<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - QSB\A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
COMMISSION FILE NO. 0-27236
MEDICAL ASSET MANAGEMENT, INC.
A DELAWARE CORPORATION EIN: 33 - 0359976
4447 E. BROADWAY, SUITE 102
MESA, ARIZONA 85206
TELEPHONE: 602-830-7414
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of November 15, 1996, 13,473,374 shares of the registrant's common stock
were issued and outstanding.
<PAGE>
Medical Asset Management, Inc.
Form 10 - QSB\A
March 31, 1996
Table of Contents
Page No.
Part 1. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
Consolidated Statement of Income 4
Consolidated Statements of Cash Flow 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part 2. Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31,
1996 RESTATED
-------------
ASSETS
CURRENT ASSETS
Cash $ 169,490
Accounts receivable 6,081,321
Management fee receivable 1,094,350
Notes receivable 99,841
Other assets 15,842
-----------
7,460,844
-----------
PROPERTY, PLANT AND EQUIPMENT, NET 772,385
FRANCHISE FEES, NET 889,900
ACQUIRED MANAGEMENT AGREEMENTS, NET 7,503,343
-----------
9,165,628
-----------
TOTAL ASSETS $16,626,472
-----------
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Capital lease obligations $ 19,000
Notes payable, shareholders 186,910
Payroll taxes payable 92,012
Accrued liabilities 314,219
Accrued income taxes payable 1,147,771
Current portion - long term debt 1,292,511
-----------
3,052,423
-----------
LONG TERM DEBT:
Long term debt, less current portion 341,400
Obligations under capital lease, less
current portion 65,100
Convertible subordinated debt 773,524
-----------
1,180,024
-----------
SHAREHOLDERS' EQUITY
Preferred stock -$.001 par value;
10,000,000 shares authorized;
Class A-3,000,000 shares issued,
3,000,000 outstanding 3,000
Common stock -$.001 par value;
50,000,000 shares authorized;
11,423,327 outstanding 11,325
Common stock to be issued,
1,208,708 shares 5,437,781
Additional paid-in capital 6,184,835
Unearned Remuneration (1,216,470)
Retained Earnings 1,973,554
-----------
12,394,025
-----------
TOTAL LIABILITIES AND EQUITY $16,626,472
-----------
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 RESTATED 1995 RESTATED
------------- -------------
<S> <C> <C>
NET REVENUE $3,533,473 $1,519,461
---------- ----------
EXPENSES
Salaries 981,022 479,452
Clinic and general and administrative 1,742,247 589,576
Depreciation and amortization 87,197 43,870
Interest 76,560
---------- ----------
2,887,026 1,112,898
---------- ----------
NET INCOME BEFORE INCOME TAXES 646,447 406,563
PROVISION FOR INCOME TAXES 291,883 185,551
---------- ----------
NET INCOME $354,564 $ 221,012
---------- ----------
---------- ----------
WEIGHTED-AVERAGE NUMBER OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS 12,173,027 9,894,656
---------- ----------
---------- ----------
INCOME PER PRIMARY COMMON SHARE $0.03 $0.02
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1996 RESTATED 1995 RESTATED
------------- -------------
<S> <C> <C>
Net income $ 354,564 $ 221,012
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 87,197 43,870
Cash provided net of effects of
medical transactions, by changes in:
Accounts receivable (867,521) (79,579)
Management fee receivable (180,550) (21,660)
Other assets 117 (75)
Accrued liabilities 277,912 25,178
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (328,281) 188,746
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (28,475) (18,285)
Net payments in medical practice transactions (117,863)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (146,338) (18,285)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of indebtedness 205,435 (196,796)
Sale of common stock 306,774 63,743
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 512,209 (133,053)
NET INCREASE (DECREASE) IN CASH 37,590 37,408
CASH, AT THE BEGINNING OF THE YEAR 131,900 50,400
--------- ---------
CASH, AT END OF PERIOD $ 169,490 $ 87,808
--------- ---------
--------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
<PAGE>
Medical Asset Management, Inc.
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
Note 1 -- Basis of Presentation and Restatement
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the unaudited consolidated financial statements
in this report reflect normal recurring adjustments considered necessary for a
fair presentation of the financial position and results of operations for the
interim period presented. To conform to the presentation for the three months
ended September 30, 1996, the contractual allocation of revenues to medical-
owner(s) of clinics and practices managed by the Company has been reclassified
as a reduction of net revenues in the three months ended March 31, 1995.
