UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2000
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from to
-------------
Commission File Number 33-55254-03
DYNAMIC ASSOCIATES, INC.
(Exact name of Small Business Issuer as specified in its charter)
Nevada 87-0473323
- ----------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation ) Identification No.)
6617 North Scottsdale Road, Suite 103
Scottsdale, Arizona 85253
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(Address of principal executive offices (Zip Code)
Issuer's telephone number, including area code (480) 315-8600
Indicate by a check mark whether the issuer (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 period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class March 31, 2000
- ------------------------------------ -----------------------
$.001 par value Class A Common Stock 18,386,429 shares
1
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
BASIS OF PRESENTATION
General
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and, therefore, do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders' deficit in
conformity with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for the three
months ended March 31, 2000 are not necessarily indicative of the results that
can be expected for the year ending December 31, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company is engaged in managing the operation of psychiatric/geriatric units
for various hospitals through Perspectives Health Management Corp.
("Perspectives"), a wholly owned subsidiary.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company had $168,765 in cash and cash equivalents. The
Company incurred an ordinary loss of $.00 per share.
Perspectives, a Nevada corporation, is a 100% owned subsidiary of the Company.
It provides elderly healthcare and gero-psychology services to small healthcare
facilities unable to provide these services in house. The Perspectives treatment
program conforms to the guidelines of the JCAHO Accreditation Manual for
Hospitals and Medical Standards. The program is reimbursed at cost by Medicare
when established as a distinct part unit of a hospital which qualifies for an
exemption from the Medicare Prospective Payment System("PPS"). The PPS exemption
provides for a cost plus reimbursement system for the unit, which allows the
hospital to receive full reimbursement of the direct operating expenses, plus an
allocation to the unit of a substantial portion of the hospital's overall
overhead and capital costs.
RESULTS OF OPERATIONS
The 2000 financial statements present the activities of the Company and
Perspectives. The 1999 financial statements present the activities of the
Company and Genesis & GCCA which became Perspectives.
During the three months ended March 31, 2000, no management fees were paid or
accrued compared to $95,958 for the same period in 1999. The officers have
agreed to waive compensation due to the Company's lack of cash.
Net ordinary loss for the three months ended March 31, 2000 was $24,045 compared
to a loss of $1,811,553 for the same period in 1999. The net loss is $.00 per
share for the quarter. Net loss for the period is largely due to bad debts that
were recorded related to expected necessary write-offs of some accounts
receivable.
Management fee income was $1,692,199 for the three months ended March 31, 2000
compared to $2,484,166 for the same period in 1999. This is a 32% decrease from
1999. The main reasons for the decline are 4 fewer contracts than in 1999 and a
reduction in fees required because the hospitals have been
2
<PAGE>
unable to pay some of the higher contracted amounts due to Medicare reductions
in the amounts the hospitals receive.
General and administrative expenses for the three months ended March 31, 2000
were $1,418,123 compared to $1,854,082 for the same period in 1999.
Depreciation and amortization expenses for the three months ended March 31, 2000
were $3,786 and $0 respectively compared to $15,028 and $636,320 for the same
period in 1999. In 1999, the Company adjusted the carrying value of goodwill to
the amount it expects to receive from the sale of Perspectives and is no longer
amortizing goodwill on a quarterly basis.
Interest expense for the three months ended March 31, 2000 was $194,335 compared
to $291,052 for the same period in 1999. Interest expense is incurred to the
Convertible Note Holders of the Company. During the quarter ended March 31,
1999, the Company was able to lower the interest rate from 10.0% to 7.5% on most
of its debt. The Company is delinquent on most of its interest payments due in
2000 (about $354,000).
During the quarter ended March 31, 1999, the Company recorded an extraordinary
gain in the amount of $7,955,381 from restructuring its convertible notes. The
extraordinary gain represented income of $.49 per share. The gain had no income
tax consequences.
Impact of the Year 2000 Issue
The "Year 2000 Problem" arose because many existing computer programs use only
the last two digits to refer to a year. Therefore, these computer programs do
not properly recognize a year that begins with "20" instead of the familiar
"19". If not corrected, many computer applications could fail or create
erroneous results. The extent of the potential impact of the Year 2000 Problem
is not yet known, and if not timely corrected, it could affect the global
economy. The Company did not experience any Y2K problems and does not expect
problems in the future.
