<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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
Securities registered under Section 12(g) of the Exchange Act:
Common Shares
<PAGE>
The registrant has filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months or such shorter period for
which such reports were required.
The Company's Form 10-KSB for the fiscal year ended December 31, 1995 was
filed late.
The number of common shares issued and outstanding as of June 30, 1996 was
13,227,168.
This report form is not filed as a transitional format.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The Company's unaudited financial statements for the second quarter of 1996
are at the end of this report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
RESULTS OF OPERATIONS
During the second quarter of 1996 the Company experienced positive
changes in several of its financial results as follows:
Increase (Decrease) 12/31/95 to 2nd Q 95/2nd Q 96
6/30/96
Revenue 19% 104%
Assets 73% 137%
Liabilities 10% (1%)
Shareholders Equity 113% 344%
Net Income 6% 110%
Earnings Per Share (20%) 100%
The results of operations for the second quarter of 1996 show the
continuance of the growth trend that the Company has experienced over the last
six quarters. This growth is based in part on the implementation of the
Company's business plan relating to medical
1
<PAGE>
asset acquisitions and execution of additional management agreements. The
Company has been active in providing its services in new geographical areas as
well as contributing to the increase of business of existing managed medical
practices.
An analysis of changes to specific indicators of the financial condition of
the Company follows:
ASSETS:
Cash The increase in cash $5,709,149.00 from December 31, 1995 is
the net cash remaining after expenses of a private placement
that occurred at the end of May, 1996 and payment of certain
short term obligations.
Accounts An increase of 46% from 12/31/1995 to 6/30/1996 reflects the
Receivable results of additional asset purchases and additional
management agreements. This compares to the 43% increase
between June 30, 1995 and June 30, 1996.
Management An increase of 9% between March 31, 1996 and June 30, 1996
Fee was tied to an increase during the quarter of the overall
revenue of the Company. Management fees receivable during
the quarter ended June 30, 1995 were 218% lower than for the
quarter ended June 30, 1996. A trend toward execution of
management agreements with four person or larger practices
is emerging which shows the larger practices transition more
slowly than smaller practices, thereby deferring receipt of
management fees. This trend may continue through the
expansion period of the Company. There is a strong
possibility that management fee receivables will continue
to increase proportionately to revenue growth.
2
<PAGE>
LIABILITIES
Notes An increase of $304,000.00 in mortgages is the result
Payable of the acquisition of real estate in connection with a
medical practice completed during the second quarter.
Accrued Increases both from December 31, 1995 and June 30, 1996
Income are a result of higher earnings from more assets.
Taxes Earnings are recognized on an accrual basis while taxes
are paid on a cash basis. This tend will continue as
the Company's expansion continues.
SHAREHOLDER'S EQUITY
Additional Paid The increase of $7,273,334.00 from March 31, 1996 is
In Capital due largely to the private placement of
$8,000,000.00 which closed May 31, 1996 and the assets
acquired in the second quarter. When assets are
acquired for stock, the value of the fixed assets
acquired in excess of the par value of the stock
increases paid in capital. This item will continue
to increase as long as the Company's growth strategy
proceeds.
Retained Earnings Retained earnings were $2,805,182.00 as of June 30,
1996, up 57% from December 31, 1995. As profits
continue to increase and the Company continues to
reinvest it earnings in growth of the Company this
amount will continue to rise.
PROFIT AND LOSS
Management Fees For the quarter ended June 30, 1996 the management fee
revenue increased to approximately 104% from the second
quarter of 1995 and by approximately 108% over the
first six months of 1995. This was due largely to fees
earned on new management agreements during the last 12
months.
Salaries, The increase in expenses of $981,117.00 or 21% over the
Consulting quarter ended March 31, 1996 is related to the growth
and Other of the Company and the acquisition of assets.
Expense
3
<PAGE>
For additional information about long term trends, competition, and liquidity
please see the discussion in the Form 10 KSB for the year ended 12/31/95.
EXPANSION ACTIVITY
The Company continued during the second quarter of 1996 to acquire
additional medical practice assets and execute additional management agreements
in exchange for consideration consisting of cash, debt and/or common stock. As
with prior transactions the Company is allowed to retain a range of 10% to 30%
of the net practice revenue. The Company by its management agreement is assured
of a minimum cash management fee of 5% of cash collected per month. Newer
management agreements are negotiated on the basis of a minimum cash management
fee of 6% of cash collected.
The below transactions were begun in the first quarter and concluded prior
to the end of the second quarter of 1996.
1. Arbor Family Medicine, Denver, Colorado. A management agreement, real
estate purchase agreement and asset purchase agreement were signed on 3/31/96.
The parties closed the asset purchase agreement and real estate purchase
agreement by July 10, 1996. This medical practice has a gross annual revenue of
$1,400,000.00.
