UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19803
ALLEGIANT PHYSICIAN SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-1774324
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Northridge Rd., Suite 500
Atlanta, GA 30350
(Address of principal executive offices including Zip Code)
(770) 643-5555
(Registrant's telephone number, including area code)
N/A
(Former name, former address, phone number and former fiscal year, if changed
since last report.)
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 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 .
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
CLASS OUTSTANDING AT August 15, 1996
- ----------------------------- ------------------------------
Common Stock, $.001 par value 34,245,519 Shares
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
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<S> <C>
Item 1. Financial Statements
Consolidated Condensed Statements of Operations 3
Consolidated Condensed Balance Sheets 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings 13
Item 3. Defaults Upon Senior Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 15
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLEGIANT PHYSICIAN SERVICES, INC. & SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
- --------------------------------------------------------------------------------
(000s omitted except for per share data)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue $12,264 $15,556 $24,806 $32,001
---------- ---------- ---------- ----------
Direct costs and other operating expenses:
Contract labor and other direct expenses 9,729 10,088 19,358 20,898
Provision for bad debts 1,593 2,125 3,203 4,206
Other 2,791 2,451 5,301 5,129
---------- ---------- ---------- ----------
Total expenses 14,113 14,664 27,862 30,233
---------- ---------- ---------- ----------
Operating income (loss) (1,849) 892 (3,056) 1,768
Net interest income (expense) (1,074) (355) (2,165) (744)
---------- ---------- ---------- ----------
Income (loss) before income taxes (2,923) 537 (5,221) 1,024
Income tax expense -- -- -- --
---------- ---------- ---------- ----------
Net income (loss) ($2,923) $537 ($5,221) $1,024
========== ========== ========== ==========
Earnings (loss) per share: ($0.19) $0.04 ($0.34) $0.08
Weighted average shares outstanding 15,503 13,774 15,381 13,459
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLEGIANT PHYSICIAN SERVICES, INC. & SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited)
- --------------------------------------------------------------------------------
(000s omitted)
June 30, December 31,
1996 1995
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $1,195 $1,784
Accounts receivable, net of allowance for doubtful
accounts of $4,577 and $5,570 in 1996 and 1995 2,833 1,468
Other current assets 658 1,029
------------ ------------
Total current assets 4,686 4,281
Property and Equipment, net of accumulated
depreciation of $1,946 and $1,641 in 1996 and
1995, respectively 1,514 1,746
Capitalized software, net of accumulated
amortization of $440 and $220 in 1996 and 1995,
respectively 2,026 1,894
Deposits and other assets 1,410 1,467
------------ ------------
$9,636 $9,388
============ ============
LIABILITIES AND STOCKHOLDERS' INVESTMENT (DEFICIT)
Current Liabilities:
Short-term borrowings and current portion of
long-term obligations $15,746 $10,403
Accounts payable 4,663 4,757
Accrued salaries and contract costs 2,597 2,589
Billings in excess of contract costs 921 1,548
Other accrued expenses 3,454 2,890
------------ ------------
Total current liabilities 27,381 22,187
Long-term Obligations:
Long-term debt and capital lease obligations 1,635 1,637
Redeemable Common Stock 276 393
Stockholders' Investment (Deficit): (19,656) (14,829)
------------ ------------
$9,636 $9,388
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLEGIANT PHYSICIAN SERVICES, INC. & SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
- --------------------------------------------------------------------------------
(000s omitted)
For the Six Months Ended June 30,
---------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($5,221) $1,024
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Minority interest in affiliate 254 --
Depreciation and amortization 607 259
Changes in assets and liabilities:
Accounts receivable, net" (1,365) 1,918
Prepaid expenses and other 328 231
Other assets 122 (241)
Accounts payable (94) (444)
Accrued expenses 574 (315)
Deposits and other current liabilities (554) (928)
---------------- ----------------
Net cash used in continuing operations (5,349) 1,504
---------------- ----------------
Net cash used in discontinued operations -- (3,494)
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Net cash used in operating activities (5,349) (1,990)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions, net (95) (144)
Capitalized software (352) (335)
Long-term note receivable to affiliate (540) (519)