Forward Looking Statements
The information contained in this section and elsewhere may at times represent
management's best estimates of the Company's future financial and technological
performance, based upon assumptions believed to be reasonable. Management makes
no representation or warranty, however, as to the accuracy or completeness of
any of these assumptions, and nothing contained in this document should be
relied upon as a promise or representation as to any future performance or
events. The Company's ability to accomplish these objectives, and whether or not
it will be financially successful is dependent upon numerous factors, each of
which could have a material effect on the results obtained. Some of these
factors are within the discretion and control of management and others are
beyond management's control. Management considers the assumptions and hypothesis
used in preparing any forward-looking assessments of profitability contained in
this document to be reasonable; however, we cannot assure investors that any
projections or assessments contained in this document, or otherwise made by
management, will be realized or achieved at any level.
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
3
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ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II - OTHER INFORMATION
Item 5. Other Information
Genesis Health Management Corporation (Genesis) (now part of Perspectives) In
December 1996, the Company purchased 100% of the outstanding common stock of
Genesis for $25,373,000. Of the purchase price, $15,050,000 was paid in cash or
notes and accounts payable and $10,323,000 was paid by issuing 3,100,000 shares
of the Common Stock of the Company at a value of $3.33 per share. The note
issued in connection with the acquisition of Genesis was paid in full on March
3, 1997. Genesis had been operating in Louisiana for 3 years prior to the
purchase by the Company. Genesis is in the business of managing and operating
psychiatric/geriatric units in various hospitals (both in-patient and
out-patient). At March 31, 2000, the former Genesis had 18 contracted units. The
former Genesis has contracts with hospitals in the states of Louisiana,
Arkansas, Mississippi and Tennessee.
Geriatric Care Centers of America, Inc. (GCCA) (now part of Perspectives)
On March 13, 1997, Geriatric Care Centers of America ("Geriatric"), a
corporation organized pursuant to the laws of the state of Tennessee, merged
with Geriatric Care Centers Acquisition Corporation, for $500,000 in cash and
150,000 shares of Common Stock of the Company. The former GCCA is also in the
business of managing and operating psychiatric/geriatric units in hospitals. At
March 31, 2000, the former GCCA had 3 operating units.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
99-1 Financial Statements as of March 31, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
DYNAMIC ASSOCIATES, INC.
DATED: May 18, 2000 By:
Grace Sim, Secretary/Treasurer
4
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DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited) (Audited)
----------------- ------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 168,765 $ 181,826
Accounts receivable (less allowance for doubtful accounts of
$1,033,909 in 2000 and $933,909 in 1999 2,374,601 2,065,028
Other receivables 67,789 70,589
Prepaid expense and other current assets 67,949 1,600
----------------- ------------------
TOTAL CURRENT ASSETS 2,679,104 2,319,043
PROPERTY, PLANT & EQUIPMENT 98,855 89,016
OTHER ASSETS
Deferred debt issue costs (less amortization of $344,084) 533,113 560,765
Goodwill (less amortization of $24,857,775) 1,590,000 1,590,000
----------------- ------------------
2,123,113 2,150,765
----------------- ------------------
$ 4,901,072 $ 4,558,824
================= ==================
LIABILITIES & (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 113,908 $ 63,363
Accrued expenses 752,261 636,179
Current portion of long-term debt 45,966 4,349
Accrued interest payable 516,685 366,305
----------------- ------------------
TOTAL CURRENT LIABILITIES 1,428,820 1,070,196
Long-term debt 13,526 5,857
Convertible notes 8,676,500 8,676,500
----------------- ------------------
8,690,026 8,682,357
----------------- ------------------
TOTAL LIABILITIES 10,118,846 9,752,553
STOCKHOLDERS' (DEFICIT)
Common Stock $.001 par value:
Authorized - 25,000,000 shares
Issued and outstanding 18,386,429 shares 18,386 18,386
Additional paid-in capital 19,146,474 19,146,474
Retained deficit (24,382,634) (24,358,589)
----------------- ------------------
TOTAL STOCKHOLDERS' (DEFICIT) (5,217,774) (5,193,729)
----------------- ------------------
$ 4,901,072 $ 4,558,824
================= ==================
</TABLE>
F - 1
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
------------------ -----------------
<S> <C> <C>
Management fees $ 1,692,199 $ 2,484,166
------------------ -----------------
1,692,199 2,484,166
