U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
(AMENDMENT NO. 3)
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 change of control occurred and 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 1995.
Following the change of control and merger of the predecessor and the Company
the business of the predecessor was conducted by the Company. The change in
control 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.
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 administration and management of the physician's practice, including
billings and collections. The Company pays the physician a contractually
stipulated percentage of net billings as if the physician were 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
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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 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 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. 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.
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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.
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:
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%
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,
together with
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strategic acquisitions of other management companies. 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.
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 overbilling 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.
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Management Fee
Receivable The 295% increase in Company compensation 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. As new
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.
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 going businesses and 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.
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Income Taxes
Payable Reporting earnings on an accrual basis results in 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.
Convertible During 1995 the Company issued $782,000.00 of 12% Series B
Subordinated Convertible Redeemable Secured Subordinated Debentures. The
Debenture 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 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.
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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:
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 owned 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 two entities that differ
considerably from the historical pattern. The first was 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
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presence in the Eastern United States. In this regard, the benefits of the HPM
acquisition exceed its revenue contribution.
The second acquisition was a Denver-based medical practice. OB-GYN
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 as actual medical
practices raises challenges to 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 and acquire medical practices 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.
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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 acquisition 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.
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 acquisition 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.
LIQUIDITY
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.
After paying for the expenses of the private offering and certain short term
indebtedness the remaining funds will be allocated to working capital. 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
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would be needed. The Company currently has no 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'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. At the present time these leased facilities
are adequate for the needs of the Company.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS.
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AS OF 12/31/95.(1)
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
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Total 6,329,190 66%
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(1) This total does not include any options to convert to common stock as no
options are outstanding. The table does not include any beneficial ownership of
any Class A Preferred Stock as the amount that can be converted and held as
common stock is limited to an amount that would be less than an amount that
would be reportable.
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(B) SECURITY OWNERSHIP OF MANAGEMENT AS OF 12/31/95.(1)
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
President, Director
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
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Total 6,329,190 66%
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(1) This total does not include any options to convert to common stock as no
options are outstanding. The table does not include any beneficial ownership of
any Class A Preferred Stock as the amount that can be converted and held as
common stock is limited to an amount that would be less than an amount that
would be reportable.
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.
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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. The preferred shareholders of Medical Asset Management, Inc.
exchanged all of their preferred shares for preferred shares of Eagle High
Enterprises. After the exchange of stock 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:
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
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Total 6,329,190 66%
The following are the Directors and Officers of the Company:
John Regan, age 46, 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.
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Dennis Calvert, age 32, is the Senior Vice President, 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 38, 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 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 1993 72,000 0 0
President
1994 96,000 0 0
1995 96,000 0 0
Dennis Calvert 1993 48,000 0 0
Senior Vice
President 1994 72,000 0 0
1995 72,000 0 0
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Michael Zaic 1994 36,000 0 0
Vice President
1995 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 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.
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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.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue 50,000,000 common shares and 10,000
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.
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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. The range of the bid prices of the common stock is as follows:
Quarter High Bid Low Bid
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
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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.
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.
17
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
No response required.
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. 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 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
exchange. The 6,960,000 shares were issued, pro-rata to the shareholders of the
predecessor Medical Asset Management, Inc. Prior to the exchange these
shareholders owned 100% of voting stock of the predecessor. After the exchange
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
18
<PAGE>
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 number of issued and outstanding shares of common stock
prior to the private placement as of May 30, 1996 was 11,343,132.
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.
19
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.,
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1
<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
2
<PAGE>
[HARLAN & BOETTGER 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 Asset 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
3
<PAGE>
<TABLE>
MEDICAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
DECEMBER 31,
----------------------------------
1995 1994
----------- -----------
<S> <C> <C>
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 4,791,809
Management Fee Receivable (Note D) 913,828 231,570
Other Receivable 99,841 3,942
---------- ----------
TOTAL CURRENT ASSETS 6,359,345 5,077,703
PROPERTY AND EQUIPMENT, NET (Note E) 528,409 435,418
GOODWILL AND INTANGIBLE ASSETS, NET 2,895,231 1,761,084
OTHER ASSETS 15,842 8,133
---------- ----------
TOTAL ASSETS $9,798,827 $7,288,338
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
MEDICAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<CAPTION>
DECEMBER 31,
-----------------------------------------
1995 1994
----------------- ---------------
<S> <C> <C>
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 F) 183,361 166,049
Current portion of long-term debt (Note G) 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 G) 341,430 2,414,646
Obligations Under Capital Leases, less
Current Portion 69,887 7,132
----------- -----------
TOTAL LONG-TERM DEBT 411,317 2,421,778
----------- -----------
CONVERTIBLE SUBORDINATED DEBT (Note H) 808,095 -
----------- -----------
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
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
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $9,798,827 $7,288,338
========== ==========
The accompanying notes are an integral part of the financial statements.