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Net cash used in investing activities (987) (998)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuances of common stock -- 1,984
Repurchase of redeemable common stock (117) --
Net short-term and long-term borrowings
(repayments) and capital lease obligations 5,864 1,032
---------------- ----------------
Net cash provided by financing activities 5,747 3,016
---------------- ----------------
Net increase in cash and cash equivalents (589) 28
Cash and cash equivalents at beginning of period 1,784 267
---------------- ----------------
Cash and cash equivalents at end of period $1,195 $295
================ ================
Cash paid during the period for:
Interest $2,002 $1,075
Income taxes $ -- $ 2
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
Notes to Consolidated Condensed Financial Statements
June 30, 1996 and 1995
Note A - Summary of Significant Accounting Policies
The interim financial statements presented herein reflect all adjustments that
are, in the opinion of management, necessary to fairly state the interim
financial statements presented, such adjustments being of a normal recurring
nature. Operating results for the interim periods presented are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. The interim statements should be read in conjunction with the Company's
audited financial statements and notes thereto for the year ended December 31,
1995. Certain reclassifications have been made to prior year's amounts to
conform to the 1996 presentation.
Note B - Short-Term Borrowings and Long-Term Debt
In February and March 1994, the Company entered accounts receivable funding
agreements with a private healthcare accounts receivable finance company. Under
these agreements, the finance company purchases with recourse and the Company
sells, on a weekly basis, the Company's eligible healthcare accounts receivable,
net of contractual adjustments, collection reserves and subsequent collections.
In June 1995, the Company entered into a separate agreement with this finance
company with the same terms as previously noted. No gain or loss is recognized
on these transactions. The Company paid a 1.5% commitment fee and pays interest
at 9.5% per annum on the net outstanding purchased accounts receivable balance
until such accounts receivable are collected. The outstanding balances of
uncollected purchased accounts receivable under both agreements totaled
approximately $22.5 million, net of amounts the finance company withheld from
the Company as reserves at June 30, 1996. As of June 30, 1996, the finance
company has advanced to the Company an additional $11.2 million. This
additional funding represents funding in excess of the contractual requirements
of the accounts receivable funding agreements and is secured by approximately
12.8 million of the Company's unregistered stock. This additional funding places
the Company in default of the contractual requirements of the accounts
receivable funding agreements. This amount has been classified as short-term
debt at June 30, 1996.
In September 1994, the Company signed a three-year promissory note agreement
with a financial broker to provide up to $2.0 million for working capital
purposes, as lenders' funds are available. No principal payments are required
for three years, but the Company may prepay the notes at any time at a premium
up to 15%. As of March 31, 1996, outstanding borrowings totaled $1.8 million,
net of additional fees of $314,000. Interest is payable monthly at the prime
rate plus 2%. The promissory notes are secured by 5.9 million shares of the
Company's unregistered common stock. The Company is required to provide the
lender with 300% market value to loan balance coverage as determined at each
month-end. Events of default, which require cure by prepayment or otherwise
within two business days after notice of default, include, among other things,
the untimely payment of monthly interest and a drop in the Company's stock
price below $0.62 per share. At June 30, 1996, the Company was in default
because the Company's common stock has been trading below $0.62 per share. The
Company has not been officially notified of this default which is required by
the note agreements. The Company has classified the notes as short-term
borrowings.
Note C - Contingencies
In April and May 1995, the Company issued an aggregate of 500,000 shares of
common stock to two corporations affiliated with a California physician in
return for promissory notes from these corporations aggregating $1 million. The
notes were due on April 30 and June 30, 1995 and were guaranteed by the
physician. In June 1995, the Company received information that the physician
had pledged the 500,000 shares to a broker/dealer to secure financing and that
the broker/dealer asserted title to the shares pursuant to the pledge. The
Company instructed its transfer agent not to permit a transfer of the shares.