2. Rocky Mountain Woman's Health Clinic, Denver, Colorado. A management
agreement was signed on 3/31/96 and an asset purchase agreement was closed by
June 30, 1996. This practice has a gross annual revenue of $ 1,200,000.00.
3. Hollister Medical Group, Hollister, California and the Company agreed
in principal to enter into a management agreement and asset purchase agreement
as of 3/31/96 but definitive contracts have not yet been signed.
4. DeSoto Family Practice, Memphis, Tennessee. A management agreement
was signed on 3/31/96 and an asset purchase agreement was completed prior to
June 30, 1996. The Company purchased real estate in connection with the purchase
of assets which was completed on August 2, 1996.
During the second quarter of 1996 the Company entered into the following
material transactions.
1. Dr. Vrtiska, Tucson, AZ. The Company purchased assets and executed a
management contract with Dr. Vrtiska during the second quarter. Annual
4
<PAGE>
revenue from Dr. Vrtiska's OBGYN Clinic is estimated to be
$2,200,000.00 per year.
2. Dr. Lamazor, Stockton, CA. The Company purchased assets and executed
a management contract with Dr. Lamazor during the second quarter. The
annual revenue from Dr. Lamazor's clinic is estimated to be
$1,000,000.00 per year.
3. Drs. Cohen and Connor, Denver, CO. The Company executed a management
contract and agreed to purchase assets during the second quarter. The
estimated revenue from these physicians is $ 1,200,000.00 per year.
The agreements are subject to a ninety day rescission.
4. Dr. Petri, Denver, CO. The Company purchased assets and executed a
management contract with Dr. Petri during the second quarter. The
annual revenue from Dr. Petri's clinic is estimated to be $ 350,000.00
per year.
5. Dr. Kessler, Denver, CO. The Company executed a management contract
and agreed to purchase assets during the second quarter. The estimated
revenue from this physician is $ 450,000.00 per year. The agreements
are subject to a ninety day rescission.
6. Dr. Richards, Denver, CO. The Company executed a management contract
and agreed to purchase assets during the second quarter. The estimated
revenue from this physician is $ 450,000.00 per year. The agreements
are subject to a ninety day rescission.
7. Drs. Maxwell and Buchanan, Colorado Springs, CO. The Company executed
a management contract and agreed to purchase assets during the second
quarter. The estimated revenue from these physicians is estimated to
be $ 1,000,000.00 per year. The agreements are subject to a ninety day
rescission.
8. Dr. Hall, Seattle, WA. The Company executed a management agreement
with Dr. Hall during the second quarter. His annual estimated revenue
is $ 500,000.00.
9. Dr. Baker, Ft. Myers, FL. The Company purchased assets and executed a
management contract with Dr. Baker during the second quarter. The
annual revenue from Dr. Baker's clinic is estimated to be $ 900,000.00
per year. The Company has entered into an agreement to purchase real
estate to be utilized in this clinic but the real estate transaction
had not closed by the end of the second quarter.
5
<PAGE>
10. Dr. Hyun, San Jose, CA. During the second quarter Dr. Hyun became
employed by Dr. Gallo who previously signed a management agreement
with the Company. Income from Dr. Hyun's services is estimated to
increase the revenue generated by Dr. Gallo by $500,000.00 per year.
The medical revenue from physicians executing new management agreements
is estimated to total $8,550,000.00. The Company will earn a management fee
based on total medical revenue.
The acquisitions set forth above include the issuance of restricted common
stock at closing and additional restricted common stock over each of the
following four years providing certain income targets are met. The total number
of restricted common shares to be issued for the above listed transactions at
closing is 192,113. The total number of shares to be issued over the next four
years providing the target income levels are attained is 960,563. Assets are
purchased at book value.
OTHER ACTIVITY
During the second quarter of 1996 management agreements with Drs. David
Liddell and Brad Shoup were terminated by mutual agreement. Those practices
had an estimated annual revenue of $2,000,000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There has been no material change in legal proceedings from the
matters reported on the Form 10-KSB for the year ended December 31, 1995.
ITEM 2. CHANGES IN SECURITIES
There has been no changes in the rights, preferences or privileges of
any security of the Company during the second quarter of 1996.
6
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There has been no default on any senior security during the second
quarter of 1996. During the second quarter the Company called its Class B
Subordinated Debentures. The holders of the debentures have the option of being
paid or converting their debentures to common shares at the rate of $ 5.00 per
share.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders during
the second 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 second quarter of 1996 the Company filed one report on Form 8-K
on May 6, 1996.
FINANCIAL STATEMENTS.
The Company's unaudited financial statements for the period ending June 30,
1996 follow this page.
