U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number 0-19499
HEALTHSTAR CORP
---------------------------------------
(Exact name of small business issuer as
specified in its charter)
DELAWARE 91-1934592
- - - --------------------------------- -------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
8745 West Higgins, Suite 300,
Chicago, Illinois 60631
----------------------------------------
(Address of principal executive offices)
(773) 693-7827
---------------------------
(Issuer's Telephone Number)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date: Common stock, $0.001 par value,
3,819,872 outstanding as of August 10, 1999
<PAGE>
HEALTHSTAR CORP.
AND SUBSIDIARIES
Index
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1999.......................3
Consolidated Statements of Operations for the Three
Months Ended June 30, 1999 and 1998..................................4
Consolidated Statements of Cash Flows for the Three
Months Ended June 30, 1999 and 1998..................................5
Notes to Unaudited Consolidated Financial Statements.................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................10
Part II: Other Information
Exhibits - None
Signatures..................................................................15
2
<PAGE>
HEALTHSTAR CORP.
AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)
June 30,
1999
-----------
Assets
Current assets:
Cash and cash equivalents $ 820
Trade accounts receivable, less allowance for doubtful
accounts of $260,712 2,036,148
Other current assets 419,708
-----------
Total current assets 2,456,676
Property and equipment, net 2,296,890
Intangibles, net of accumulated amortization of $726,972 8,550,523
Other assets, at cost 145,038
-----------
Total assets $13,449,127
===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 901,291
Accrued expenses 1,169,483
Current portion of long-term debt 3,025,000
-----------
Total current liabilities 5,095,774
-----------
Shareholders' equity:
Common stock, $.001 par value 15,000,000 shares authorized,
3,819,872 shares issued and outstanding 3,820
Additional paid -in- capital 8,151,129
Retained earnings 198,404
-----------
Total shareholders' equity 8,353,353
-----------
Total liabilities and shareholders' equity $13,449,127
===========
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
HEALTHSTAR CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings
(Unaudited)
Three Months Ended
June 30,
-------------------------
1999 1998
----------- -----------
Revenues:
Capitated fees $ 2,094,986 $ 2,651,252
Repricing fees 1,586,819 1,763,230
Other revenue 239,758 191,186
----------- -----------
3,921,563 4,605,668
----------- -----------
Operating expenses:
Cost of services 533,627 702,868
Salaries and wages 1,957,559 2,029,672
General and administrative 1,081,631 1,267,252
Depreciation and amortization 318,158 289,114
Interest expense 58,166 160,343
----------- -----------
3,949,141 4,449,249
----------- -----------
Income (loss) before income taxes (27,578) 156,419
Income tax expense (benefit) (9,279) 55,000
----------- -----------
Net income (loss) (18,299) 101,419
Retained earnings at beginning of quarter 216,703 392,373
----------- -----------
Retained earnings at end of quarter $ 198,404 $ 493,792
=========== ===========
Earnings (loss) per share-Basic and diluted $ -- $ 0.03
=========== ===========
Weighted average shares outstanding-Basic and diluted 3,819,872 2,977,901
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
HEALTHSTAR CORP.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended June 30,
----------------------
1999 1998
--------- ---------
Operating activities:
Net income (loss) $ (18,299) $ 101,419
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 318,158 289,114
Bad debt expense 107,654 120,783
Interest expense on debentures -- 29,578
Increase (decrease) in cash resulting from changes
in operating assets and liabilities:
Trade accounts receivable (148,951) (82,486)
Other current assets 446 (38,785)
Accounts payable 18,380 (253,628)
Accrued expenses (419,552) (581,697)
--------- ---------
Net cash used in operating activities (142,164) (415,702)
--------- ---------
Investing activities:
Purchases of equipment (27,175) (8,190)
--------- ---------
Net cash used in investing activities (27,175) (8,190)
--------- ---------
Financing activities:
Decrease (Increase) in other assets (1,777) 63,334
Net proceeds from line of credit 250,000 200,000
Net proceeds from (payments on) long-term debt (150,000) --
--------- ---------
Net cash provided by financing activities 98,223 263,334
--------- ---------
Net decrease in cash and cash equivalents (71,116) (160,558)
Cash and cash equivalents at beginning of quarter 71,936 199,466
--------- ---------
Cash and cash equivalents at end of quarter $ 820 $ 38,908
========= =========
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
HEALTHSTAR CORP. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
HealthStar Corp. (the "Company") is a healthcare management company
dedicated to controlling the cost, improving the quality and enhancing the
delivery of healthcare services. The Company also provides related products
and services designed to reduce healthcare costs. The Company markets and
provides programs and services to insurance companies, self-insured
businesses for their medical plans, and third parties that administer
employee medical plans. These programs and services assist clients in
reducing healthcare costs for group health plans and for workers'
compensation coverage and automobile accident injury claims. The Company
operates its business through its two wholly-owned subsidiaries,
HealthStar, Inc. ("HealthStar") and National Health Benefits & Casualty
Corporation ("NHBC").