The $1 million in promissory notes guaranteed by the physician have not been
paid and on August 28, 1995 the Company filed a civil action against the
physician and his related corporations for default under the note agreements and
related guaranties. The physician, on December 22, 1995, filed a cross-
complaint against the Company for, among other things, fraud and breach of
contract. On April 9, 1996, the broker/dealer filed legal action against the
physician and his related corporations for fraud and securities fraud, and
against the Company for certain violations of the related state's Uniform
Commercial Code. There is no assurance, however, that the Company will be able
to collect the notes in whole or in part. Certain facts and events, in the near
term, could change the Company's current valuation that the stock subscription
receivable is collectible.
<PAGE>
During the fourth quarter of 1994, the Company filed in the Superior Court of
the State of California, County of Los Angeles, an action against certain
workers' compensation insurers and administrators seeking $123.0 million in
compensatory damages claiming abuse of process, intentional interference with
contractual and prospective economic relations, negligent interference with
contractual and prospective economic relations and unfair business practices,
which led to NPI's termination of pain management services to new patients
covered by the slow-paying California litigated workers' compensation system
insurance carriers. Certain of the defendants in the lawsuit have filed cross-
complaints seeking restitution from Allegiant, its healthcare subsidiaries and
their associated medical groups for funds previously paid to the medical groups
and other damages. Although there can be no assurances, based upon the facts
and circumstances known to date, in the opinion of management, final resolution
of this matter will not have a material adverse effect on the Company's
financial condition or results of operations.
Note D - Income Taxes
The Company's income tax benefit for the period ended June 30, 1996, was
calculated at an effective rate of 38% before being offset by an increase in the
deferred tax valuation allowance. The increase in the valuation allowance was
recognized based on the uncertainty of future tax obligations generated from
planned earnings through June 30, 1997.
Note E - Sale of Anesthesia Contract Business
Effective June 1, 1996, and subject to the rescission rights described below,
the Company transferred substantially all of its assets relating to its
anesthesia operations (the "Transaction") to Anesthesia Solutions, Inc. ("ASI").
The Transaction will be rescinded if the requisite shareholder approval of the
Transaction is not received by October 1, 1996. The assets to be sold in the
Transaction include all of the Company's anesthesia contracts, physician and
nurse contracts, office furniture and computer equipment used in the contract
anesthesia business. The anesthesia contract business accounted for
approximately 95% of the Company's revenue in fiscal years 1995, 1994 and 1993
and approximately 92% in the first quarter of 1996. The assets to be sold
primarily consists of contracts and are recorded in the Company's financial
statements at nominal amounts as of December 31, 1995.
The consideration received in the Transaction was a Promissory Note, dated June
1, 1996, (the "Note") by ASI in favor of the Company, in original principal
amount of $16.0 million, with interest equal to 9% per year. The Note will be
reduced by certain liabilities assumed by ASI totaling approximately $12
million. The Agreement requires interest only payments on the Note to be made
for the first six months commencing July 1, 1996, and monthly principal payments
of $500,000 starting January 1, 1997, increasing to $1,500,000 on July 1, 1997,
until the Note is paid in full. The Note is secured by 2,750,000 shares of
EquiMed, Inc., $.0001 par value, common stock. An additional sale premium up to
$9 million will be paid by ASI if the provisions of an earn-out agreement are
realized by ASI within twelve months. It cannot be assured that the benefits of
the earn-out agreement will be met.
Since June 1, 1996 the anesthesia contract business has been operated by ASI and
the assets of the anesthesia contract business have been transferred to ASI. Due
to the timing of the Transaction and the prerequisite shareholder approval, the
Company has reflected the operations of the anesthesia contract business for the
month of June 30, 1996, in the accompanying Consolidated Condensed Statements of
Operations. The financial position of the Company, reflected in the accompanying
Balance Sheets, includes the assets and liabilities of the anesthesia contract
business at June 30, 1996. The Company will continue to report the operations
and financial positions of the anesthesia contract business until the Company
has obtain shareholder approval of the Transaction.