7
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
BALANCE SHEET
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1955 (UNAUDITED)
JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited)
------------- -------------
ASSETS
CURRENT ASSETS
Cash $ 5,841,022 $ 91,780
Accounts receivable 7,632,911 5,353,136
Management fee receivable 1,187,350 373,209
Prepaid expense 266,123 0
Note receivable, shareholder 99,841 248,372
Other assets 48,486 12,075
Real estate 304,000 0
----------- ----------
15,399,733 6,078,572
----------- ----------
FURNITURE AND EQUIPMENT, NET 1,144,702 426,298
FRANCHISE FEES, NET 877,800 926,200
GOODWILL, NET 2,080,744 791,684
----------- ----------
4,103,246 2,144,182
----------- ----------
TOTAL ASSETS $19,502,979 $8,222,754
----------- ----------
----------- ----------
<PAGE>
JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited)
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Capital lease obligations $ 84,100 $ 22,132
Note payable, shareholders 121,910 277,591
Payroll taxes payable 30,000 72,609
Notes payable - accounts receivable 1,538,427 3,329,746
Accrued liabilities 342,674 251,902
Accrued income taxes payable 1,591,750 754,753
Mortgages 304,000 0
Convertible subordinate debt 796,524 201,431
----------- ----------
4,809,385 4,910,164
----------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock-$.001 par value;
10,000,000 shares authorized;
Class A-3,000,000 shares
issued and outstanding 3,000 3,000
Common stock-$.001 par value-50,000,000
shares authorized;
13,227,168 shares issued
and outstanding 13,227 10,245
Additional paid-in capital 11,871,889 1,908,917
Accumulated surplus 2,805,479 1,390,428
----------- ----------
14,693,595 3,312,590
----------- ----------
TOTAL LIABILITY AND EQUITY $19,502,979 $8,222,754
----------- ----------
----------- ----------
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
CASH FLOW STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 (UNAUDITED)
JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited)
------------- -------------
Net income $ 525,297 $ 250,798
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization 96,764 38,132
(Increase) Decrease in:
Accounts Receivable (1,551,590) (475,787)
Management Fee Receivable (93,000) (119,949)
Other assets (622,767) (248,372)
Increase (Decrease) in:
Capital Leases 0 0
Accounts Payable (62,012) 7,609
Accrued Liabilities 345,660 182,604
Loans Payable 170,516 327,764
----------- ---------
NET CASH PROVIDE BY (USED IN)
OPERATING ACTIVITIES (1,191,132) (37,171)
CASH FLOWS FROM INVESTING ACTIVITIES
Property and Equipment Additions (412,939) (7,884)
----------- ---------
NET CASH PROVIDE BY (USED IN)
INVESTING ACTIVITIES (412,939) (7,884)
CASH FLOWS FROM FINANCING ACTIVITIES
0 0
Sale of Common Stock 7,275,603 49,027
----------- ---------
NET CASH PROVIDE BY (USED IN)
FINANCING ACTIVITIES 7,275,603 49,027
NET INCREASE (DECREASE) IN CASH 5,671,532 3,972
CASH, AT THE BEGINNING OF THE YEAR 169,490 87,808
----------- ---------
CASH, AT THE END OF THE YEAR $ 5,841,022 $ 91,780
----------- ---------
----------- ---------
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 (UNAUDITED)
1996 1995
(Unaudited) (Unaudited)
----------- -----------
Net income $ 1,021,895 $ 542,743
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization 166,263 76,254
(Increase) Decrease in:
Accounts receivable (2,419,108) (698,892)
Management Fee Receivable (273,522) (141,639)
Other assets (719,198) (252,314)
Increase (Decrease) in:
Capital Leases (4,737) 0
Accounts Payable (76,155) (98,490)
Accrued Liabilities 649,317 353,767
Loans Payable 380,299 368,198
---------- ---------
NET CASH PROVIDE BY (USED IN)
OPERATING ACTIVITIES (1,274,946) 155,637
CASH FLOWS FROM INVESTING ACTIVITIES
Property and Equipment Additions (749,439) 7,082
---------- ---------
NET CASH PROVIDE BY (USED IN)
INVESTMENT ACTIVITIES (749,439) 7,082
CASH FLOWS FROM FINANCING ACTIVITIES
0 (230,125)
Sale of Common Stock 7,733,534 112,764
---------- ---------
NET CASH PROVIDE BY (USED IN)
FINANCING ACTIVITIES 7,733,534 (117,361)
NET INCREASE (DECREASE) IN CASH 5,709,148 45,358
CASH, AT THE BEGINNING OF THE YEAR 131,673 46,422
---------- ---------
CASH, AT THE END OF THE YEAR $ 5,841,022 $ 91,780
---------- ---------
---------- ---------
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 (UNAUDITED)
