U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1996
[ ] 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 33-80944-LA
NATIONAL SPECIALTY NETWORKS, INC.
(Name of small business issuer in its charter)
California 33-0403505
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
451 W. Lambert Rd., Suite 216
Brea, California 92821-3920
(Address of principal executive offices)
Registrant's telephone number including area code (714) 256 9654
Indicate by check mark whether the registrant (1) has filed reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
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
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of October 31, 1996 -
1,225,534 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I - Financial Information
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets ............................................................F-2
Statements of Operations ...................................................F-3
Statements of Stockholders' Equity .........................................F-4
Statements of Cash Flows ..................................................F-5
Notes to Financial Statements ..............................................F-6
F-1
<PAGE>
NATIONAL SPECIALTY NETWORKS, INC.
(A Development Stage Enterprise)
Balance Sheets
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, 1996 Sept 30, 1996
---------- ----------
ASSETS (Unaudited)
CURRENT ASSETS
Cash ...................................................................... $ 2,043 1,149
---------- ----------
Total current assets .................................................... 2,043 1,149
---------- ----------
OTHER ASSETS
Deferred income tax asset (note 3) ........................................ 0 0
---------- ----------
Total other assets ...................................................... 0 0
---------- ----------
Total Assets ................................................................ $ 2,043 1,149
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes payable (notes 4, 6) ................................................ $ 50,215 58,676
Accrued interest ........................................................... 7,336 8,378
---------- ----------
Total liabilities ....................................................... 57,551 67,054
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized 15,000,000
shares; 1,225,534 issued and outstanding. (note 5) ...................... 23,693 23,693
Preferred stock, Series A, no par value ($1 stated value);
authorized 2,000,000 shares; 915,714 shares issued and
outstanding. (note 4) ................................................... 915,714 915,714
Treasury stock (note 6) ................................................... (1,633) (1,633)
Deficit accumulated during the development stage .......................... (993,282) (1,003,679)
---------- ----------
Total Stockholders' Equity .................................................. (55,508) (65,905)
---------- ----------
Total Liabilities and Stockholders' Equity .................................. $ 2,043 1,149
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
NATIONAL SPECIALTY NETWORKS, INC.
(A Development Stage Enterprise)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Period from
July 14, 1989
3 Months ended September 30, (Inception) to
1995 1996 Sept 30, 1996
REVENUE
Expense re-imbursement $ 0 0 848
Interest 0 0 1,315
--------------- -------------- -----------------
Total revenue 0 0 2,163
--------------- -------------- -----------------
EXPENSES
Human resources:
NSN officers (note 5) 0 0 340,178
RMG employees 0 0 97,014
Others 0 0 40,550
Consultants:
NSN officers 0 0 109,167
Others 0 0 19,638
Professional fees 0 0 66,690
Bad debt 0 0 454
Bank charges 18 0 71
Communications 0 0 17,485
Office rent and overhead 0 0 120,089
Office expenses 0 1,204 19,406
Public offering expense 0 7,950 10,135
Travel 0 0 133,952
Interest 832 1,043 24,752
Miscellaneous 0 200 6,261
--------------- -------------- -----------------
Total expenses 850 10,397 1,005,842
--------------- -------------- -----------------
Net loss before tax benefit (850) (10,397) (1,003,679)
--------------- -------------- -----------------
Income tax benefit (note 3) 0 0 0
--------------- -------------- -----------------
Net loss $ (850) (10,397) (1,003,679)
=============== ============== =================
Weighted average number of
shares outstanding 1,225,534 1,225,534 1,225,534
=============== ============== =================
Net loss per share $ (0.01) (0.01) (0.82)
=============== ============== =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
NATIONAL SPECIALTY NETWORKS, INC.
