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 June 30, 1997
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
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.)
2171 Sandy Drive State College, Pennsylvania 16801
(Address of principal executive offices) (Zip Code)
(814) 238-0375
(Registrant's telephone number, including area code)
N/A
(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 par value per share, 4,454,443 shares outstanding
as of July 31, 1997.
<PAGE>
EquiMed, Inc.
FORM 10Q
For the Quarter Ended June 30, 1997
PART 1 - FINANCIAL INFORMATION
Page
Item 1: Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at
December 31, 1996 and June 30, 1997 1
Condensed Consolidated Income Statements for
the Six Months ended June 30, 1996 and 1997 3
Condensed Consolidated Income Statements for
the Three Months ended June 30, 1996 and 1997 4
Condensed Consolidated Statement of
Stockholders' Equity for the Six Months
ended June 30, 1997 5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended
June 30, 1996 and 1997 6
Notes to Condensed Consolidated Financial
Statements 8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
<PAGE>
EquiMed, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
December 31, June 30,
1996 1997
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 27,010 $ 3,691
Accounts receivable, net 6,307 8,589
Receivable from affiliates 9,718 18,192
Prepaid expenses and other current
assets 1,607 2,935
Deferred income taxes 3,171 3,171
Total current assets 47,813 36,578
Property and equipment, net 12,379 23,373
Management agreements, net of
accumulated amortization 5,490 14,979
Advances to/(from) principal
shareholder 5,025 (3,714)
Other assets 884 930
71,591 72,146
Liabilities and stockholders' equity
Current liabilities
Accounts payable 1,312 2,409
Payable to affiliates 7,815 0
Accrued salaries and professional
fees 3,243 3,203
Other accrued expenses 6,006 6,923
Income taxes payable 7,921 9,499
Current portion of long-term debt 686 4,338
Current portion of obligations under
capital leases:
Related parties 354 271
Other 717 1,770
Total current liabilities 28,054 28,413
Long-term debt, net of current portion 2,431 7,359
Obligations under capital leases, net
of current portion:
Related parties 1,545 1,212
Other 1,853 5,890
Deferred income taxes 771 771
Minority interests 1,473 1,937
Stockholders' equity:
Preferred stock, 1,000,000 authorized
shares, none issued 0 0
Common stock, $.0001 par value,
authorized 16,666,666 shares,
issued and outstanding 4,765,246
as of December 31, 1996 and issued
4,765,246 and outstanding 4,475,526
as of June 30, 1997 3 3
Less Treasury stock, 289,720 shares,
at cost as of June 30, 1997 0 (5,638)
Additional paid-in capital 81,600 81,600
Partner's Capital 657 657
Retained deficit (46,796) (50,058)
35,464 26,564
71,591 72,146
See notes to condensed consolidated financial statements
<PAGE>
EquiMed, Inc.
Condensed Consolidated Income Statements
(in thousands, except per share amounts)
(Unaudited)
Six months ended
June 30,
1996 1997
Net revenues $50,142 $36,038
Costs and expenses:
Professional fees and expenses 13,261 7,193
Treatment and support services 18,579 13,603
General and administrative expenses 5,875 4,021
Depreciation and amortization 2,672 2,341
Amortization of EquiVision, Inc.
acquisition 396 0
Interest expense: 0 0
Related parties 306 317
Other 1,050 838
Loss on sale of receivables 361 273
Other income, net (280) (305)
Total costs and expenses 42,220 28,281
Income before minority interest,
extraordinary items and income taxes 7,922 7,757
Minority interest 281 441
Income before income taxes 7,641 7,316
Provision for income taxes 3,145 1,540
Cumulative adjustment to establish
deferred income taxes 1,277 0
Total provision for income taxes 4,422 1,540
Net income before extraordinary charge 3,219 5,777
Extraordinary charge for refinancing of
debt, net of income taxes 127 0
Net income 3,092 5,777
Net income per share before extraordinary
charge: $ 0.69 $ 1.26
Extraordinary charge -- --
Net income per share $ 0.69 $ 1.26
Weighted average common shares and
equivalents 4,475 4,600
See notes to condensed consolidated financial statements
<PAGE>
EquiMed, Inc.
