved proposals to cancel
2,000,000 shares of common stock and effect a 1-for-3.5 reverse stock split
of the Company's common stock. The effects of the reverse split was to
convert three and one half (3.5) shares of common stock into one (1) share
of common stock.
N. ASSET ACQUISITIONS:
During the years ended December 31, 1994 and 1995 the Company entered into
Asset Purchase and Clinic Management Agreements with various physicians.
These agreements provided for the Company to acquire all the assets and
properties which the physician's own in connection with the conduct of the
physicians medical practice. The assets included (i) all of the physicians
accounts receivable (whether or not deemed collectible) as reflected on the
physicians books and records, on the effective date of the agreement and at
all times during the terms of the agreement. All accounts receivable
acquired are reflected on the Company's balance sheet with a corresponding
allowance account for those accounts considered possibly uncollectible,
(ii) all administrative (i.e., non-medical) aspects of every kind and
character pertaining to the running of the Clinic and (iii) all other
assets as described in the agreement. In the exchange for the assets
acquired the Company agrees to pay to the physicians cash and stock as set
forth in each separate agreement. The Company has recorded on its
financial statements the assets acquired based upon their fair market value
at the date of the agreement.
F-17
<PAGE>
MEDICAL ASSETS MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
N. ASSET ACQUISITION (CONTINUED):
In conjunction with these acquisitions the Company also entered into
management contracts with each of the physicians involved. The Company has
legal title to patient accounts receivable, and therefore records them on
its balance sheet as account receivable. The Company is liable for certain
operating expenses of the practices, and therefore records them as an
expense on its statement of operations. Under these agreements the Company
is to receive a minimum of ten percent (10%) up to a maximum of thirty
percent (30%) of net billings of the practices as a management fee. The
Company records the management fees earned as revenues on its statement of
operations and records as management fee receivable the amount due from the
physicians separately from accounts receivable, which represents amounts
due from patients. The Company is also obligated to pay a stipulated
percentage of net billings to the physicians, and records them as
consulting fee expense on its statement of operations with corresponding
liability in accounts payable.
During the year ended December 31, 1995 the Company had one material asset
acquisition. Payments for these assets consisted of cash and shares of the
Company's common stock. During the year ended December 31, 1995 the
Company paid $1,606,202 cash and issued 146,000 shares of its common stock.
In addition, an additional 584,000 shares of common stock is to be issued
at 146,000 shares each December through 1999 as payment for the acquisition
contingent upon certain earnings criteria. The issuance of these
contingent shares of common stock shall result in an additional element of
cost of the acquired asset. The additional cost will be recorded at the
time the additional shares are issued.
O. MANAGEMENT CONTRACTS
The Company pays the physicians a contracted stipulated percentage of net
billings based upon a management contract entered into between the Company
and the physician. During the first year of the agreement, at the election
of the physician, the transaction can be reversed with only the loss of the
management and accounting fees due the Company from the physician during
this time. During the next three years the physician may terminate the
management agreement with the Company with partial loss of benefits. After
four years termination will result in further restrictions, such as a
covenant not to compete. All fees earned by the Company prior to
termination are retained by the company.
F-18
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
BALANCE SHEET
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1955 (UNAUDITED)
JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited)
------------- -------------
ASSETS
CURRENT ASSETS
Cash $ 5,841,022 $ 91,780