<PAGE>
In accordance with the Agreement, the Transaction must be approved by the
Company's shareholders by October 1, 1996. The Company expects to hold its
annual meeting on September 20, 1996, at which the shareholders will vote on the
Transaction. There is no assurance that the shareholders will vote in favor of
the Transaction. If the Transaction is not approved by the shareholders, the
Transaction will be rescinded and the Company will pay ASI, or ASI will pay the
Company, as the case may be, an amount necessary to place the respective parties
in their financial positions at May 31, 1996, as if the Agreement had not been
consummated on June 1, 1996.
In June 1996, the Company was reimbursed approximately $1.6 million by ASI for
certain liabilities assumed by ASI pursuant to the Transaction. The Company has
classified this in current liabilities in "Short-term borrowings and current
portion of long-term obligations."
<PAGE>
Item 2: Management's Discussion and Analysis of Results of Operations and
Financial Condition
OVERVIEW
Historically, the Company's principal business activity has been its contract
anesthesia division, which accounted for 90% of the Company's net revenue during
the first six months of 1996. As discussed in greater detail below, the Company
intends to sell this division. This will conclude the shift of the Company's
core business from contract anesthesia services to providing other healthcare
related services including hospital information systems, physician recruiting
and staffing services, locum tenens services and physician practice management
services. The Company was formed in 1988 and for the next five years
concentrated on providing contract management services to hospital
anesthesiology departments and offered physician recruiting services to
hospitals for all physician specialties. In late 1993, while continuing to offer
and expand the services previously mentioned, the Company made the decision to
shift its market focus from contract anesthesia services to the development and
management of integrated healthcare delivery networks primarily in small urban
areas. Given this broader definition of the market to which the Company offered
its services, the Company changed its name in late 1994 to Allegiant Physician
Services, Inc. from Premier Anesthesia, Inc.
Effective June 1, 1996, and subject to the recision rights described below,
Allegiant Physician Services, Inc. (the "Company") transferred substantially all
of its assets (the "Transaction") to Anesthesia Solutions, Inc. ("ASI"), a newly
formed company. The Transaction will be rescinded if the requisite shareholder
approval of the Transaction is not received on or before October 1, 1996. The
assets to be sold in the Transaction include all of the Company's anesthesia
contracts, physician and nurse contracts, office furniture and computer
equipment used in the contract anesthesia business.
The consideration received in the Transaction was a Promissory Note, dated June
1, 1996, (the "Note") by ASI in favor of the Company, in original principal
amount of $16.0 million, with interest equal to 9% per year. The Note will be
reduced by certain liabilities assumed by ASI totaling approximately $12.o
million. The Agreement requires interest only payments on the Note to be made
for the first six months commencing July 1, 1996, and monthly principal payments
of $500,000 starting January 1, 1997, increasing to $1.5 million per month
beginning July 1, 1997 and to be paid thereafter until the Note is paid in full.
The Note is secured by 2,750,000 shares of Equimed Inc., $.0001 par value,
common stock. An additional sale premium up to $9.0 million will be paid by ASI
if the provisions of an earn-out agreement are realized by ASI within twelve
months.
In accordance with the Agreement, the Transaction must be approved by the
Company's shareholders by October 1, 1996. In the event the Transaction is not
approved by the shareholders, the Transaction will be rescinded and the Company
will pay ASI, or ASI will pay the Company, as the case may be, an amount
necessary to place the respective parties in the financial positions at May 31,
1996, as if the transfer had not been made on June 1, 1996.