Condensed Consolidated Income Statements
(in thousands, except per share amounts)
(Unaudited)
Three months ended
June 30,
1996 1997
Net revenues $29,410 $18,331
Costs and expenses:
Professional fees and expenses 7,974 3,572
Treatment and support services 10,823 7,329
General and administrative expenses 3,374 2,389
Depreciation and amortization 1,551 1,219
Amortization of EquiVision, Inc.
acquisition 237 0
Interest expense: 0 0
Related parties 72 156
Other 644 426
Loss on sale of receivables 152 146
Other income, net (143) (216)
Total costs and expenses 24,684 15,021
Income before minority interest,
extraordinary items and income taxes 4,726 3,310
Minority interest 168 149
Income before income taxes 4,558 3,161
Provision for income taxes 1,847 188
Cumulative adjustment to establish
deferred income taxes 0 0
Total provision for income taxes 1,847 188
Net income before extraordinary charge 2,711 2,974
Extraordinary charge for refinancing of
debt, net of income taxes 0 0
Net income 2,711 2,974
Net income per share before extraordinary
charge: $ 0.57 $ 0.66
Extraordinary charge -- --
Net income per share $ 0.57 $ 0.66
Weighted average common shares and
equivalents 4,734 4,527
See notes to condensed consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
EquiMed, Inc.
Condensed Consolidated Statement of Stockholders' Equity
Six Months Ended June 30, 1997
(Unaudited)
(in thousands, except share amounts)
Additional
Common Stock Treasury Stock Paid-in Partners' Retained
Shares Amount Shares Cost Capital Capital Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996, 4,765,246 $3 $81,600 $657 $(46,796) $35,464
Dividend (9,039) (9,039)
Repurchase of common stock
using Treasury method 289,720 (5,638) (5,638)
Net Income 5,777 5,777
Balance, June 30, 1997 4,765,246 $3 289,720 (5,638) $81,600 $657 $(50,058) $26,564
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
EquiMed, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Six months ended
June 30,
1996 1997
Cash flows from operating activities
Net income 3,092 5,777
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 3,069 2,341
Deferred income taxes 1,277
Minority interest 276 441
Changes in operating assets and
liabilities, net of acquired
businesses
Accounts receivable (3,848) (2,282)
Receivables from/payable to
affiliates (2,082) (16,289)
Prepaid expenses and other
current assets 682 (1,328)
Accounts payable (1,428) 1,097
Accrued salaries and benefits (966) (40)
Other accrued expense (512) 917
Income taxes payable (1,561) 1,578
Net cash (used in) operating activities (2,001) (7,789)
Cash flows from investing activities
Payments for practice acquired, net of
cash acquired (3,033) (5,933)
Purchase of property and equipment (988) (1,091)
Decrease in other assets (83) (46)
Net cash used in investing activities (4,104) (7,070)
Cash flows from financing activities
Proceeds from long-term borrowings 13,361 1,345
Repayment of long-term debt (20,051) (327)
Proceeds from issuance of common stock 24,222 0
Repurchase of common stock (5,638)
Repayment of obligations under capital
leases:
Related parties (3,213) (375)
Other (2,006) (364)
Distributions:
Primary owner (3,543) (3,101)
Minority owners (25) 0
Net cash provided by (used in) financing
activities 8,745 (10,684)
Net increase/(decrease) in cash 2,640 (23,319)
Cash at beginning of period 824 27,010
Cash at end of period 3,464 3,691
See notes to condensed consolidated financial statements
<PAGE>
EquiMed, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1997
1. Business, Organization and Basis of Presentation
EquiMed, Inc., a Delaware corporation ("EquiMed" or the
"Company"), is the legal successor to Equivision, Inc., a
Pennsylvania corporation ("Equivision"), which was
incorporated in October 1991 and commenced operations as an
ophthalmology-related and physician practice management
business, effective January 1, 1992. Equivision completed
its initial public offering in November 1993 and has been a
reporting company under the Securities Exchange Act of 1934
(the "Exchange Act") since that time.