Accounts receivable 7,632,911 5,353,136
Management fee receivable 1,187,350 373,209
Prepaid expense 266,123 0
Note receivable, shareholder 99,841 248,372
Other assets 48,486 12,075
Real estate 304,000 0
----------- ----------
15,399,733 6,078,572
----------- ----------
FURNITURE AND EQUIPMENT, NET 1,144,702 426,298
FRANCHISE FEES, NET 877,800 926,200
GOODWILL, NET 2,080,744 791,684
----------- ----------
4,103,246 2,144,182
----------- ----------
TOTAL ASSETS $19,502,979 $8,222,754
----------- ----------
----------- ----------
F-19
<PAGE>
JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited)
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Capital lease obligations $ 84,100 $ 22,132
Note payable, shareholders 121,910 277,591
Payroll taxes payable 30,000 72,609
Notes payable - accounts receivable 1,538,427 3,329,746
Accrued liabilities 342,674 251,902
Accrued income taxes payable 1,591,750 754,753
Mortgages 304,000 0
Convertible subordinate debt 796,524 201,431
----------- ----------
4,809,385 4,910,164
----------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock-$.001 par value;
10,000,000 shares authorized;
Class A-3,000,000 shares
issued and outstanding 3,000 3,000
Common stock-$.001 par value-50,000,000
shares authorized;
13,227,168 shares issued
and outstanding 13,227 10,245
Additional paid-in capital 11,871,889 1,908,917
Accumulated surplus 2,805,479 1,390,428
----------- ----------
14,693,595 3,312,590
----------- ----------
TOTAL LIABILITY AND EQUITY $19,502,979 $8,222,754
----------- ----------
----------- ----------
F-20
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
CASH FLOW STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 (UNAUDITED)
JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited)
------------- -------------
Net income $ 525,297 $ 250,798
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization 96,764 38,132
(Increase) Decrease in:
Accounts Receivable (1,551,590) (475,787)
Management Fee Receivable (93,000) (119,949)
Other assets (622,767) (248,372)
Increase (Decrease) in:
Capital Leases 0 0
Accounts Payable (62,012) 7,609
Accrued Liabilities 345,660 182,604
Loans Payable 170,516 327,764
----------- ---------
NET CASH PROVIDE BY (USED IN)
OPERATING ACTIVITIES (1,191,132) (37,171)
CASH FLOWS FROM INVESTING ACTIVITIES
Property and Equipment Additions (412,939) (7,884)
----------- ---------
NET CASH PROVIDE BY (USED IN)
INVESTING ACTIVITIES (412,939) (7,884)
CASH FLOWS FROM FINANCING ACTIVITIES
0 0
Sale of Common Stock 7,275,603 49,027
----------- ---------
NET CASH PROVIDE BY (USED IN)
FINANCING ACTIVITIES 7,275,603 49,027
NET INCREASE (DECREASE) IN CASH 5,671,532 3,972
CASH, AT THE BEGINNING OF THE YEAR 169,490 87,808
----------- ---------
CASH, AT THE END OF THE YEAR $ 5,841,022 $ 91,780
----------- ---------
----------- ---------
F-21
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 (UNAUDITED)
1996 1995
(Unaudited) (Unaudited)
----------- -----------
Net income $ 1,021,895 $ 542,743
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization 166,263 76,254
(Increase) Decrease in:
Accounts receivable (2,419,108) (698,892)
Management Fee Receivable (273,522) (141,639)
Other assets (719,198) (252,314)
Increase (Decrease) in:
Capital Leases (4,737) 0
Accounts Payable (76,155) (98,490)
Accrued Liabilities 649,317 353,767
Loans Payable 380,299 368,198
---------- ---------
NET CASH PROVIDE BY (USED IN)
OPERATING ACTIVITIES (1,274,946) 155,637
CASH FLOWS FROM INVESTING ACTIVITIES
Property and Equipment Additions (749,439) 7,082
---------- ---------
NET CASH PROVIDE BY (USED IN)
INVESTMENT ACTIVITIES (749,439) 7,082
CASH FLOWS FROM FINANCING ACTIVITIES
0 (230,125)
Sale of Common Stock 7,733,534 112,764
---------- ---------
NET CASH PROVIDE BY (USED IN)
FINANCING ACTIVITIES 7,733,534 (117,361)
NET INCREASE (DECREASE) IN CASH 5,709,148 45,358
CASH, AT THE BEGINNING OF THE YEAR 131,673 46,422
---------- ---------
CASH, AT THE END OF THE YEAR $ 5,841,022 $ 91,780
---------- ---------
---------- ---------
F-22
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 (UNAUDITED)
June 30, 1996 June 30, 1995
(Unaudited) (Unaudited)
----------- -----------
REVENUE
Management fee income $ 6,477,487 $ 3,178,444
---------- ----------
6,477,487 3,178,444
---------- ----------
EXPENSES
Salaries 1,109,953 353,641