Previously, these contractual allocations were reported as consulting fees.
This reclassification had no effect on net income for any period presented.
During the third quarter of 1996, it was determined that the Company had
incorrectly accounted for contingent stock committed to be issued in future
years under management agreements acquired in 1994 as purchase price
adjustments rather than compensation expense as required by generally accepted
accounting principles. The Company continues to account for nonforfeitable
stock committed to be issued for management agreements acquired in 1995 and
1996 as a component of their purchase price. This intangible asset is
amortized over 25 years or the life of the agreement. Both nonforfeitable and
contingent common stock committed to be issued in future periods is shown as a
separate component in shareholders equity in accordance with generally accepted
accounting principles. These amounts were previously reported as unissued
shares. The unearned remuneration associated with contingent shares is also
shown as a reduction of equity. The following schedule summarizes the effect
of restating the Company's 1995 and 1996 financial statements:
<PAGE>
Medical Asset Management, Inc.
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
NET INCOME SHAREHOLDER'S
NET INCOME PER SHARE EQUITY
---------- --------- -------------
FISCAL 1996
- -----------
Quarter ended March 31:
As previously reported $496,598 .05 $ 6,892,695
Adjustment (142,034) (.02) 5,501,330
As presented herein 354,564 .03 12,394,025
FISCAL 1995
- -----------
Quarter ended March 31:
As previously reported $291,945 $0.03 $ 3,012,765
Adjustment (70,933) 628,510
As presented herein 221,012 0.02 3,641,275
The presentation of the Company's financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses as well as disclosures on contingent
assets and liabilities. Because of inherent uncertainties in the process,
actual future results could differ from those expected, and thus accrued, at
the reporting date. These unaudited financial statements, footnote
disclosures and other information should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-KSB,
as may be amended.
<PAGE>
Medical Asset Management, Inc.
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
Note 2 -- Medical Service Revenue
Medical service revenue for services to patients by clinics and practices
affiliated with the Company is recorded when services are rendered based upon
established or negotiated charges reduced by contractual adjustments and
allowances for doubtful accounts. Differences between estimated contractual
adjustments and final settlements are reported in the period when final
settlements are determined. Medical service revenue of the affiliated clinics
and practices is also reduced by the contractual amounts retained by the
medical groups to arrive at the Company's revenue shown on its income statement.
The following presents the amounts included in the determination of the
Company's net revenue (in thousands):
Three Months
Ended March 31
---------------------
1996 1995
------ ------
Medical service revenue $5,450 $2,549
Amounts retained by
medical groups 1,917 1,030
------ ------
Net Revenue $3,533 $1,519
------ ------
------ ------
Number of management
service agreements at end
of period 23 11
Note 3 -- Medical Practice Transactions
During the first three months of 1996, the Company acquired certain non-medical
assets of and entered into long-term management service agreements with five
medical practices. The transactions have been accounted for as asset
purchases. The following presents the aggregate consideration required to
complete those transactions (in thousands):
<PAGE>
Medical Asset Management, Inc.
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
Three Months
Ended March 31
---------------------
1996 1995
------ ----
Cash and transaction costs $ 118 -0-
Issuance of notes 497 91
Common stock 2,381 625
(Include shares to be issued)
The Company is currently committed to issue shares of Common Stock pursuant to
completed acquisition transactions as follows: 38,345 shares in 1996; 302,177
shares in 1997; 302,177 shares in 1998; 302,177 shares in 1999; and 263,832
shares in 2000. Although such shares are not issued or outstanding for legal
purposes, such shares are nonforfeitable and considered as outstanding for per
share calculations.
The accompanying unaudited consolidated financial statements include the
results of operations from the Company's management service agreements from
their respective effective dates. The following unaudited proforma information
presents the results of operations for the three months ended March 31, 1995,
assuming all 1995 and 1996 transactions were consummated on January 1, 1995 and
for the three months ended March 31, 1996 assuming all 1996 transactions were
consummated January 1, 1996. Such proforma information is based on the
historical financial information of the medical practices and does not include
operational or other changes which might have been effected pursuant to the
Company's management of the nonmedical aspects of such practices. The proforma
information presented below is for illustrative information only and is not
necessarily indicative of results which would have been achieved or results
which may be achieved in the future (in thousands, except share amounts):
Three Months Ended March 31
---------------------------
1996 1995
---------------------
Revenue $3,909 $2,074
Net income 450 248
Net income per share 0.04 0.03
<PAGE>
Medical Asset Management, Inc.