EquiMed is the result of the merger between Equivision and
Colkitt Oncology Group, Inc., a Delaware corporation (the
"Oncology Group"), and the subsequent reincorporation merger
of Equivision with and into its wholly owned Delaware
subsidiary, EquiMed. These two mergers are referred to
collectively herein as the "Merger." The business
combination of the Oncology Group and Equivision was
accounted for as a reverse purchase. As a result, the
Oncology Group was considered for financial reporting
purposes as the acquiror. The Merger was consummated on
February 2, 1996, and a follow-up public offering was
completed on February 15, 1996 consisting of shares sold by
the Company and a selling stockholder. The Oncology Group
was formed in order to facilitate the acquisition by
Equivision, of EquiMed Common Stock and the subsequent
acquisition by EquiMed, of the stock and assets of various
corporations, partnerships and joint ventures owning or
controlling 30 radiation oncology centers comprising the
Oncology Group. Pursuant to the merger agreement the
stockholders of the Oncology Group received approximately
21 million shares of the Company's common stock (the "Common
Stock"). Douglas R. Colkitt, M.D., the principal
stockholder of the Oncology Group, is currently the
Chairman, Chief Executive Officer and also the principal
stockholder of the Company. Dr. Colkitt became the Chief
Executive Officer of EquiMed on January 1, 1997. Pursuant
to the Merger, EquiMed succeeded to all of the assets,
liabilities and contractual obligations of Equivision and of
the Oncology Group.
In addition to the acquisition of the radiation oncology
centers, the Oncology Group had entered into management
agreements (the "Management Agreements") with the
professional corporations affiliated with such radiation
oncology centers and owned by Dr. Colkitt. These
professional corporations employ physicians that maintain
medical practices and provide medical care to patients
receiving treatment at the radiation oncology centers.
In general, the Management Agreements provide that EquiMed,
as the surviving corporation of the Merger, must supply the
professional corporations with offices and facilities, non-
professional personnel, inventory, supplies and management
and administrative services. Under the terms of the
Management Agreements, EquiMed is responsible for billing
and collecting the receivables of the professional
corporations. Although each professional corporation has
legal title to its receivables and net revenues from patient
care, EquiMed is an agent of each of the professional
corporations for the purposes of billing and collection
activities.
The Company currently owns, operates or manages 35 radiation
oncology centers (the "Oncology Centers") and operates or
manages the professional corporations affiliated with such
Oncology Centers.
In addition, the Company currently manages five
complementary subspecialty medical practices in medical
oncology, urology, and internal medicine. The professional
corporations and the subspecialty medical practices are
hereinafter collectively referred to as the "Affiliated
Medical Practices."
EquiMed is a transnational holding company for a group of
companies focused primarily on the provision of physician
practice management services, information technology and
outsourcing services primarily to the health care industry.
The Company provides medical practice management services to
the Oncology Centers and Affiliated Medical Practices. In
addition, through its management services organization
division (the "MSO Division"), the Company provides data
processing, billing, accounting, collections and other
administrative and outsourcing services to the health care
industry and other businesses. The Oncology Centers and
Affiliated Medical Practices provide medical services in
selected U.S. geographic markets. Through wholly owned and
majority owned subsidiaries, the Company also engages in
real estate leasing, provides medical and legal
transcription services, established and operates a cosmetic
laser treatment center and is involved, through a captive
insurance company, in the reinsurance of professional
liability for the Oncology Centers and the Affiliated
Medical Practices and workers' compensation insurance.
In June 1997, the Board of Directors of the Company approved
a one-for-six reverse split of Common Stock (the "Reverse
Split") which took effect on August 11, 1997. The Board
believes the Reverse Split is desirable for several reasons.
The Reverse Split should enhance the acceptability of the
Common Stock by the financial community and investing
public. The reduction in the number of issued and
outstanding shares of Common Stock by the Reverse Split is
expected to increase the per share market price of Common
Stock. The Board also believes that the Reverse Split will
result in a broader market for the Common Stock than that
which currently exists. All share and per share data have
been adjusted to give retroactive effect to the Reverse
Split.
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 presentation have been included. Operating
results for the six month period ended June 30, 1997 are not
necessarily indicative of the results that may be expected
for the year ended December 31, 1997. For further
information, refer to the financial statements and footnotes
thereto in the Company's annual report on Form 10-K for the
year ended December 31, 1996.