Consulting fees 2,147,070 979,741
Legal and accounting 27,536 0
Depreciation and amortization 96,764 36,132
Debenture interest 23,000 0
Bank charges 0 0
Telephone 11,365 0
General and administrative 2,137,924 1,402,419
Travel 41,189 0
Interest, other 36,184 0
---------- ----------
5,830,985 2,773,933
---------- ----------
NET INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 846,302 404,511
PROVISION FOR INCOME TAXES (321,205) (153,713)
---------- ----------
NET INCOME BEFORE EXTRAORDINARY
ITEM 525,297 250,798
EXTRAORDINARY ITEM, UTILIZATION
OF NET OPERATING LOSS CARRYFORWARDS 0 0
---------- -----------
NET INCOME $ 525,297 $ 230,798
---------- -----------
---------- -----------
WEIGHTED-AVERAGE NUMBER OF SHARES
OUTSTANDING 12,441,321 10,984,321
---------- -----------
---------- -----------
EARNINGS PER SHARE (COMMON ONLY) $ 0.04 $ 0.02
---------- -----------
---------- -----------
F-23
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
REVENUE
Management fee income $11,927,610 $ 5,727,784
----------- -----------
11,927,610 5,727,784
----------- -----------
EXPENSES
Salaries 2,090,975 833,093
Consulting fees 3,945,610 1,935,020
Legal and accounting 27,536 0
Depreciation and amortization 156,280 78,264
Debenture interest 23,000 0
Bank charges 0 0
Telephone 21,385 0
General and administrative 3,682,171 1,991,995
Travel 41,189 0
Interest, other 112,744 0
----------- -----------
10,380,853 4,836,372
----------- -----------
NET INCOME BEFORE TAXES AND EXTRAORDINARY ITEM 1,648,757 891,412
PROVISION FOR INCOME TAXES (624,862) (348,669)
----------- -----------
NET INCOME BEFORE EXTRAORDINARY ITEM 1,021,895 542,743
EXTRAORDINARY ITEM, UTILIZATION OF NET OPERATING
LOSS CARRYFORWARDS 0 0
----------- -----------
NET INCOME $ 1,021,895 542,743
=========== ===========
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING 11,701,906 10,842,918
============ ===========
EARNINGS PER SHARE (COMMON ONLY) $ 0.09 $ 0.05
============ ===========
</TABLE>
F-24
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
(Unaudited) (Unaudited)
------------------ ----------------
REVENUE
Management fee income $ 6,477,487 $11,927,610
----------- -----------
6,477,487 11,927,610
----------- ----------
EXPENSES
Salaries 1,109,953 2,090,975
Consulting fees 2,147,070 3,945,610
Legal and accounting 27,536 27,536
Depreciation and amortization 96,764 166,263
Debenture interest 23,000 23,000
Bank Charges 0 0
Telephone 11,365 11,365
General and administrative 2,137,924 3,862,171
Travel 41,189 41,189
Interest, other 36,184 112,744
----------- -----------
5,630,985 10,280,853
----------- -----------
NET INCOME BEFORE TAXES AND
EXTRAORDINARY ITEM 846,502 1,646,757
PROVISION FOR INCOME TAXES (321,205) (624,862)
----------- -----------
NET INCOME BEFORE EXTRAORDINARY
ITEM 525,297 1,021,895
EXTRAORDINARY ITEM, UTILIZATION
OF NET OPERATING LOSS
CARRYFORWARDS 0 0
----------- -----------
NET INCOME 525,297 1,021,895
=========== ===========
WEIGHTED-AVERAGE NUMBER OF
SHARES OUTSTANDING 12,441,321 11,701,506
=========== ===========
EARNINGS PER SHARE (COMMON ONLY) 0.04 0.09
=========== ============
F-25
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
SECTION ONE
CORPORATE ORGANIZATION,
MERGER AND EXECUTIVE COMPENSATION
(1) Proxy Statement to Shareholders of Eagle High Enterprises, Inc. dated
June 10, 1995. (pp 1-16).
(2) Stock Exchange Agreement with Shareholders of Medical Asset
Management, Inc. and Eagle High Enterprises, Inc. dated June 24, 1994.
(pp 17-31).
(3) Articles of Incorporation of Eagle High Enterprises, Inc. filed
January 23, 1986. (pp. 32-38).
(4) Certificate of Amendment of Articles of Incorporation of Eagle High
Enterprises, Inc. filed June 21, 1994. (pp. 39-44).
(5) Bylaws of the Company. (pp. 45-61).
(6) Subsidiaries of the Company:
(A) Articles of Incorporation of Medical Asset Corporation filed
May 12, 1989 and amendments thereof filed August 14, 1992 and
June 21, 1994. (pp. 62-67).
(B) Certificate of Merger of Medical Asset Corporation into
the Company filed May 2, 1995. (pp. 68-70).
(7) Compensation Agreements with Officers:
(A) Employment Agreement with John Regan dated
January 1, 1995. (pp. 71-74).
(B) Employment Agreement with Dennis Calvert dated
III-1
<PAGE>
January 1, 1995. (pp. 75-77).
(C) Employment Agreement with Michael Zaic dated
January 1, 1995. (pp. 78-81).