General & administrative expenses 1,418,123 1,854,082
Depreciation 3,786 15,028
Amortization of goodwill 0 636,320
Bad debts 100,000 1,186,637
------------------ -----------------
1,521,909 3,692,067
------------------ -----------------
NET OPERATING INCOME (LOSS) 170,290 (1,207,901)
OTHER INCOME (EXPENSE)
Interest expense (194,335) (291,052)
Unrealized (decrease) in investment 0 (9,000)
------------------ -----------------
(194,335) (300,052)
------------------ -----------------
NET (LOSS) BEFORE INCOME TAXES (24,045) (1,507,953)
INCOME TAX EXPENSE 0 303,600
------------------ -----------------
NET (LOSS) BEFORE
EXTRAORDINARY ITEM (24,045) (1,811,553)
Extraordinary item - Gain on restructuring of debt (no
applicable income taxes) 0 7,955,831
------------------ -----------------
NET INCOME (LOSS) $ (24,045) $ 6,144,278
================== =================
Net income (loss) per weighted average share:
Operations $ (.00) $ (.11)
Extraordinary item .00 .49
------------------ -----------------
NET INCOME (LOSS) $ (.00) $ .38
================== =================
Weighted average number of common shares used to compute
net (loss) per weighted average share 18,386,429 16,305,179
================== =================
</TABLE>
F - 2
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
------------------ -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ (24,045) $ 6,144,278
Adjustments to reconcile net income (loss) to cash provided
(used) by operating activities:
Depreciation and amortization 31,438 695,191
Non-cash debt restructuring 0 (7,955,831)
Bad debts 100,000 1,186,637
Unrealized change in investment 0 9,000
Deferred taxes 0 300,000
Changes in assets and liabilities:
Accounts receivable (406,773) (746,435)
Prepaid expenses and other 18,383 (16,425)
Accounts payable and accrued expenses 317,007 167,067
------------------ -----------------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 36,010 (216,518)
FINANCING ACTIVITIES
Cash from (to) subsidiaries / LLC 0 (220,522)
Principal payments on debt (49,071) (962)
------------------ -----------------
NET CASH (USED) BY
FINANCING ACTIVITIES (49,071) (221,484)
------------------ -----------------
DECREASE IN CASH AND CASH EQUIVALENTS (13,061) (438,002)
Cash and cash equivalents at beginning of period 181,826 478,418
------------------ -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 168,765 $ 40,416
================== =================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 16,303 $ 18,029
Cash paid for income taxes 0 0
</TABLE>
During 2000, the Company purchased a vehicle in the amount of $13,625 by
incurring a loan in the same amount.
During 1999, the Company issued 4,162,500 shares of its restricted common stock
and 8,325,000 warrants to purchase stock at $1.50 per share until December 31,
2000 to retire debt of $8,325,000 and accrued interest of $912,881.
F - 3
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1: EXPECTED SALE OF SUBSIDIARIES
In late 1999, the Company began negotiations to sell
Perspectives. The Company merged Perspectives with Genesis and
GCCA with Perspectives being the surviving entity. The Company
is finalizing negotiations whereby it will sell Perspectives
under a contract bearing interest at 8% per year. The contract
calls for sixty monthly payments of $20,000 and then a balloon
payment of $900,000. The contract has a present value of about
$1,590,000. The Company is also finalizing an agreement with
shareholders who are owed $8,325,000 in convertible notes. The
shareholders have tentatively agreed to accept the assignment of
the above contract to reduce the $8,325,000 owed to them and
then to convert the remaining debt of $6,225,000 into the
Company's common stock at the rate of $.15 per share. This would
result in 41,500,000 new shares of the Company's common stock
being issued, and the shareholders as a group would have voting
control of the Company.
NOTE 2: SEGMENT INFORMATION
Pre-consolidation net income (loss) is as follows:
Dynamic $ (197,378)
Perspectives 173,333
---------------
$ (24,045)
===============
F - 4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Dynamic Associates, Inc. and Subsidiaries March 31, 2000
financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000878146
<NAME> Dynamic Associates, Inc.
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.00
<CASH> 168,765
<SECURITIES> 0
<RECEIVABLES> 3,476,299
<ALLOWANCES> 1,033,909
<INVENTORY> 0
<CURRENT-ASSETS> 2,679,104
<PP&E> 184,215
<DEPRECIATION> 85,360
<TOTAL-ASSETS> 4,901,072
<CURRENT-LIABILITIES> 1,428,820
<BONDS> 8,690,026
0
0
<COMMON> 18,386
<OTHER-SE> (5,236,160)
<TOTAL-LIABILITY-AND-EQUITY> 4,901,072
<SALES> 1,692,199
<TOTAL-REVENUES> 1,692,199
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,521,909
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 194,335
<INCOME-PRETAX> (24,045)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,045)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,045)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