2. Other Business Acquisitions
On January 1, 1997, the Company acquired several support
companies from Douglas R. Colkitt, M.D. for $2,738,755 in
cash (including acquisition costs). These business
combinations have been accounted for as purchases. Purchase
price in excess of book value of these related entities
wholly owned by Dr. Colkitt have been reflected as dividends
paid.
On January 3, 1997, the Company acquired the assets of
Prophecy Health Management, Inc. for $500,000, consisting of
$450,000 in cash (including acquisition costs) and notes
payable in the amount of $50,000. The business combination
was accounted for as a purchase.
On January 8, 1997, the Company acquired the assets of three
court reporting companies known as Doyle Court Reporting for
$4,473,471, consisting of $2,473,471 in cash (including
acquisition costs), and notes payable in the amount of
$2,000,000 plus an additional earnout of $300,000 in cash.
The business combination was accounted for as a purchase.
On February 5, 1997, the Company acquired the assets of
Riverdale Home Therapies, Inc. for $2,271,000 in cash
(including acquisition costs). The business combination was
accounted for as a purchase.
On February 11, 1997, the Company acquired the assets of
Oaklane Cancer & Hematology Clinic for $2,291,000,
consisting of $1,191,000 in cash (including acquisition
costs) and notes payable in the amount of $1,100,000. The
business combination was accounted for as a purchase.
On April 1, 1997, the company acquired several support
companies from Douglas R. Colkitt, M.D. for $6,000,000 in
cash (including acquisition costs), plus potential earn-out
of up to $9,300,000 payable in Common Stock in the event the
Management Services Companies achieve aggregate combined
pre-tax earnings of $3,500,000 in 1997. These business
combinations have been accounted for as purchases. Purchase
price in excess of book value of these related entities
wholly owned by Dr. Colkitt has been reflected as dividends
paid.
A summary of assets acquired in the business combinations
accounted for as purchases, during the six months ended
June 30, 1997 is (in thousands):
Cash $ 880
Accounts receivable 1,183
Prepaid expense and other current assets 441
Property & Equipment 11,211
Management agreements 8,857
$22,572
The pro forma unaudited results of operations for the six
months ended June 30, 1996 and 1997, assuming consummation
of the purchases described above, as of January 1, 1996, are
(in thousands, except per share amounts).
Three months ended Six months ended
June 30, June 30,
1996 1997 1996 1997
Net revenues $32,639 $18,935 $58,022 $37,272
Income before
extraordinary items 2,582 2,974 3,291 6,484
Net Income 2,582 2,974 3,164 6,484
Net income per share
before extraordinary
item .55 .66 .74 1.41
Net income per share .55 .66 .71 1.41
3. Business Dispositions
Effective on November 1, 1996, the Company sold its
ophthalmology centers (the "Ophthalmology Division") to
Physician Resource Group and its wholly owned subsidiary,
PRG Georgia, Inc. (collectively, "PRG"). The consideration
received by the Company for the sale to PRG was
approximately $55,077,000 in cash and the assumption by PRG
of approximately $16,611,000 of liabilities. In addition,
the Company agreed to assist PRG in its acquisition of
additional ophthalmology practices from November 1996 to
April 1997 in consideration for negotiated fees and expenses
based on the number of additional ophthalmology practice
acquisitions accomplished in such period.
The operating results of the Ophthalmology Division included
in the Company's 1996 results of operations for the period
from February 1, 1996 through June 30, 1996 are as follows
(amounts in thousands):
Net Revenues $22,615
Costs and expenses
Professional expenses 6,570
Center operating expenses 10,114
General and administrative expenses 3,082
Depreciation and amortization 1,397
Interest expense 595
Other income, net 0
Total costs and expenses $21,746
Net income before taxes 869
Minority Interest 38
Provision for income taxes 331
Net income $ 498
4. Commitments and Contingencies
In connection with the Merger, Dr. Colkitt has indemnified
the Company from any income tax liabilities, if any, not
reflected in the financial statements of the Oncology Group
related to any period or periods prior to the Merger (the
"General Indemnification Agreement").