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
Note 4 -- Capitalization
As part of entering into long-term management agreements with medical
practices described in Note 3, the Company has nonforfeitable commitments to
issue shares of Common Stock at specified future dates for no further
consideration. Both contingent and nonforfeitable common stock to be issued
is shown as a separate component in shareholders' equity and the amounts,
upon issuance of the shares, will be reclassified to par value and additional
paid in capital.
During the first quarter of 1996, the Company raised $306,774 through a private
placement through the sale of 183,352 shares of the Company's stock.
Note 5 -- Net Income Per Share
The computation of net income per share is based on the weighted average number
of shares of Common Stock and Common Stock equivalents outstanding during the
periods in accordance with the requirements of the Securities and Exchange
Commission (SEC). Fully diluted net income per share has not been presented
because it does not differ materially from the primary per share computations.
The following table summarizes the determination of shares used in per share
calculations (in thousands):
Three Months
Ended March 31
1996 1995
------------------
Outstanding at end of period
Common Stock 11,737 9,840
Common Stock to be issued 1,055 153
------- -----
12,792 9,993
Effect of weighting (619) (98)
------- -----
Shares used in per share
calculations 12,173 9,895
------- -----
------- -----
<PAGE>
Medical Asset Management, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Introduction
Medical Asset Management, Inc. (the "Company") enters into management
agreements with, and purchases the nonmedical assets of medical clinics and
practices. Under the terms of these management agreements, the Company
provides comprehensive management services to its affiliated practices,
including operational and administrative services, and furnishes management
personnel, facilities, supplies and equipment. The Company's revenue consists
of management fees and includes the reimbursement of all medical practice non-
medical operating costs.
The Company's objective is to create a national network of regionally
integrated medical clinics and practices that preserve the individual
contracting physician's practice, thereby establishing the individual practice
or clinic as a stable going concern, thus assisting older physicians to
transition their medical practices to younger associates.
Results of Operations
Since June of 1994 when the Company completed its recapitalization as a public
company, it has grown from managing three affiliated physicians in one state to
45 affiliated physicians and 23 practices in four states as of March 31, 1996.
For the first three months of 1995, four of the Company's affiliated practices
each contributed more than 10% of the Company's revenue. For the first three
months of 1996, only one of the Company's affiliated practices contributed more
than 10% of the Company's revenue and that clinic contributed 25% of total
revenue in that period. For the first three months of 1995, the payor mix of
medical practice revenue, expressed as a percentage, was 35% for Medicare and
Medicaid, 30% for managed care and 35% for private insurance and other payors.
For the first three months of 1996, the payor mix of medical practice revenue
was 35% for Medicare and Medicaid, 35% for managed care and 30% for private
insurance and other payers. As a result of the Company's rapid growth, the
Company's limited period of affiliation with the physician practices and the
different payor and patient mixes of the practices, the Company does not
believe that the period-to-period comparisons and percentage relationships
within periods are fully meaningful at this time.
The following table sets forth the percentages of revenue represented by
certain items reflected in the Company's Statement of Income. The information
that follows should be read in conjunction with the Company's unaudited
consolidated financial statements and notes thereto included elsewhere herein.
<PAGE>
Medical Asset Management, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Three Months
Ended March 31
1996 1995
-------------------
Revenue 100.0% 100.0%
Operating expenses:
Salaries 27.8% 31.6%
Clinic and general and administrative 49.3% 38.8%
Depreciation and amortization 2.5% 2.9%
Interest 2.2%
----- -----
Income before income taxes 18.3% 26.8%
Income taxes 8.3% 12,2%
----- -----
Net income 10.0% 14.5%
----- -----
----- -----
Comparison of the Three Months Ended March 31, 1996 and the Three Months Ended
March 31, 1995
The company entered into management agreements with two practices in the first
three months of 1995 and five practices in the first three months of 1996, the
results of which are included in the Company's operating results from the dates
of affiliation. Changes in the results of operations from the first three
months of 1995 to the first three months of 1996 were caused primarily by
additional practices that the Company entered into management agreements with
in 1995.
Revenue
Revenue for the three months ended March 31, 1996 increased $2.0 million or
133% over the comparable prior year period. Substantially all of the increase
was attributable to the addition of new practices subsequent to March 31, 1995
which are included in the results for the three months ended March 31, 1996.