Historically, the Company also operated medical/surgical centers specializing in
the multi-disciplinary treatment of chronic pain. The Company discontinued all
pain treatment operations in 1994. The Company evaluated the historical trend of
payments from the insurance carriers, the length of time in the payment cycle
and the cost of collection related to receiving these payments. Under these
circumstances, the Company determined that it was in the best interest of the
shareholders to discontinue all operations related to its pain treatment
operations. As a result, the Company recorded a $12.0 million charge to 1994
earnings, of which $8.4 million provided for a write-down of accounts receivable
and a provision of $3.6 million to adjust the estimated net realizable value of
the assets of the pain treatment operations.
In December 1995, the Company sold its pain treatment operations to Pain Net
Inc. (Pain Net), a company formed and owned by former members of the senior
management of the Company's discontinued pain treatment operations, for $2.3
million in cash paid at closing and $12.5 million in two promissory notes. The
notes earn interest at 12% per year and are collateralized by patient
receivables of Pain Net. Pain Net will repay the notes from future operations.
The Company expects to fully collect these notes, however, the repayments will
be reflected as income when received due to the highly leveraged structure of
Pain Net.
In August 1996, the Board of Directors of the Company decided to restructure the
Physician Practice Management unit, which heretofore had pursued both hospital
and physician sponsored practice networks. Hereafter, the Company will pursue
only physician-sponsored networks for development. The Company also eliminated
its physician recruiting and staffing services unit.
<PAGE>
RESULTS OF OPERATIONS
Second Quarter 1996 Compared to second Quarter 1995
Net revenue decreased $3.3 million or 21.2% between periods. The continued
deterioration in the number of anesthesia procedures and the decrease of one
contract on a comparable basis between the second quarter of 1996 and 1995
resulted in a decrease in anesthesia net revenue of approximately $2.9 million
for the quarter ended June 30, 1996.
Operating income for the second quarter of 1996 was a loss of $1.8 million
compared to income of $892,000 for the second quarter of 1995. The decrease in
operating income is attribute to both the contract anesthesia business
deterioration and an increase in investment spending by the Company on its
hospital information systems business unit. Contract labor and other direct
costs were 79.3% and 64.9% of net revenue for the three months ended June 30,
for 1996 and 1995 respectively. Other expenses increased from $2.4 million, or
15.8% of net revenue , to $2.8million or 22.8% of net revenue for the three
months ended June 30 1995 and 1996 respectively.
Net interest expense for the second quarter of 1996 increased to $1.1 million
compared to $355,000 during the same period in 1995. The Company's commitment to
fund its hospital information systems and physician practice management groups
along with the necessity to provide working capital to its pain treatment
operations caused its debt position to increase from $8.5 million at the end of
the second quarter in 1995 to $17.4 million as of June 30, 1996. Additionally,
the Company will not recognize interest income on the promissory notes from the
sale of the pain treatment operations until payment is received.
Weighted shares used to compute earnings per share were higher in 1996 than in
1995 due to the conversion of approximately 1.5 million shares of the Company's
common stock from debt to equity at various times during the past twelve months.
Earnings per share from operations declined to a loss of $.19 per share during
the second quarter of 1996 compared to income of $.04 per share during the
comparable time period in 1995.
Year-to-Date 1996 Compared to Year-to-Date 1995
Net revenue for the six months ended June 30, 1996 declined $7.2 million from
the corresponding period in 1995. This decline is mostly attributable to the
deterioration, as addressed before, in the contract anesthesia business which
was $6.7 million less during the first six months of 1996 compared to 1995.
Operating income for the first six months of 1996 was a loss of $3.1 million
compared to income of $1.8 million during the first six months of 1995. Though
the contract anesthesia net revenue was down $7.2 million, there was not a
corresponding drop in contract labor and other direct costs associated with
these contracts. These costs were 78% and 65% of net revenue for the six months
ended June 30, 1996 and 1995, respectively.
Net interest expense for the first six months of 1996 was $2.2 million compared
to $744,000 for the first six months of 1995. This increase in interest costs
was associated with the Company's commitment, as mentioned previously, to fund
its hospital information systems and physician practice management groups, as
well as the funding needs in 1995 of the pain treatment operations. These
funding requirements increased the Company's debt and, accordingly, its debt
service.