On March 21, 1996, the Company entered an appearance as a
plaintiff to a declaratory judgment action commenced
August 30, 1995, in the Delaware Court of Chancery. The
litigation seeks a declaration that the merger of the non-
professional component of eight oncology centers into the
Oncology Group prior to the Merger was effected in
accordance with applicable Delaware law and that the merger
consideration was fair to the interests held by minority
shareholders (the "Minority Holders") in connection with the
purchase of their shares. The Minority Holders have filed
answers and counterclaims in the Delaware action against the
Company and other counterclaim defendants for breach of
fiduciary duty, breach of contract, fraud and other
violations of Delaware statutory law. The counterclaims
seek rescission of the August 1995 mergers of the eight
corporations and compensatory and/or rescissory damages.
The Minority Holders allege that the value of their holdings
that were cancelled pursuant to these mergers exceeded
$50,000,000.
While Dr. Colkitt and the entities that were merged into the
Company pursuant to the Merger believe they have meritorious
defenses to the allegations of the Minority Holders,
Dr. Colkitt has entered into an agreement with the Company
to fully indemnify the Company against any damage, loss,
expense or liability, including attorneys' fees and
expenses, incurred by the Company resulting from the
litigation with the Minority Holders (the "MH
Indemnification Agreement").
As a part of the General and MH Indemnification Agreements,
Dr. Colkitt is required to place shares of the Company's
stock held by him with the Company. Dr. Colkitt has placed
shares of the Company's stock with the Company based upon
the Company's estimate of any potential damage, loss,
expense or liability, including attorneys' fees and
expenses, which may be incurred by the Company resulting
from the litigation with the Minority Holders and from any
income tax liabilities not reflected in the financial
statements of the Oncology Group related to any period or
periods prior to the Merger.
Based upon 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.
On May 15, 1997, the Company filed Demand for Arbitration
before the American Arbitration Association in Philadelphia,
Pennsylvania to enforce certain terms of the Asset Purchase
Agreement dated October 7, 1996 between the Company and PRG
(the "Agreement") and to recover damages for breach of the
Agreement by PRG. Under the Agreement, the Company sold
substantially all of the assets of its Ophthalmology
Division to PRG and also agreed, during the period beginning
November 1996 and ending April 1997, to assist PRG in the
acquisition of additional ophthalmology practices. In
return for such additional services, the Company is entitled
to receive from PRG certain fees and expenses based upon the
status of such additional acquisitions as of May 15, 1997.
PRG failed to make the May 15, 1997 payment to the Company
and has advised the Company that it does not intend to make
such payment. Under the Demand for Arbitration, the Company
is also seeking damages in connection with PRG's refusal to
provide the Company's representatives with access to
financial records of the Ophthalmology Division, which
refusal had delayed the Company's ability to complete its
annual audit and filings required under the Securities
Exchange Act of 1934, as amended. PRG has filed a
counterclaim against the Company in which they seek damages
in excess of $45,000,000 in connection with PRG's
acquisition of the Company's Ophthalmology Division in
November 1996.
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.
The Company has been named in two actions relating to
professional liability claims at one of its ophthalmology
centers. The claims pertain to a period when the Company
was partially self insured for that center. The Company
intends to defend these claims vigorously and believes it
has meritorious defenses. Management believes the ultimate
disposition of these matters will not have a material
adverse effect on the Company's financial position or the
results of operations.
The Company and its subsidiaries are not parties nor is the
Company's property subject to any other material litigations
or proceedings, other than the litigation described above
and other litigation incidental to business.
5. 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.
During 1996 and through June 30, 1997, the Company failed to
comply with certain covenants of the receivable purchase
agreement. Remedies available to Alden due to these events
of noncompliance include termination of the receivable
purchase agreement. Proceeds to the Company from
receivables sold under this agreement were approximately
$15,513,206 for the six months ended June 30, 1997. At
June 30, 1997, the balance of receivables transferred that
remain uncollected was approximately $5,639,618.
The Company has contracted with National Medical Financial
Services ("NMFS"), a company in which Dr. Colkitt is the
Chairman and a principal 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 Company's
accounting personnel were transferred to a company
controlled by Dr. Colkitt and a subcontractor of NMFS.
During the three months ended June 30, 1996 and 1997, the
Company expensed $595,000 and $604,000. During the six
months ended June 30, 1996 and 1997, the Group expensed
$1,180,000 and $1,175,000, 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.
6. Subsequent Events
Effective July 1, 1997, the Company also acquired from
Dr. Colkitt all of the capital stock of an anesthesia
services company, Anesthesia Solutions, Inc. ("ASI"). The
total consideration for ASI was an assumption of debt and a
potential earn-out payable in Common Stock based on a
multiple of EBITDA.
