<PAGE> 1
Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended March 31, 1996
--------------
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From ______________to____________
Commission file number 0-27456
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EQUIMED, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-1668112
- - ------------------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
3754 LaVista Rd.
Tucker, Georgia 30084 - 5637
- - ----------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(404) 320-6211
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(Registrant's telephone number, including area code)
EQUIVISION, INC.
- - -------------------------------------------------------------------------------
(Former name or former address, 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 periods that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date. Common Stock, $.0001 no par
value per share, 28,274,349 shares outstanding as of May 13, 1996.
<PAGE> 2
EQUIMED, INC.
FORM 10-Q
For the Quarter Ended March 31, 1996
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C>
Item 1: Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at
December 31, 1995 and March 31, 1996 2
Condensed Consolidated Income Statements
for the Three Months Ended
March 31, 1995 and 1996 3
Condensed Consolidated Statement of
Shareholders' Equity for the Three Months
Ended March 31, 1996 4
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended
March 31, 1995 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
</TABLE>
1
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EquiMed, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
-------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 824 $ 2,928
Accounts receivable, net 4,988 12,958
Prepaid expenses and other current assets 547 3,564
Deferred income taxes 658 680
------------------------------
Total current assets 7,017 20,130
Property and equipment, at cost 11,337 18,729
Goodwill 1,589 37,911
Services agreements - 23,463
Non-compete agreements 263 1,832
Patient records - 1,405
Other assets 100 949
Deferred income taxes 273 273
------------------------------
$20,579 $104,692
LIABILITIES AND SHAREHOLDERS' EQUITY ==============================
Current liabilities:
Notes payable to related parties $ 725 $ -
Accounts payable 1,377 3,280
Payable to affiliates 506 304
Accrued salaries and professional fees 3,123 4,014
Other accrued expenses 1,997 6,060
Income taxes payable 7,236 5,960
Current Portion of Long-term debt 2,048 9,973
Current portion of obligations under capital lease
Related parties 596 269
Other 1,596 1,078
------------------------------
Total current liabilities 19,204 30,938
Long-term debt, net of current portion 3,188 10,036
Obligations under capital leases, net of current portion
Related parties 4,518 1,869
Other 2,643 1,590
Deferred income taxes - 2,035
Minority interests 1,171 1,388
Shareholders' equity:
Preferred stock, 1,000,000 authorized shares, none issued - -
Common stock, $ .0001 par value, authorized 100,000,000
shares, issued and outstanding 20,783,633 in 1995 and 27,566,244 2 70,145
in 1996
Additional paid-in capital 1,760 1,760
Accumulative deficit (11,907) (15,069)
------------------------------
(10,145) 56,836
------------------------------
$20,579 $104,692
==============================
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE> 4
EquiMed, Inc.
Condensed Consolidated Income Statements
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1996
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<S> <C> <C>
Net revenues $15,014 $20,732
Costs and Expenses:
Professional fees and expenses 4,147 5,287
Treatment and support services 4,262 7,756
General and administrative expenses 1,643 2,501
Depreciation and amortization 666 1,121
Amortization of EquiVision, Inc. acquisition - 159
Interest expense
Related parties 231 234
Other 267 406
Loss on sale of receivables - 209
Other income, net (34) (137)
---------------------------
Total costs and expenses 11,182 17,536
Income before minority interest,
extraordinary item and income taxes 3,832 3,196
Minority interest 306 113
---------------------------
Income before income taxes
and extraordinary item 3,526 3,083
Provision for income taxes:
Income tax expense 1,410 1,298
Cumulative adjustment to establish
deferred income taxes for change in tax status - 1,277
---------------------------
1,410 2,575
---------------------------
Income before extraordinary item 2,116 508
Extraordinary charge from refinancing
of debt, net of income taxes - (127)
---------------------------
Net income $ 2,116 $ 381
===========================
Net income per share before extraordinary item $ 0.10 $ 0.02
Extraordinary item $ - $ -
---------------------------
Net income per share $ 0.10 $ 0.02
===========================
Weighted average common shares and
equivalents 20,784 25,327
===========================
See notes to condensed consolidated financial statements
</TABLE>
3
<PAGE> 5
EquiMed, Inc.