June 30, 1996 June 30, 1995
(Unaudited) (Unaudited)
----------- -----------
REVENUE
Management fee income $ 6,477,487 $ 3,178,444
---------- ----------
6,477,487 3,178,444
---------- ----------
EXPENSES
Salaries 1,109,953 353,641
Consulting fees 2,147,070 979,741
Legal and accounting 27,536 0
Depreciation and amortization 96,764 36,132
Debenture interest 23,000 0
Bank charges 0 0
Telephone 11,365 0
General and administrative 2,137,924 1,402,419
Travel 41,189 0
Interest, other 36,184 0
---------- ----------
5,830,985 2,773,933
---------- ----------
NET INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 846,302 404,511
PROVISION FOR INCOME TAXES (321,205) (153,713)
---------- ----------
NET INCOME BEFORE EXTRAORDINARY
ITEM 525,297 250,798
EXTRAORDINARY ITEM, UTILIZATION
OF NET OPERATING LOSS CARRYFORWARDS 0 0
---------- -----------
NET INCOME $ 525,297 $ 230,798
---------- -----------
---------- -----------
WEIGHTED-AVERAGE NUMBER OF SHARES
OUTSTANDING 12,441,321 10,984,321
---------- -----------
---------- -----------
EARNINGS PER SHARE (COMMON ONLY) $ 0.04 $ 0.02
---------- -----------
---------- -----------
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
REVENUE
Management fee income $11,927,610 $ 5,727,784
----------- -----------
11,927,610 5,727,784
----------- -----------
EXPENSES
Salaries 2,090,975 833,093
Consulting fees 3,945,610 1,935,020
Legal and accounting 27,536 0
Depreciation and amortization 156,280 78,264
Debenture interest 23,000 0
Bank charges 0 0
Telephone 21,385 0
General and administrative 3,682,171 1,991,995
Travel 41,189 0
Interest, other 112,744 0
----------- -----------
10,380,853 4,836,372
----------- -----------
NET INCOME BEFORE TAXES AND EXTRAORDINARY ITEM 1,648,757 891,412
PROVISION FOR INCOME TAXES (624,862) (348,669)
----------- -----------
NET INCOME BEFORE EXTRAORDINARY ITEM 1,021,895 542,743
EXTRAORDINARY ITEM, UTILIZATION OF NET OPERATING
LOSS CARRYFORWARDS 0 0
----------- -----------
NET INCOME $ 1,021,895 542,743
=========== ===========
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING 11,701,906 10,842,918
============ ===========
EARNINGS PER SHARE (COMMON ONLY) $ 0.09 $ 0.05
============ ===========
</TABLE>
<PAGE>
MEDICAL ASSET MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
(Unaudited) (Unaudited)
------------------ ----------------
REVENUE
Management fee income $ 6,477,487 $11,927,610
----------- -----------
6,477,487 11,927,610
----------- ----------
EXPENSES
Salaries 1,109,953 2,090,975
Consulting fees 2,147,070 3,945,610
Legal and accounting 27,536 27,536
Depreciation and amortization 96,764 166,263
Debenture interest 23,000 23,000
Bank Charges 0 0
Telephone 11,365 11,365
General and administrative 2,137,924 3,862,171
Travel 41,189 41,189
Interest, other 36,184 112,744
----------- -----------
5,630,985 10,280,853
----------- -----------
NET INCOME BEFORE TAXES AND
EXTRAORDINARY ITEM 846,502 1,646,757
PROVISION FOR INCOME TAXES (321,205) (624,862)
----------- -----------
NET INCOME BEFORE EXTRAORDINARY
ITEM 525,297 1,021,895
EXTRAORDINARY ITEM, UTILIZATION
OF NET OPERATING LOSS
CARRYFORWARDS 0 0
----------- -----------
NET INCOME 525,297 1,021,895
=========== ===========
WEIGHTED-AVERAGE NUMBER OF
SHARES OUTSTANDING 12,441,321 11,701,506
=========== ===========
EARNINGS PER SHARE (COMMON ONLY) 0.04 0.09
=========== ============
<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: August 12, 1996
-------------------------------------
By: /s/ John Regan
-------------------------------------
John Regan, President and Chief Financial Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDING JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,841,022
<SECURITIES> 0
<RECEIVABLES> 7,632,911
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,379,733
<PP&E> 1,144,702
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,502,979
<CURRENT-LIABILITIES> 4,809,385
<BONDS> 0
0
3,000
<COMMON> 13,227
<OTHER-SE> 14,677,378
<TOTAL-LIABILITY-AND-EQUITY> 19,502,979
<SALES> 6,477,487
<TOTAL-REVENUES> 6,477,487
<CGS> 0
<TOTAL-COSTS> 5,830,985
<OTHER-EXPENSES> 36,184
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,000
<INCOME-PRETAX> 846,302
<INCOME-TAX> (321,205)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527,297
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