On July 1, 1997, the Company acquired the assets of Mayur
Patel, M.D. for $1,243,623, consisting of $565,000 in cash
(including acquisition costs) and notes payable in the
amount of $678,623. The business combination was accounted
for as a purchase.
7. Accounting Pronouncements
In February, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 128
"Earnings per Share" ("SFAS 128"), which will change the
current method of computing earnings per share. The new
standard requires presentation of "basic earnings per share"
and "diluted earnings per share" amounts, as defined.
SFAS 128 will be effective for the Company's quarter and
year ending December 31, 1997, and upon adoption, all prior-
period earnings and per share data presented will be
restated to conform with the provisions of the new
pronouncement. Application earlier than the Company's
quarter ending December 31, 1997 is not permitted. The
Company does not believe the application of the new standard
will materially impact the financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results Of Operations
At June 30, 1997, the Company owned, operated or managed 35
radiation oncology centers, operated or managed the
Affiliated Medical Practices associated with such oncology
centers and five complementary subspecialty medical
practices. In addition, the Company owned three equipment
or real estate leasing companies, two transcription
companies and had established billing, collections and other
outsourcing subsidiaries and a captive insurance company.
At June 30, 1996, the Company owned, operated or managed
34 oncology centers and 20 ophthalmology centers. The
decrease in centers owned, operated or managed was
attributable to the sale of the Ophthalmology Division
offset by acquisitions of four complementary medical
practices, one oncology center, three leasing companies, two
transcription companies and five management services
companies during the twelve month period ended June 30,
1997.
Net revenues for the six months ended June 30, 1997
decreased 28% to $36,038,000 from $50,142,000 for the same
period in 1996. The decrease in net revenues was
attributable to the sale of ophthalmology centers (which
generated net revenues of $22,615,000 in the six months
ended June 30, 1996) offset by the net revenues of
$8,511,000 generated by the newly acquired businesses in the
six month period ended June 30, 1997.
Professional fees and expenses are incurred at center
locations and consist primarily 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 six month period
ended June 30, 1997 decreased 45.8% to $7,193,000 from
$13,261,000 for the same period in 1996. These decreased
expenses resulted from the sale of the Ophthalmology
Division. As a percentage of net revenues, professional
fees and expenses decreased to 20.0% in the six month period
ended June 30, 1997 from 26.45% in the same period in 1996.
This decrease was due to a change in the mix of the
businesses included within the Company.
Treatment and support services consist of center-related,
non-physician payroll costs, medical, treatment, and optical
costs, marketing and other center-related cost. Treatment
and support services during the six month period ended
June 30, 1997 decreased 26.8% to $13,603,000 from
$18,579,000 for the same period in 1996. These decreased
expenses resulted from the sale of the Ophthalmology
Division offset by subsequent acquisitions. As a percentage
of net revenues, treatment and support services increased to
37.8% from 37.1% in 1996. This increase was due to a change
in the mix of businesses included within the Company.
General and administrative expenses consist of billing,
accounting, development, legal and corporate administrative
expense. General and administrative expenses during the six
months ended June 30, 1997 decreased to $4,021,000 from
$5,875,000 for the same period in 1996. As a percentage of
net revenues, general and administrative expenses decreased
to 11.2% in 1997 from 11.7% in 1996. These decreased
expenses resulted from the sale of the Ophthalmology
Division offset by the acquisition of the Management
Services companies.
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 identifiable assets acquired in
connection with acquisitions. Depreciation and amortization
decreased to $2,341,000, or 6.5% of net revenues, for the
six month period ended June 30, 1997 from $2,672,000, or
5.3% of net revenues for the same period in 1996. There was
no material change due to the mix of the businesses included
within the Company, as a result of acquisitions.
Interest expense decreased to $1,428,000, or 4.0% of net
revenues, for the six month period ended June 30, 1997 from
$1,717,000, or 3.4% of net revenues for the same period in
1996, primarily as a result of decreased borrowings and the
repayment of debt.