Condensed Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1996
(Unaudited)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------- PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995,
Note 1 20,783,633 $ 2 $1,760 $(11,907) $(10,145)
Cumulative effect of
pooling-of-interests, Note 3 402,685 17 - - 17
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Balance, December 31, 1995
As restated 21,186,318 19 1,760 (11,907) (10,128)
Cash and deemed distributions
to Dr. Colkitt and affiliates - - - (3,543) (3,543)
Acquisition of EquiVision, Inc. 4,338,831 45,581 - - 45,581
Issuance of Common Stock
in connection with public
offering, net of issuance cost 2,000,000 24,200 - - 24,200
Issuance of Common Stock
in connection with 38,095 324 - - 324
acquisitions
Issuance of Common Stock 3,000 21 - - 21
Net income - - - 381 381
---------------------------------------------------------------------------
Balance, March 31, 1996 27,566,244 $70,145 $1,760 $(15,069) $ 56,836
===========================================================================
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 6
EquiMed, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1996
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $2,116 $ 381
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 666 1,281
Deferred income taxes - 1,277
Minority interest 306 113
Changes in operating assets and liabilities,
net of acquired business:
Accounts receivable (741) (1,464)
Receivables from/payable to affiliates 936 (424)
Prepaid expenses and other current assets 293 (471)
Accounts payable (303) (586)
Accrued salaries and professional fees (1,274) (516)
Other accrued expenses (1,031) 208
Income taxes payable 1,410 (1,051)
----------------------------
Net cash provided (used) by operating activities 2,378 (1,252)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for practices acquired, net of cash
acquired - (1,530)
Purchase of property and equipment (125) (218)
Decrease in other assets 367 148
----------------------------
Net cash provided (used) by investing activities 242 (1,600)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings - 8,425
Repayment of long-term debt (149) (19,448)
Proceeds from issuance of common stock - 24,221
Repayment of obligations under capital leases:
Related parties (98) (2,976)
Other (260) (1,715)
Capital contributions by primary owner 730 -
Distributions:
Primary owner (2,618) (3,543)
Minority owners - (8)
----------------------------
Net cash provided (used) by financial activities (2,395) 4,956
----------------------------
Net increase in cash 225 2,104
Cash at beginning of period 2,565 824
----------------------------
Cash at end of period $2,790 $ 2,928
============================
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 7
EquiMed, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1996
1. AGREEMENT AND PLAN OF MERGER
On October 26, 1995, Colkitt Oncology Group, Inc. (the "Oncology Group"),
EquiVision, Inc. ("EquiVision"), Douglas R. Colkitt, M.D. ("Dr. Colkitt") and
EquiMed, Inc. ("EquiMed" or the "Company") entered into an Agreement and Plan
of Merger pursuant to which, on February 2, 1996, the Oncology Group merged
with and into EquiVision and, immediately thereafter, EquiVision effected an
immediate reincorporation in Delaware and a 1-for-2 reverse stock split through
a merger (the "Reincorporation Merger") with and into EquiMed, a newly-formed
Delaware subsidiary of EquiVision, formed for the purpose of effecting the
reincorporation and reverse stock split. The merger between the Oncology Group
and EquiVision and the Reincorporation Merger are referred to collectively
herein as the "Merger". The Oncology Group was formed prior to consummation of
the Merger to acquire all of the stock or assets of various corporations,
partnerships and joint ventures which owned or controlled 30 radiation oncology
centers. All share and per share amounts in this report reflect the 1-for-2
reverse stock split that was effected upon consummation of the Reincorporation
Merger.
The stockholders of the Oncology Group's received 20,783,633 shares of
EquiVision common stock as consideration for the merger with EquiVision. Upon
consummation of the Merger, the Company had 25,122,464 shares of common stock
outstanding. The business combination has been treated for accounting purposes
as a reverse purchase transaction because the stockholders of the Oncology
Group obtained a majority of the shares of the combined Company upon completion
of the acquisition.