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.
7
<PAGE>
<TABLE>
MEDICAL ASSET MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<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.
8
<PAGE>
<TABLE>
MEDICAL ASSET MANAGEMENT INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994
------------- ------------
<S> <C> <C>
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
============ ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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.
On December 29, 1995 the Company exchanged common stock of the Company for
100% of the outstanding common stock of Healthcare Professional
Management, Inc. For financial statement purposes the transaction has been
recorded under the Pooling of Interest Method per APB 16.
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.
10
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
GOODWILL
Amounts paid for the acquisition of newly-acquired medical clinics in
excess of the fair value of the net assets of such medical clinics have
been charged to goodwill. Goodwill is related to revenues the Company
anticipates realizing in future years. The Company has decided to amortize
its goodwill over a period of up to 25 years 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 goodwill amortization to determine whether later events and
circumstances warrant revised estimates of useful lives. The Company also
evaluates whether the carrying value of goodwill has become impaired by
comparing the carrying value of goodwill to the value of projected
undiscounted cash flows from acquired assets or businesses. Impairment is
recognized if the carrying value of goodwill is less than the projected
undiscounted cash flow from acquired assets or business.
INTANGIBLE ASSETS
Intangible assets consist of franchise fee agreements with certain
related parties. Intangible assets 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.
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
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.
C. ACCOUNTS RECEIVABLE:
Accounts receivable represents amounts due from patients. A portion of
the receivables represent worker's compensation receivables. 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.
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.
12
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F. 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
========== ==========
G. LONG-TERM DEBT:
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
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. At December 1996 all unpaid
principal and interest due - 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
=========== ==========
</TABLE>
13
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. LONG-TERM DEBT: (CONTINUED)
Aggregate maturities of debt as of December 31, 1995 is as follows:
DECEMBER 31,
1996 $1,047,676
1997 341,430
------------
$1,389,106
============
H. 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.
I. 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:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Amounts computed at statutory federal tax rate $ 498,000 $212,800
State income taxes 42,000 15,000
------------ ----------
Provision for income taxes $540,000 $227,800
============ ==========
</TABLE>
14
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. 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
=============
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
==========
15
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. COMMITMENTS AND CONTINGENCIES (CONTINUED):
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. Based upon the opinion of legal
counsel, management has reflected in the accounts payable of the Company
a sufficient amount to cover any possible loss due to the outcome of the
legal proceedings and litigation.
K. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental disclosures of cash flow information for the years ended
December 31, 1995, 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
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 -
</TABLE>
L. 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.
M. ASSET ACQUISITIONS:
During the years ended December 31, 1994 and 1995 the Company entered
into Asset Purchase and Clinic Management Agreements with twelve separate
physicians. These agreements provided for the Company to acquire all the
assets and properties which the physicians 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,
16
<PAGE>
MEDICAL ASSET MANAGEMENT, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
M. ASSET ACQUISITIONS: (CONTINUED)
(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 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. Any amount paid in excess of the fair value has
been changed to goodwill.
In conjunction with these acquisitions the Company also entered into a
management agreement with each of the physicians involved. Under the
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.
17
<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
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January 1, 1995. (pp. 71-74).
(B) Employment Agreement with Dennis Calvert dated
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
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1, 1994. (pp. 372-375).
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.
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(pp. 1068-1138).
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).
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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, 1995
(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.
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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: JUNE 12, 1996
-------------------------------
By: /S/ JOHN REGAN
---------------------------------
John Regan, President
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