The Company is the successor company to Champion Financial Corporation
("Champion"), a Utah corporation. Effective November 16, 1998, Champion
Financial Corporation (Champion), a Utah corporation, reincorporated in the
State of Delaware. At the same time, Champion merged all of its assets into
its newly formed Delaware subsidiary, HealthStar Corp. The effectiveness of
this reincorporation has caused HealthStar Corp. to continue to operate
Champion's business while Champion has ceased to exist.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of HealthStar
Corp. and Subsidiaries have been prepared in accordance with generally
accepted accounting principles for interim financial information and
pursuant to rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for a
complete financial statement presentation. In the opinion of management
such unaudited interim information reflects all adjustments, consisting
only of normal recurring adjustments, necessary to present the Company's
financial position and results of operations for the periods presented. The
results of operations for interim periods are not necessarily indicative of
the results to be expected for a full fiscal year. It is suggested that
these consolidated financial statements be read in conjunction with the
Company's audited consolidated financial statements included in the
Company's Annual Report Form 10-KSB, for the year ended March 31, 1999.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
the Company and its two wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
CASH EQUIVALENTS
The Company considers all highly liquid instruments with original
maturities of three months or less to be cash equivalents.
6
<PAGE>
HEALTHSTAR CORP. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
EARNINGS (LOSS) PER SHARE
The Company adopted Statement of Accounting Standards No. 128 "Earnings per
Share" (SFAS 128) during 1997. The Company's Earnings per Common Share
(EPS) figures for the prior period were not effected by adoption of SFAS
128. In accordance with SFAS 128, basic EPS is computed by dividing net
income, after deducting preferred stock dividends requirements (if any), by
the weighted average number of shares of common stock outstanding.
Diluted EPS reflects the maximum dilution that would result after giving
effect to dilutive stock options and warrants and to the assumed conversion
of all dilutive convertible securities and stock.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties. Management believes that the recorded amounts of current assets
and current liabilities approximate fair value because of the short
maturity of these instruments. The recorded balance of long-term debt
approximates fair value, as the terms of the debt are similar to rates
currently offered to the Company for similar debt instruments.
REVENUE RECOGNITION
Repricing fees are derived from a negotiated percentage of the medical
savings generated from customer claims managed by the Company or on a per
member per month basis. The percentage of savings fees are recognized as
revenue as the Company renders services and notifies the health care
provider of their required billings reduction for a specified period of
time. The Company receives monthly capitation fees based upon the number of
each customer's members regardless of services actually provided.
COST OF SERVICES
The major components of cost of services consist of utilization review,
case management, external marketing commissions, and costs associated with
electronic transmission of customers' healthcare claims.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets,
which approximates three years for equipment to seven years for furniture
and fixtures. Computer software is amortized over three to five years.
INTANGIBLES
Intangibles, which represent the excess of purchase price over fair value
of net tangible assets acquired, are amortized on a straight-line basis
over the expected periods to be benefited, generally 20 years. The Company
assesses the recoverability of intangible assets by determining whether the
amortization of the intangibles over their remaining lives can be recovered
through undiscounted future operating cash flows of the acquired operation.
The amount of intangible impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting the
Company's average cost of funds. The assessment of the recoverability of
intangibles will be impacted if estimated future operating cash flows are
not achieved.
7
<PAGE>
HEALTHSTAR CORP. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
INCOME TAXES
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
A valuation allowance must be established to reduce deferred income tax
benefits if it is more likely than not that a portion of the deferred
income tax benefits will not be realized. It is management's opinion that
the entire deferred tax benefit may not be recognized in future years.
Therefore, a valuation allowance equal to the deferred tax benefit has been
established.
IMPAIRMENT OF LONG-LIVED ASSETS
Management reviews the possible impairment of long-lived assets and certain
identifiable intangible assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is the amount by which the carrying amount of
the assets exceeds the fair value of the assets.