SECTION TWO
MATERIAL CONTRACTS
(1) Asset Purchase and Clinic Management agreements:
SUBPART ONE
(A) California Contracts:
1. Management Agreement-Dr. Dickstein, May 1, 1991.
(pp. 82-156).
2. Exchange Agreement-Dr. Dickstein, June 19, 1991 and
Amendment thereto June 22, 1992. (pp. 157-167).
3. Loan Purchase Agreement-Dr. Dickstein, Sept. 1, 1991.
(pp. 168-181).
4. Agreement to Exchange Stock--Dickstein Family Trust
March 28, 1995. (pp. 182-187).
5. Management Agreement--Dr. Horn, Dr. Burrows,
February 1, 1993. (pp. 188-305).
6. Management Agreement--Dr. Sult, December 31, 1993.
(pp.306-366).
7. Management Agreement--Dr. Regester, Oct. 17, 1994.
(pp. 367-371).
8. Management Agreement--Dr. Brent Davidson, November
1, 1994. (pp. 372-375).
III-2
<PAGE>
9. Management Agreement--Dr. Spigelman, March 31,
1995. (pp. 376-433).
10. Management Agreement--Dr. Gallo, March 31, 1995.
(pp. 434-492)
11. Asset Purchase Agreement--Dr. Gallo, March 31, 1995.
(pp. 493-534).
SUBPART TWO
(B) WASHINGTON AND ALASKA:
1. Management Agreements (2)--Dr. Liddell, Dec. 31, 1994.
(pp. 535-608).
2. Management Agreement--Dr. Davidhizar, June 14, 1994.
(pp. 609-679).
3. Management Agreement--Dr. Epstein, Dec. 31, 1994.
(pp. 680-754).
4. Management Agreement--Dr. Angelo, Dec. 31, 1994.
(pp. 755-826).
5. Management Agreement--Dr. Newell, Dec. 31, 1994.
(pp. 827-904).
6. Management Agreement--Dr. Bramwell, Nov. 11, 1994.
(pp. 905-985).
7. Management Agreement--Dr. Craig Davidson, December
12, 1994. (pp. 986-991).
8. Management Agreement--Dr. Scheyer, Nov. 1, 1994.
(pp. 992-1067).
9. Management Agreement--Dr. Shoup, January 1, 1994.
(pp. 1068-1138).
III-3
<PAGE>
10. Management Agreement--Dr. Fox, November 1, 1994.
(pp. 1139-1148).
11. Management Agreement--Dr. Johnson, Dec. 15, 1994.
(pp. 1149-1151).
12. Tangible Asset Purchase/Medical Practice Agreement
Dr. Mann, March 31, 1995. (pp. 1152-1157).
SUBPART THREE
(2) Contracts relating to pending private placement of $3,000,000 Class B
Debentures:
A. Agency Agreement between the Company and Global
Securities Corp., December 2, 1994. (pp. 1158-1172).
B. Debenture Trust Indenture between the Company,
Global Securities Corp. and Pacific Corporate Trust
Company, January 1, 1995. (pp. 1173-1272).
C. Security Agreement between the Company and Pacific
Corporate Trust Company, January 1, 1995. (pp. 1273-
1324).
(3) Additional Material Contracts:
A. Management Agreement--Dr. Wardle, October 1, 1995
(pp. 1325-1396).
B. Management Agreement--Dr. Stone, October 1, 1995
(pp. 1397-1467).
C. Articles of Incorporation of HPM Acquisition
Corporation. (pp. 1468-1471).
D. Articles of Merger of Healthcare Professional
Management, Inc. (pp. 1472-1475).
III-4
<PAGE>
E. Plan of Merger between Healthcare Professional
Management, inc. and HPM Acquisition Corporation
(pp. 1476-1484).
F. Agreement with Healthcare Professional Management,
Inc. dated December 29, 1995 (pp. 1485-1510).
G. Asset Purchase and Clinic Management Agreement
between the Company and Ronald H. Yanagihara, M.D.
dated December 28, 1996 (pp. 1511-1549).
H. Asset Purchase and Clinic Management Agreement
between the Company and Habib A. Tobbagi, M.D.,
dated December 18, 1995 (pp. 1550-1615).
I. Asset Purchase and Medical Practice Management
Agreement between the Company and OB-GYN
Associates, P.C. dated December 31, 1995 (pp. 1616-
1692).
Item 2. Description of Exhibits--See Item 1.
III-5
<PAGE>
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934, this
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDICAL ASSET MANAGEMENT, INC.
Dated: August 6, 1996
/s/ John Regan
By: John Regan, President
III-6