Weighted shares used to compute earnings per share were higher in 1996 than 1995
for the reasons addressed previously.
Liquidity and Capital Resources
The Company's cash balance at June 30, 1996 was approximately $1.2 compared to
$1.8 million at the end of the year. The decrease was primarily due to the
decision to pay off a convertible debenture in the approximate amount of
$300,000 prior to conversion and the Company's continued investment spending on
its hospital information systems and physician practice management groups.
The Company entered into an accounts receivable funding program with a private
healthcare accounts receivable financing company during the first quarter of
1994 and has continued that arrangement to date. The Company has found it
necessary, from time to time , to call on its principal financing company to
provide additional cash beyond its contractual commitment.
The Company executed an Asset Purchase Agreement with ASI providing for the sale
of the Company's contract anesthesia operations effective June 1, 1996. The sale
is subject to shareholder approval and will be voted upon by the shareholders at
the Company's 1996 annual meeting. The contract anesthesia division accounted
for approximately 91% and 90% of the Company's operations in 1995 and during the
first six months of 1996 respectively.
Consequently, the future cash flows and capital resources of the Company should
be dramatically impacted by this sale. The contract anesthesia division provided
approximately $3.8 million in net cash flows during 1995. Although cash
contributions from this division have decreased in recent years, the sale of
this division will have immediate liquidity benefits to the Company. The
agreement with ASI provides that upon consummation of the sale, ASI will assume
$7.5 million in short term debt from the Company's principal lender. ASI will
also assume approximately $4.5 million of other current obligations. The Company
believes that this reduction of approximately $12.0 million in working capital
requirements will provide the Company with a more favorable working capital
position. The reduction in short term debt translates into a monthly savings of
approximately $75,000 in interest costs plus a cash inflow of $30,000 from
interest income on the promissory note from ASI. Additionally, the Company will
be paying down short term debt as collections on its accounts receivables occur.
The principal services of the Company upon consummation of the sale with ASI
will be (i) hospital information services, (ii) locum tenens services and (iii)
physician practice management services. Hospital information services and
physician practice management services, though mature as business concepts, are
essentially new business groups and did not provide a contribution to revenue in
1995 or the first quarter of 1996. Locums tenes services is a relatively new
business group, formed in January of 1995.
Though all the remaining subsidiaries and business groups of the Company are
promising, only locums tenens services has made significant revenue
contributions during 1995 and the first six months of 1996, along with the
contract anesthesia division. There can be no assurances that this business
group will be able to provide the working capital needs of the entire Company.
The Company expects to receive a primary note from ASI upon consummation of the
sale with ASI of approximately $4.0 million. However, the Company will not
benefit from reduction of the principal balance of the note until seven months
after the closing of the sale. At that time, the Company will receive principal
payments of $500,000 per month for five months beginning on January 1, 1997,
increasing to $1.5 million per month on July 1, 1997, and continuing until the
principal is paid off. Additionally, the Company is entitled to an additional
"earn-out" on a "variable note" based upon the profitability of the contracts
sold. The "earn-out can be up to $9.0 million. However, this amount is
indeterminable at this time and it cannot be assured that the benefits of any
"earn-out" will be realized.
<PAGE>
The Company is dependent upon the continuation of the accounts receivable
financing arrangement it has with its primary financing company. Although the
Company expects the finance company to continue to provide additional funding to
the Company while the Company seeks to become cash flow positive, there is no
assurance that the amount of such funding will meet the Company's requirements
or that the Company will become cash flow positive. The Company has identified
approximately $20.0 million of previously billed but uncollected accounts
receivable. The Company has contracted with a national collection group to
rebill and begin the collection effort on these accounts. Upon rebilling the
finance company is committed to purchase these receivables, upon acceptance, for
approximately $10.0 million. Although the Company expects the finance company to
accept a majority of the rebilled accounts, there is no assurance of the
ultimate accepted amount, if any.