The purchase price of EquiVision was $45,600,000 and has been allocated to the
assets purchased and the liabilities assumed based upon the fair market values
at the date of acquisition. The excess of purchase price over the fair value
of the net assets was $38,000,000 and has been recorded as goodwill.
Upon completion of the Merger, certain of the entities which comprised the
Oncology Group ceased to qualify as S Corporations and became subject to
corporate income taxes. As a result, the Company recorded a cumulative
adjustment of $1,277,000 to establish deferred income taxes for the change in
tax status. These deferred taxes represented the cumulative temporary
differences between financial reporting and tax reporting.
6
<PAGE> 8
EquiMed, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
1. AGREEMENT AND PLAN OF MERGER (CONTINUED)
In order to effect the Merger and in connection therewith, the stockholders'
approved an increase of the shares of common stock of the Company from
20,000,000 shares to 100,000,000 shares.
2. BASIS OF PRESENTATION
As a result of the Merger, which has been accounting for as a reverse purchase
transaction, the accompanying unaudited condensed financial statements of
EquiMed reflects the financial position, results of operations and cash flows
of Colkitt Oncology Group, Inc. These financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further information, refer
to the financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1995.
3. OTHER BUSINESS ACQUISITIONS
On March 1, 1996, the Company acquired the primary operating assets of two
ophthalmology practices for $3,115,000, consisting of $1,541,000 in cash
(including acquisition costs), notes payable in the amount of $1,250,000 and
$324,000 in common stock. In addition, the Company also acquired the the
primary operating assets of a medical oncology practice on March 1, 1996, for
$1,486,000, consisting of $1,486,000 in cash (including acquistion costs).
These business combinations have been accounted for as purchases.
On March 18, 1996, the Company consummated a merger with an ophthalmology
practice and ambulatory surgery center for approximately 403,000 shares of
EquiMed common stock valued at approximately $5,000,000. The business
combination was accounted for by the pooling-of interest method. Because this
acquisition was not material, the Company's financial statements, share and per
share amounts have not been restated to include the accounts and operations for
periods to January 1, 1996.
7
<PAGE> 9
EquiMed, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
3. OTHER BUSINESS ACQUISITIONS (CONTINUED)
A summary of assets acquired in the business combinations accounted for as
purchases, during the three months ended March 31, 1996 is (in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents $ 1,497
Accounts recievable 6,506
Prepaid expense and other current assets 2,573
Property & Equipment 8,086
Goodwill 38,070
Services agreements 21,877
Non-compete agreements 1,930
Patient records 1,437
Other 811
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$82,787
=======
</TABLE>
The pro forma unaudited results of operations for the three months ended March
31, 1995 and 1996, assuming consummation of the purchases described above, as
of January 1, 1995, are (in thousands, except share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1996
-----------------------
<S> <C> <C>
Net revenues $23,690 $24,235
Income before extraordinary item 2,395 366
Net income 2,229 239
Net income per share before
extraordinary item .10 .01
Net income per share .09 .01
</TABLE>
8
<PAGE> 10
EquiMed, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
4. AMENDMENT OF REVOLVING CREDIT AGREEMENT
On May 14, 1996, Company entered into an amendment of its $20,000,000 Revolving
Credit Agreement ("Credit Agreement") with a bank. The amendment limits future
borrowings under the Credit Agreement to $15,000,000 and limits future
acquisitions during the remaining term of the Credit Agreement which matures
November 30, 1996, to an aggregate of $50,000,000. Future borrowings under the
Credit Agreement are limited to the funding of ongoing working capital and can
not be used for acquisitions. The amendment permits the issuance of common
stock and notes payable, as defined by certain restrictive covenants, to
consummate future acquisitions.
Borrowings under the current Credit Agreement at March 31, 1996 were
approximately $8,425,000 and have been classified by the Company in the current
portion of long-term debt.