STOCK BASED COMPENSATION
The Company applies SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
which permits entities to recognize as expense over the vesting period the
fair value of all stock-based awards on the date of grant. Alternatively,
SFAS No. 123 also allows entities to continue to apply the provisions of
APB Opinion No. 25 and provide pro forma net earnings and pro forma
earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123. In accordance with APB Opinion No. 25,
compensation expense is recorded on the date an option is granted only if
the current market price of the underlying stock exceeds the exercise
price.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.
8
<PAGE>
HEALTHSTAR CORP. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, Continued
(2) DEBT
Debt consists of the following at June 30, 1999:
Note payable to Harris Trust and Savings Bank, due November
30, 1999, secured by substantially all the assets of the
Company $1,925,000
Line of credit with Harris Trust and Savings Bank with
permitted outstanding borrowings of $1,500,000, and
secured by substantially all the assets of the Company 900,000
Unsecured note payable to an individual, interest payable
monthly at 8%, currently due 200,000
----------
$3,025,000
==========
The note payable and line of credit bear interest at the prime rate plus
1.5% (9.25% at June 30, 1999).
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the financial statements and
footnotes for the quarter ended June 30, 1999 and the year ended March 31, 1999
contained in the Company's Form 10-KSB filed with the Securities and Exchange
Commission on June 29, 1999.
OVERVIEW
The managed healthcare cost containment industry is highly fragmented, with
a large number of competitors. The Company does not believe that any single
company commands significant market share. The management of the Company
believes the level of competition will continue to increase in the future. Most
of the Company's competitors are national managed care providers, insurance
companies, HMOs, and third-party administrators that have implemented their own
managed care programs. Several large insurance companies for workers'
compensation, health and automobile have also implemented their own
cost-containment programs through the carrier's own personnel. Many of the
Company's current and potential competitors are significantly larger and have
greater financial, technical, marketing, and management resources than the
Company.
The Company competes on the basis of its specialized knowledge and
expertise in the managed healthcare services industry and on its ability to
deliver effective services to the customer with a high level of customer
satisfaction at a very affordable price. There can be no assurance that the
Company will be able to compete successfully. The managed healthcare industry
has experienced significant changes in recent years, primarily as a result of
rising healthcare costs. The Company will be required to respond to various
competitive factors affecting the healthcare industry, including new medical
technologies that may be introduced; general trends relating to the demand for
healthcare services; regulatory, economic, and political factors; changes in
patient demographics; and competitive pricing strategies by HMOs and other
healthcare plans.
The financial statements include the results of operations of the Company
and its two wholly-owned subsidiaries HealthStar, Inc.("HealthStar"), acquired
December 12, 1997, and National Health Benefits & Casualty Corporation ("NHBC"),
acquired January 1, 1997.
RESULTS OF OPERATIONS
The Company derives the majority of its revenue from fees charged to
clients for access to the Company's network of contracted providers. The
Company's client base consists of a variety of payors of medical claims such as
insurance companies, third-party administrators and self-insured employers.
Access fees can be either a fixed, monthly fee per enrolled subscriber which is
called a capitated fee or can be based on a percentage of the amount of the
discount off of billed charges which is granted by a contracted provider. The
Company's participation in the amount saved varies from 20% to 25% with the
exact amount determined by contractual provisions with the Company's clients.
Total revenue decreased $684,105 to $3,921,563 for the three months ended
June 30, 1999 compared to $4,605,668 for the three months ended June 30,1998, a
decrease of 15%. The decrease in revenue is a result of unanticipated attrition
attributable to the integration of HealthStar. Included in revenue was the
recognition of a gain of approximately $115,000 on the sale of the Company's POS
vision program which was sold on June 7, 1999.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
Cost of services includes the cost of outsourcing the case management and
utilization review functions, commissions paid to outside brokers, fees paid to
other regional PPO networks for access to providers not contracted directly with
the Company and other products and services provided by outside vendors. Cost of
services decreased $169,241, or 24%, to $533,627 for the three months ended June
30, 1999 from $702,868 in 1998. The majority of the decrease is a result of
HealthStar discontinuing its pharmacy benefit program previously made available
to HealthStar customers. In addition, HealthStar has discontinued its
relationships with other networks and, as a result, is no longer paying access
fees to these networks.