Minority interest primarily represents interest in
individual cancer centers held by entities other than the
Company. Such entities have included hospitals or other
such health care providers which enter into affiliation
arrangements with the Company. Minority interest in the
earnings of such centers increased to $441,000, or 1.2% of
net revenues for the six month period ended June 30, 1997
from $281,000, or 0.6% of net revenues for the same period
in 1996. This increase was primarily the result of improved
profitability of those centers with minority interest
holdings.
During the six month period ended June 30, 1997, the Company
recorded income tax expense of $1,540,000. During the six
month period ended June 30, 1996, the Company recorded
income tax expense of $3,145,000.
Liquidity And Capital Resources
At June 30, 1997, the Company had cash and cash equivalents
of $3,691,000. During the six month period ended June 30,
1997, the Company used cash in operating activities of
$7,789,000 and used cash in investing and financial
activities of $7,070,000 and $10,684,000 respectively.
Cash flows from operating activities during the six month
period ended June 30, 1997 included net income of $5,777,000
and a subsequent adjustments for cash provided by
depreciation and amortization of $2,341,000. Cash was
provided by increases in accounts payable, accrued expenses
and income taxes of $1,097,000, $917,000 and $1,578,000,
respectively, offset by accumulation of accounts receivable
and related party receivables of $2,282,000 and $16,289,000,
respectively. The accumulation of accounts receivable was
attributable to a reduction in the level of accounts
receivable sold under the factoring arrangement.
The Company's principal sources of liquidity for working
capital and current operations will be its factoring
arrangement and cash flows from operations. The Company has
been considering other capital alternatives to finance its
acquisitions strategy. 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.
<PAGE>
PART II - OTHER INFORMATION
Item 1: Legal Proceedings (No response required)
Item 5: Other Information .(no response required)
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
(3.1) Certificate of Incorporation of the Company*
(3.2) Bylaws of the Company*
(11) Statement re: computation of earnings per
share
(27) Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed May 13, 1997
____________________
* Incorporated herein by reference to the exhibit to the
Company's Registration Statement on Form SB-2 (No.
33-98058).
<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.
EQUIMED, INC. (Registrant)
By /s/Douglas R. Colkitt
Douglas R. Colkitt,
Chairman and Chief Executive
Officer
By /s/ Daniel Beckett
Daniel Beckett,
Chief Financial Officer
August 12, 1997
<PAGE>
EXHIBIT INDEX
Exhibit
(3.1) Certificate of Incorporation of the Company*
(3.2) Bylaws of the Company*
(11) Statement re: computation of earnings per share
(27) Financial Data Schedule
____________________
* Incorporated herein by reference to the exhibit to the
Company's Registration Statement on Form SB-2 (No.
33-98058).
EquiMed, Inc.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
1996 1997 1996 1997
Primary:
Weighted average common
shares outstanding 4,174 4,527 4,452 4,600
Net effect of dillutive
stock options and
warrants-based on the
treasury stock method
using average market
price 47 -- 26 --
Weighted average common
share and equivalent
outstanding 4,221 4,527 4,478 4,600
Net Income 2,711 2,975 3,092 5,777
Net income per share 0.64 .66 0.69 1.26
Fully Diluted:
Weighted average common
shares outstanding 4,730 4,527 4,452 4,600
Net effect of dillutive
stock options and
warrants-based on the
treasury stock method
using average market
price 4 -- 23 --
Weighted average common
share and equivalent
outstanding 4,734 4,527 4,475 4,600
Net Income 2,711 2,974 3,092 5,777
Net income per share 0.57 0.66 0.69 1.26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF EQUIMED, INC. FOR THE THREE
MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,691
<SECURITIES> 0
<RECEIVABLES> 8,589
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,578
<PP&E> 23,373
<DEPRECIATION> 0
<TOTAL-ASSETS> 72,146
<CURRENT-LIABILITIES> 28,413
<BONDS> 20,840
0
0
<COMMON> 75,962
<OTHER-SE> 50,058
<TOTAL-LIABILITY-AND-EQUITY> 72,146
<SALES> 0
<TOTAL-REVENUES> 36,038
<CGS> 0
<TOTAL-COSTS> 27,158
<OTHER-EXPENSES> 305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,428
<INCOME-PRETAX> 7,316
<INCOME-TAX> 1,540
<INCOME-CONTINUING> 5,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,777
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