5. PUBLIC OFFERING OF COMMON STOCK
On February 14, 1996, the Company consummated the sale of 2,000,000 shares of
common stock in connection with a public offering at $14 per share. Net
proceeds from the offering were approximately $24,200,000.
6. COMMITMENTS AND CONTINGENCIES
The Company is insured with respect to medical malpractice risks on a
claims-made basis. Should these claims-made policies not be renewed or
replaced with equivalent insurance, claims based on occurrences during the term
of the respective policies, but asserted subsequently would be uninsured.
At March 31, 1996, the Company has several malpractice claims outstanding which
have arisen in the normal course of business. In addition, it is possible that
certain incidents may have occurred which have not been reported as of this
date. The Group has policies and procedures in place to track and monitor
incidents of significance.
9
<PAGE> 11
EquiMed, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Note 13 to the Oncology Group's combined financial statements included in
EquiMed's 1995 annual financial statements provides a detailed description of
certain litigation involving Dr. Colkitt, the Company's chairman and majority
stockholder, and several related entities and the former holders of minority
interests in certain of the Company's centers. The Company believes this
litigation will ultimately be settled through Dr. Colkitt's purchase of the
minority interests in these entities (collectively the "Joint Venture
Entities"). Although mergers approved on August 30, 1995 effected the transfer
of the minority interests in the Joint Ventures Entities to Dr. Colkitt, the
purchase price to be paid for such interests has not yet been determined. At
August 30, 1995, the carrying value of the minority interests of the Joint
Venture Entities in the amount of $375,000 was reported as a capital
contribution by Dr. Colkitt. At the date the purchase price is determined, the
Company expects to record the difference between the carrying value of the
minority interests in the Joint Venture Entities and the purchase price as a
capital contribution.
Based on management's knowledge of the facts to date and consultation with its
legal advisors, management believes the ultimate disposition of these matters
will not have an adverse effect on the Company's financial position or the
results of operations.
7. RELATED PARTY TRANSACTIONS
The Company entered into a receivables purchase agreement on April 27, 1995.
Under the terms of the agreement, receivables are transferred to Oncology
Funding Corporation (a company that is wholly-owned by Dr. Colkitt) which then
factors the receivables with an unrelated financing company, John Alden Asset
Management Company ("Alden"). The factored receivables may be denied by Alden
for various reasons including nonpayment by the payor. The transfer of
receivables to Alden is recognized as a sale and the difference between the
sales price (adjusted for the accrual of probable adjustments) and the net
receivables is recognized as a gain or loss on the sale of receivables. Under
the receivables purchase agreement, the balance of receivables transferred that
remained uncollected at any date is limited to $6,000,000. Proceeds to the
Company from receivables sold under this agreement were approximately
$8,278,000 for the three months ended March 31, 1996. At March 31, 1996, the
balance of receivables transferred that remain uncollected was approximately
$3,364,000.
10
<PAGE> 12
EquiMed, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited) (continued)
7. RELATED PARTY TRANSACTIONS
The Company has contracted with National Medical Financial Services ("NMFS"), a
company in which Dr. Colkitt is the primary and controlling shareholder, to
perform billing services for the Company. Effective January 1, 1995, the
contract with NMFS was renegotiated and the fee for billing services was
reduced to 3% of collected revenue. In addition, NMFS agreed to begin
performing accounting services for the Company for a fee of 1% of collected
revenues. As a result, a portion of the group's accounting personnel were
transferred to a company controlled by Dr. Colkitt and a subcontractor of NMFS.
During the three months ended March 31, 1995 and 1996, the Group expensed
$635,000 and $585,000, respectively, for services provided by NMFS. The Group
estimates that the cost to provide these services internally, prior to the
contract with NMFS, was approximately 3% of net revenues.
The actual cost of accounting, technical and management services provided by
OSC, as described in Note 1 of the Oncology Group's 1995 combined financial
statements, of $1,258,000 and $1,062,000 for the three-month periods ended
March 31, 1995 and 1996, respectively, are included in general and
administrative expenses.