Salaries and wages includes all employee compensation including payroll
taxes, health insurance and other employee benefits. Also included are
commissions paid to in-house sales and marketing personnel. For the quarter
ended June 30, 1999, salaries and wages were $1,957,559 compared to $2,029,672
for the quarter ended June 30, 1998, a decrease of $72,113 or 4%.
General and administrative expenses include all other operating expenses
such as bad debt expense, telephone charges, office supplies, postage, travel
and entertainment, professional fees, insurance, rent and utilities. For the
quarter ended June 30, 1999, general and administrative expenses were $1,081,631
compared to $1,267,252 for the quarter ended June 30, 1998, a decrease of
$185,621 or 15%. The d`ecrease is a result of tighter cost control throughout
various operating expense categories.
For the three months ended June 30, 1999, depreciation and amortization
increased $29,044, or 10%, to $318,158 from $289,114 for the three months ended
June 30, 1998. Goodwill of approximately $9,000,000 recorded in connection with
the acquisition of HealthStar is being amortized over 20 years.
For the quarter ended June 30, 1999, the Company incurred interest expense
of $58,166 compared to interest expense of $160,343 for the quarter ended June
30, 1998, a decrease of $102,177. The decrease was a result of the conversion of
$3,000,000 of convertible debentures into common stock during August 1998. The
remaining $1,000,000 debenture was repaid on March 31, 1999. The interest rate
on the Company's term loan and line of credit was 9.25% at June 30, 1999. The
interest rate on the seller note payable is 8.0%.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had a working capital deficiency of
$2,639,098 compared to a working capital deficiency of $2,910,005 at March 31,
1999, an improvement of $270,907.
The Company has historically funded its working capital requirements and
capital expenditures primarily from cash flow generated from operations
supplemented by borrowings under its credit facility with Harris Trust and
Savings Bank ("Harris"). For the three months ended June 30, 1999, cash flow
used by operations was $142,164 compared to $415,702 for the three months ended
June 30,1999, an increase in cash flow of $273,538.
The Company has a $4 million credit facility with Harris which is secured
by substantially all the assets of the Company. $2.5 million of the facility is
comprised of a term loan and $1.5 million represents a revolving line of credit.
In connection with this facility, the Company is required to comply with certain
financial covenants. Covenants include a minimum current ratio, maximum leverage
ratio and a minimum fixed charge coverage ratio. On June 8, 1999, Harris amended
certain terms of the credit facility. The amended terms, in addition to
requiring that the entire balance outstanding be repaid by November 30, 1999,
reset several of these ratios and added an additional minimum earnings
requirement for subsequent periods. At June 30, 1999, the Company was in
compliance with all of the financial covenants, as restated, except for the
leverage ratio requirement, which had not been restated as part of the amended
terms. Harris has agreed to a waiver in connection with this requirement and
will restate this requirement retroactive to June 8, 1999.
At June 30, 1999, the borrowings consisted of $1,925,000 remaining on the
term loan and $900,000 outstanding on the line of credit, with approximately
$150,000 of additional borrowing capacity available. Interest on the debt due to
Harris is calculated at the prime rate plus 1.5% (9.25% at June 30, 1999). The
Company is actively seeking replacement financing through various sources and
relationships with other companies in a related line of business to ensure that
adequate resources are available to meet the accelerated deadline of the bank
debt.
Although there can be no assurances, management of the Company anticipates
growth and expansion to continue to accelerate through fiscal year 2000 with the
acquisition of complementary businesses or business lines, management personnel
and infrastructure additions. The Company believes additional sources of cash
flow may be required in conjunction with any such acquisition activity. There
can be no assurance that the Company may be able to obtain such funds on terms
acceptable to the Company. Management currently believes that cash on hand,
amounts available under the revolving line of credit and cash generated from
future operations will be sufficient to fund the Company's operations and
anticipated expansion plans.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
YEAR 2000
Many computer programs and equipment with embedded chips or processors use
two rather than four digits to represent the year and may be unable to
accurately process dates after December 31, 1999. This, as well as certain other
date-related programming issues, may result in miscalculations or system
failures which can disrupt the businesses which rely on them. The term "Year
2000 Issue" is used to refer to all difficulties the turn of the century may
bring to computer users.
The Company has determined that many of its internal computer programs and
some items of its equipment are susceptible to potential Year 2000 system
failures or processing errors. This assessment of internal systems is
substantially complete and plans have been formulated to modify or replace the
impacted programs or equipment. Remediation efforts are underway using both
internal and external resources, with priority given to the systems whose
failure might have a material impact on the Company. To date all required
changes have been identified and made and testing of the changes is
approximately 85% complete.