<PAGE>
Medical Asset Management, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Clinic and general and administrative expenses
Clinic and general and administrative expenses, which on a combined basis
include both clinic and corporate operating expenses for the three months ended
March 31, 1996, increased by $1,153,000 or 196% over the comparable prior year
period. Substantially all of the increase was attributable to the addition of
new practices and growth in the corporate staff to support continued expansion.
Salaries
Salaries consist of the cost of corporate management and operations and
development personnel. For the three months ended March 31, 1996, salaries
increased by $502,000 or 105% over the comparable prior year period. The
increase was caused by additional staff required to support the Company's rapid
growth.
Depreciation and Amortization
Depreciation and amortization expenses for the three months ended March 31,
1996 increased $43,300 or 99% over the comparable prior year period. The
increase was primarily the result of amortization of additional intangible
assets acquired during 1995.
Interest
Interest expense for the three months ended March 31, 1996 increased $76,600 or
100% over the comparable prior year period. The increase was primarily
attributable to interest paid on the Company's Convertible Subordinated
Debentures issued in 1995.
<PAGE>
Medical Asset Management, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Company requires capital primarily to obtain management agreements with,
and to purchase the nonmedical assets of additional medical practices pursuant
to its business plan. From its incorporation through March 31, 1996, the
Company has entered into management agreements with 23 medical practices. To
fund this rapid growth and development, the Company has satisfied its
transaction and working capital needs through private placements of common
stock and debt. To fund its operations, the Company relies primarily on
management fees received from its affiliated physician practices. The Company
had net cash used in Operations of $328,000 for the three months ended March
31, 1996, primarily as a result of a $867,000 increase in accounts receivable.
The increase in accounts receivable was as a result of the company entering
into agreements with five practices during the three months ended March 31,
1996. Cash flow from Operations was $189,000 for the comparable prior year
period.
As of March 31, 1996, the Company had working capital of approximately $3.6
million and cash of approximately $169,000. The Company currently expects that
its principal use of funds in the near future will be in connection with
anticipated transactions with affiliated physician groups and the related
purchase of property, plant and equipment. The Company believes that its
existing cash resources, the use of the Company's common stock as partial
consideration for new acquisitions, together with the net proceeds from the
contemplated offering of additional common stock by the Company for cash, will
be sufficient to meet the Company's anticipated acquisition, expansion and
working capital needs for the foreseeable future. The Company may raise capital
through the issuance of long-term or short-term indebtedness or the issuance of
additional equity securities in private or public transactions, at such times
and terms as management deems appropriate and the market allows. To the extent
that the Company is unable to raise needed levels of funding through sales of
shares, the Company's business plan may need to be curtailed within available
resources.
<PAGE>
Medical Asset Management, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART 2 -- OTHER INFORMATION
Item 1 -- Legal Proceedings
There has been no material change in legal proceedings from that reported on
the Form 10-KSB for the year ended December 31, 1995.
Item 2 -- Changes in Securities
There have been no changes in the rights, preferences or privileges of any
security of the Company during the first quarter of 1996.
Item 3 -- Defaults Upon Senior Securities
There have been no defaults on any senior security during the first quarter of
1996.
Item 4 -- Submission of Matters to a Vote of Security Holders
No matters have been submitted to a vote of security holders during the first
quarter of 1996.
Item 5 -- Other Information
The Company is advised that the Securities and Exchange Commission is
conducting an investigation of persons the Company may have done business with
in the past. The status of the investigation is unknown.
Item 6 -- Exhibits and Reports on Form 8-K
During the first quarter of 1996 the Company filed no reports on Form 8-K.
<PAGE>
SIGNATURE
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, this registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDICAL ASSET MANAGEMENT, INC.
Dated:
-----------------------------
By: /s/ John Regan
--------------------------------
John Regan, President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 169
<SECURITIES> 0
<RECEIVABLES> 6,081
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,461
<PP&E> 772
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,626
<CURRENT-LIABILITIES> 3,826
<BONDS> 0
0
3,000
<COMMON> 10,406
<OTHER-SE> 1,974
<TOTAL-LIABILITY-AND-EQUITY> 16,626
<SALES> 0
<TOTAL-REVENUES> 3,533
<CGS> 0
<TOTAL-COSTS> 2,887
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 646
<INCOME-TAX> 292
<INCOME-CONTINUING> 354
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 354
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