The report of the Company's independent certified public accountants contains an
explanatory paragraph as to the Company's ability to continue as a going
concern. According to the report, the Company has experienced recurring losses,
a capital deficit, cash flow deficiencies and overfunding related to short-term
financing received by the Company that raise substantial doubt about the
Company's ability to continue as a going concern. Additionally, the Company has
not complied with certain covenants of existing loan agreements.
Certain of the Company' s assets might be worth substantially less than the
amounts shown on the Company's balance sheet if the Company is unable to
continue as a going concern and the financial statements have not been adjusted
to reflect the outcome of this uncertainty. There can be no assurance that the
future revenues will exceed operating expenses to enable the Company to
continue as a going concern.
To reduce the operating losses and improve cash flows, the Company implemented
or is in the process of implementing the following plan: (i) expand its hospital
information systems business by completing the enhanced version of its
proprietary software system and market it to hospitals, outpatient and
ambulatory surgical centers and other healthcare providers: (ii) continue to
market and grow its locums tenens services by taking advantage of a significant
market need for temporary physicians: and (iii) develop its physician practice
management services by offering a broad range of management and organizational
services to physician-sponsored networks.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information required herein is incorporated by reference from Note
C, Contingencies, in the "Notes to Consolidated Condensed Financial
Statements" included in Part I - Financial Information of this Form
10-Q.
Item 3. Defaults Upon Senior Securities
Information required herein is incorporated by reference from Notes
B, Short-term Borrowings and Long-term Debt, in the "Notes to
Consolidated Condensed financial Statements" included in Part I -
Financial Information of this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Page
----
11 Statement regarding computation of per share earnings 14
(b) Reports on Form 8-K during the quarter ended June 30, 1996:
No reports were filed on Form 8-K during the quarter ended June 30,
1996.
<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.
Allegiant Physician Services, Inc.
(Registrant)
Date: August 19, 1996 By: /s/ James R. Begnaud
--------------- --------------------------------
James R. Begnaud
Vice President, Chief Accounting
Officer, and Controller
Date: August 19, 1996 By: /s/ Timothy L. Powers
--------------- --------------------------------
Timothy L. Powers
Executive Vice President,
Treasurer and Chief Financial
Officer
<PAGE>
Exhibit 11
ALLEGIANT PHYSICIAN SERVICES, INC. AND SUBSIDIARIES
Statement Regarding Computation of Per Share Earnings
For The Three and Six Month Periods Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------
(000s omitted except for per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 15,503 13,767 15,381 13,448
======== ======== ======== ========
Number of common and common equivalent
shares outstanding 15,503 13,774 15,381 13,459
======== ======== ======== ========
Net earnings (loss) for earnings
(loss) per share ($2,923) $537 ($5,221) $1,024
Earnings (loss) per share: ($0.19) $0.04 ($0.34) $0.08
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of this exhibit.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 1,195 1,195
<SECURITIES> 0 0
<RECEIVABLES> 2,833 2,833
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,686 4,686
<PP&E> 1,514 1,514
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 9,636 9,636
<CURRENT-LIABILITIES> 27,381 27,381
<BONDS> 0 0
0 0
0 0
<COMMON> 24 24
<OTHER-SE> 43,194 43,194
<TOTAL-LIABILITY-AND-EQUITY> 9,636 9,636
<SALES> 12,264 24,806
<TOTAL-REVENUES> 12,264 24,806
<CGS> 11,322 22,561
<TOTAL-COSTS> 14,113 27,862
<OTHER-EXPENSES> 2,791 5,301
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,074 2,165
<INCOME-PRETAX> (2,923) (5,221)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,923) (5,221)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,923) (5,221)
<EPS-PRIMARY> (0.19) (0.34)
<EPS-DILUTED> (0.19) (0.34)
</TABLE>