In addition, the Company has operating and capital leases which related parties
as described in Note 8 to the Oncology Group's 1995 combined financial
statements included elsewhere herein.
8. SUBSEQUENT EVENTS
Effective April 1, 1996, the Company acquired the primary operating assets of
two ophthalmology practices for $2,565,000, consisting of $1,315,000 in cash
(including acquisition costs) and a note payable in the amount of $1,250,000.
These business combinations will be accounted for as purchases.
On April 11, 1996, the Company consummated a merger with an ophthalmology
practice, ambulatory surgery center and optical shop for approximately 708,000
shares of EquiMed common stock valued at approximately $9,150,000. The
business combination will be accounted for by the pooling-of-interests method.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
Results Of Operations
At March 31, 1996, the Company owned or controlled 31 oncology centers, 20
ophthalmology centers, eight ambulatory surgery centers ("ASCs") and managed
five additional oncology centers and one ASC. At March 31, 1995, the Company
owned or controlled 30 oncology centers and managed four additional oncology
centers. The increase in centers owned or controlled was attributable to
acquisitions during the three months ended March 31, 1996.
Net revenues for the three months ended March 31, 1996 increased to $20,732,000
from $15,014,000 for the same period in 1995. The increase in net revenues was
entirely attributable to acquisitions.
Professional fees and expenses are incurred at center locations and consist of
physician compensation and liability insurance. Physicians are primarily
compensated on either the profitability of an individual center or a percentage
of professional fees generated. Professional fees and expenses during the
three month period ended March 31, 1996 increased to $5,287,000 from $4,147,000
for the same period in 1995, or an increase of 27.5%. These increased expenses
resulted from acquisitions. As a percentage of net revenues, professional fees
and expenses decreased to 25.5% in 1996 from 27.6% in 1995. This decrease was
due to a change in the mix of compensation methods.
Treatment and support services consist of center-related, non-physician payroll
costs, medical, treatment, and optical costs, marketing and other
center-related costs. Treatment and support services during the three month
period ended March 31, 1996 increased to $7,756,000 from $4,262,000 for the
same period in 1995, or an increase of 82%. These increased expenses resulted
from acquisitions. As a percentage of net revenues, treatment and support
services increased to 37.4% in 1996 to 28.4% in 1995. This increase is
primarily attributable to the increase in net revenues attributable to
ophthalmology centers and related ASCs relative to those of oncology centers.
Ophthalmology centers and ASCs have higher levels of costs associated with
their operation, as compared to oncology centers.
General and administrative expenses consist of billing, accounting,
development, legal and corporate administrative expense. General and
administrative expenses during the three months ended March 31, 1996 increased
to $2,501,000 from $1,643,000 for the same period in 1995, or an increase of
52%. As a percentage of net revenues, general and administrative expenses
increased to 12.1 % in 1996 from 10.9% in 1995. These increased expenses
resulted from (i) an increase in the number of centers in operation, (ii) an
increase in development efforts and (iii) the continued establishment of an
administrative base to support ongoing expansion.
12
<PAGE> 14
Results of Operations (continued)
Depreciation consists of depreciation of property and equipment. Amortization
consists primarily of the amortization of excess costs of acquired businesses
over fair value of the net indentifiable assets acquired in connection with
acquisitions, service agreements and non-compete agreements. Depreciation and
amortization increased to $1,280,000, or 6.2% of net revenues, for the three
month period ended March 31, 1996 from $666,000 or 4.4%, for the same period in
1995, as a result of acquisitions.
Interest expense increased to $849,000, or 4.1% of net revenues, for the three
month period ended March 31, 1996 from $498,000 or 3.3% of the net revenues for
the same period in 1995, primarily as a result of increased borrowings in
conjuction with acquisitions and borrowings under its factoring arrangement.
Minority interest primarily represents interest in individual cancer centers
held by entities other than EquiMed. Such entities have included hospitals or
other such health care providers which affiliate with the Company. Minority
interest in the earnings of such centers decreased to $113,000, or 0.6% of net
revenue for the three month period ended March 31, 1996 from $306,000, or 2% of
net revenues for the same period in 1995. This decrease was primarily the
result of the Company acquiring increased ownership in several such centers.