The Company is also dependent on its contracted medical providers and payor
clients to successfully address their respective Year 2000 technology issues in
connection with their claims processing functions. An important part of the Year
2000 program involves working with those third parties to determine the extent
to which the Company may be vulnerable to their failure to address their own
Year 2000 issues. The Company is communicating with those third parties to
ascertain whether their Year 2000 issues which might impact the Company are
being addressed. Where practical and appropriate, the Company will try to verify
the information or assurances they provide with testing, particularly with
regard to mission critical relationships. At present, the Company has not been
advised by any third party of any Year 2000 issue likely to materially interfere
with the Company's business. However, not all third parties have been responsive
to the Company's inquiries and there may be providers of significant services on
which the Company relies, such as utilities, which are unwilling or unable to
provide information concerning their Year 2000 readiness. To the extent that
outside vendors do not provide satisfactory responses, the Company will consider
changing to vendors who have demonstrated Year 2000 readiness. However, there
are no assurances that the Company will be able to do so.
The Company has begun to develop contingency plans to minimize any Year
2000 disruptions in the event that an internal or third party mission critical
system does not function properly. The contingency plans call for isolation of
the failing component and taking the appropriate corrective action, which may
include modification or replacement of the faulty hardware, software or
non-information system, manual processing of transactions, use of alternative
service providers, relocation to temporary facilities, and other measures as
deemed necessary. Once developed, these contingency plans will be continually
refined as additional information becomes available.
The consequences of an uncorrected Year 2000 issue could include business
interruption, exposure to monetary claims by clients and others and loss of
business goodwill. The likelihood of these events and the possible financial
impact if they occur cannot be predicted.
The Company is continuing to upgrade equipment to be Year 2000 compliant
and total expenditures relating to the upgrade for the year are expected to be
approximately $20,000.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
The estimates and conclusions set forth above contain forward-looking
statements and are based on management's best estimate of future events. Risks
to completing the plan include the availability of resources, the Company's
ability to discover and correct material Year 2000 issues, and other third
parties on which the Company relies to bring their systems into Year 2000
compliance.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 130, "Reporting of
Comprehensive Income" establishes standards for reporting and display of
comprehensive income (all changes in equity during a period except those
resulting from investments by and distributions to owners) and its components in
financial statements.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" establishes standards for
reporting information about operating segments in annual financial statements,
selected information about operating segments in interim financial reports and
disclosures about products and services, geographic area and major customers.
Statement of Accounting Standards No.134, " Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise". This Statement establishes accounting and
reporting standards for certain activities of mortgage banking enterprises and
other enterprises that conduct operations that are substantially similar to the
primary operations of a mortgage banking enterprise. The adoption of this
statement contains no change in disclosure requirements of the Company.
Statement of Accounting Standards No. 135, "Recission of FASB Statement No.
75 and Technical Corrections". This Statement rescinds Statement No. 75,
"Deferral of the Effective Date of Certain Accounting Requirements for Pension
Plans of State and Local Governmental Units," and provides technical corrections
for over 20 accounting pronouncements. This new standard, which will be
effective for fiscal years ending after February 15, 1999, is not currently
anticipated to have a significant impact on the consolidated financial
statements based on the current financial structure and operations of the
Company.
ACCOUNTING STANDARDS NOT YET ADOPTED
Statement of Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities". This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. This new standard, which will be
effective for all fiscal quarters of all fiscal years beginning after June 15,
1999, is not currently anticipated to have a significant impact on the
consolidated financial statements based on the current financial structure and
operations of the Company. The Financial Accounting Standards Board has issued
an exposure draft that defers the effective date of FASB Statement No. 133 to
all fiscal quarters of all fiscal years beginning after June 15, 2000.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HealthStar Corp.
DATE: August 10, 1999 By: /s/ Denise E. Nedza
------------------------------------
Denise E. Nedza
Chief Financial Officer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1999, AND STATEMENT OF INCOME FOR THE THREE MONTHS ENDING
JUNE 30, 1999, OF HEALTHSTAR CORP. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 820
<SECURITIES> 0
<RECEIVABLES> 2,296,860
<ALLOWANCES> 260,712
<INVENTORY> 0
<CURRENT-ASSETS> 2,456,676
<PP&E> 3,023,862
<DEPRECIATION> 726,972
<TOTAL-ASSETS> 13,449,127
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0
0
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