During the three month period ended March 31, 1996, the Company recorded income
tax expense of $1,298,000 and a cumulative adjustment of $1,277,000 to
establish deferred income taxes. Upon completion of the business combination
between the Colkitt Oncology Group, Inc.("Oncology Group") and EquiVision, Inc.
("EquiVision") and subsequent merger with and into EquiMed, Inc. ("EquiMed" or
the "Company"), certain of the entities which comprised the Oncology Group
ceased to qualify as S Corporations and became subject to corporate income
taxes. The change from S Corporation to C Corporation resulted in the Company
recording the cumulative effect of deferred taxes due to this change in tax
status. During the three month period ended March 31, 1995, the Company
recorded income tax expense of $1,410,000.
Liquidity And Capital Resources
At March 31, 1996, the Company had cash and cash equivalents of $ 2,928,000.
During the three month period ended March 31, 1996, the Company used cash in
operating and investing activities of $1,252,000 and $1,600,000, respectively,
and generated cash of $4,956,000 in financing activities.
13
<PAGE> 15
Liquidity And Capital Resources (continued)
Cash flows from operating activities during the three month period ended March
31, 1996 included significant adjustments for cash provided by depreciation and
amortization of $1,281,000 and deferred income taxes of $1,277,000. Cash was
used for the accumulation of accounts receivable and reductions in accounts
payable, accrued salaries and professional expenses and income taxes payable of
$1,464,000, $586,000, $516,000 and $1,051,000, respectively. The accumulation
of accounts receivable during the period was attributable to a reduction in the
level of accounts receivable sold under a factoring arrangement and to a lesser
extent, the lag related to revenue collections associated with acquisitions.
Significant investing activities during the three month period ended March 31,
1996, included cash payments in connection with acquisitions of $1,530,000.
Significant financing activities during the three month period ended March 31,
1996, included $24,221,000 in proceeds from the sale of common stock, repayment
of $24,139,000 in long-term debt and capital lease obligations and $8,425,000
in proceeds from an institutional lender.
On December 4, 1995, the Company received a committment letter from its
existing lender (the "Commitment Letter"), which would increase its existing
$20,000,000 credit agreement (the "Credit Agreement"). The Commitment Letter
expired on its terms on February 29, 1996. After continuing to discuss the
terms of an increase in the Credit Agreement, on May 14, 1996, the Company
entered into an amendment to Credit Agreement which limits future borrowings
under this facility to $15,000,000, and limits future acquitions during the
remaining term of the Credit Agreement which matures November 30, 1996, to an
aggregate of $50,000,000. Future borrowings under the Credit Agreement are
limited to the funding of working capital and can not be used for acquisitions.
The amendment permits the issuance of common stock and notes payable, as
defined by certain restrictive covenants, to consummate future acquisitions.
The Company is currently pursuing a new line of credit facility with other
commercial lenders to replace the Credit Agreement prior to its maturity on
November 30, 1996.
During 1995, the Company entered into a factoring arrangement with a major life
insurance company to provide capital. While this facility can provide up to
$6,000,000 in financing, under the terms of the revised Credit Agreement
borrowing can not exceed $5,000,000.
The Company's principal sources of liquidity for working capital and current
operations will be its Credit Agreement, as amended, its factoring arrangement
and operating cash flows. The Company has been considering other capital
alternatives to finance its acquisitions strategy. These alternatives include,
among others, an underwritten public or private offering of debt securities.
While the Company believes it will be able to secure adequate funds which, when
combined with the issuance of common stock and promissory notes, will enable it
to consummate its planned acquisitions, there can be no assurance that it will
be able to do so.
14
<PAGE> 16
PART II - OTHER INFORMATION
Item 1: Legal Proceedings (No response required)
Item 2: Changes in Securities
As described more fully under Item 4 below, on February 2, 1996, the
Company completed two mergers, the second of which effected a reincorporation
in Delaware and a 1-for-2 reverse stock split of the Company's common stock.
Pursuant to these mergers, the Company's authorized common stock increased from
20,000,000 to 100,000,000 share and its outstanding common stock increased from
4,338,831 to 25,122,464 shares. The rights of holders of the Company's common
stock were not materially modified, limited or qualified by the merger.
Item 3: Defaults upon Senior Securities (No response required)
Item 4: Submission of Matters to a Vote of Security Holders
A special meeting of stockholders was held on February 2, 1996. At
the special meeting, the following matters were voted upon by the
Company's stockholders.
(1) Approval of the merger of Colkitt Oncology Group, Inc.
("COG") and EquiVision, Inc., the Company's predecessor
("EquiVision") pursuant to an Agreement and Plan of Merger
(the "Merger Agreement") among COG, Dr. Douglas R. Colkitt,
EquiVision and the Company pursuant to which COG would be
merged with and into EquiVision and all shares of common stock
of COG outstanding at February 2, 1996, would be converted
into an aggregate 20,783,633 shares of EquiVision common stock
(the"COG Merger").
<TABLE>
<S> <C>
For: 2,750,847
Against: 4,650
Abstain: 13,716
</TABLE>
(2) Approval of the merger of EquiVision with and into the
Company pursuant to the Merger Agreement, as a result of which
each share of EquiVision common stock would be converted into
one-half of one share of EquiMed common stock (the
"Reincorporation Merger").
<TABLE>
<S> <C>
For: 2,733,544
Against: 4,550
Abstain: 49,120
</TABLE>
15
<PAGE> 17
Item 4: Submission of Matters to a Vote of Security Holders (continued)
(3) Approval of an amendment to EquiVision's Articles of
Incorporation increasing the authorized shares of common stock
from 20,000,000 share to 100,000,000 shares for purposes of
effecting the COG Merger.
<TABLE>
<S> <C>
For: 2,750,000
Against: 5,000
Abstain: 31,816
</TABLE>
All share results reflect the 1-for-2 reverse stock split effective
upon consummation of the Reincorporation Merger.
Item 5: Other Information (no response required)
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re: computation of earnings per share
(b) Reports on Form 8-K
Form 8-K filed February 20, 1996.
16
<PAGE> 18
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.
EQUIMED, INC.
-------------------------------------------
(Registrant)
/s/ Larry W. Pearson
-------------------------------------------
Larry W. Pearson
President and Chief Executive Officer
May 13, 1996 /s/ William E. Pritts II
--------------------------------------------
William E. Pritts II
Chief Financial Officer
17
<PAGE> 19
EQUIMED, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
11 Statement Regarding Computation of Earnings Per Share 19
27 Financial Data Schedule (for SEC purposes only).
</TABLE>
18
<PAGE> 1
EXHIBIT 11
EQUIMED, INC
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1995 1996
-----------------
<S> <C> <C>
Weighted average common shares outstanding 20,784 25,045
Net effect of dilutive stock options and warrants -
based on the treasury stock method - 282
-----------------
Weighted average common share and
equivalents outstanding 20,784 25,327
=================
Net income $2,116 $ 381
=================
Net income per share $ 0.10 $ 0.02
=================
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,928,000
<SECURITIES> 0
<RECEIVABLES> 12,958,00
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,130,000
<PP&E> 18,729,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 104,692,000
<CURRENT-LIABILITIES> 30,938,000
<BONDS> 0
0
0
<COMMON> 70,145,000
<OTHER-SE> 56,836,000
<TOTAL-LIABILITY-AND-EQUITY> 104,692,000
<SALES> 0
<TOTAL-REVENUES> 20,732,000
<CGS> 0
<TOTAL-COSTS> 16,687,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 849,000
<INCOME-PRETAX> 3,083,000
<INCOME-TAX> 2,575,000
<INCOME-CONTINUING> 508,000
<DISCONTINUED> 0
<EXTRAORDINARY> (127,000)
<CHANGES> 0
<NET-INCOME> 381,000
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