(A Development Stage Enterprise)
Statements of Stockholder's Equity
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Total
Common Preferred Treasury Accumulated Stockholders'
Stock Stock Stock Deficit Equity
BALANCE, June 30, 1996 $ 9,900 0 0 (920,511) (910,611)
Net loss 0 0 0 (10,397) (10,397)
-------------- ------------- ------------- ----------------- ------------------
BALANCE, Sept 30, 1996 $ 23,693 915,714 (1,633) (1,003,679) (65,905)
============== ============= ============= ================= ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
NATIONAL SPECIALTY NETWORKS, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Period from
July 14, 1989
3 Months ended September 30, (Inception) to
1995 1996 Sept 30, 1996
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
Net loss ...................................................... $ (850) (10,397) (1,003,679
Adjustments to reconcile net loss to net cash used for
development activities:
Stock issued for services rendered ........................ 0 0 23,000
Increase in interest payable .............................. 832 1,043 8,379
(Increase) decrease in interest receivable ................ 0 0 0
---------- ---------- ----------
Net cash used for development activities ...................... (18) (9,354) (972,300)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of fixed assets .......................................... 0 0 6,000
---------- ---------- ----------
Net cash provided by investing activities ..................... 0 0 6,000
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash .................................. 0 0 693
Notes payable under third-party development agreements
(note 2) ..................................................... 0 0 899,315
Cash received for notes payable ............................... 0 8,460 71,188
Cash used to reduce notes payable ............................. 0 0 (3,747)
---------- ---------- ----------
Net cash provided by financing activities ..................... 0 8,460 967,449
---------- ---------- ----------
(Decrease) increase in cash ................................... (18) (894) 1,149
---------- ---------- ----------
CASH, beginning of period ..................................... 143 2,043 0
---------- ---------- ----------
CASH, end of period ........................................... $ 125 1,149 1,149
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid in cash ......................................... $ 0 0 837
========== ========== ==========
Preferred stock issued for notes payable ...................... $ 0 0 915,714
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
NATIONAL SPECIALTY NETWORKS, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
(Unaudited)
(1) Summary of Significant Accounting Policies
The Company. National Specialty Networks, Inc. is a California chartered
development stage corporation which conducts business from its headquarters in
Brea, California and was incorporated on July 14, 1989.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the dates of the statements of
financial condition and revenues and expenses for the years then ended. Actual
results could differ significantly from those estimates. Material estimates that
are particularly susceptible to significant change in the near-term relate to
the book-tax difference of accounting for the development expenses (see note 3
). The financial statements for the three months ended September 30, 1995 and
1996 include all adjustments which in the opinion of management are necessary
for fair presentation. The following summarize the more significant accounting
and reporting policies and practices of the Company:
a) Furniture and equipment Furniture and equipment was carried at cost
during the development process. In March 1992 NSN sold all of its furniture and
equipment. At that time the cost was removed from the accounts and the resulting
loss reflected in the development expenses.
The Company expects that future expenditures for furniture and equipment
will be capitalized, and depreciated over the estimated useful life of the
assets. Expenditures for maintenance and repairs will be charged to operations
as incurred.
b) Notes payable The Company issued notes payable to various parties
pursuant to third-party development agreements (note 2). Interest on the notes
was capitalized into the principal balance of the notes during the development
process pursuant to the third-party development agreements.
c) Net loss per share Net loss per share is computed by dividing the net
loss by the number of shares outstanding during the period.
(2) Development expenses The Company entered into third-party agreements
with two companies and two individuals in January 1990 for the development of
its Standard Treatment Protocols (STP) concept, the Specialty Preferred Provider
Organization (SPPO) concept and the search for funding from independent third
parties.
The two contracted companies (whose principals are founders and
stockholders of NSN) are independent health care consulting companies which are
currently expected to remain in their primary businesses subsequent to the
initial public offering. The principals of one of the companies, Ronning
Management Group, Inc. (RMG), will be involved in the operations of NSN on a
part-time basis. The principal of the other company, Medworth Futures, Inc., and
the two individuals will be involved in the operations of NSN full-time upon
funding of the company.
Financial Accounting Standards Board (FASB) Statement of Financial
Accounting Standards 2 (SFAS 2) requires that all internally generated
development costs be charged to expense when incurred. SFAS 68 requires that a
company which is obligated to repay another for development costs under a
funding agreement must record a liability to the extent of its obligation and
charge the costs to expense as incurred. Accordingly, NSN charged its
development costs to expense as incurred, and recorded the liability incurred
under the third- party agreements. 100% of the cumulative total development
expenses relate to the development of the STP concept, the development of the
SPPO concept and NSN's search for funding from independent third parties to
allow NSN to begin marketing both the STP and SPPO concepts.
F-6
<PAGE>
NATIONAL SPECIALTY NETWORKS, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
(3) Income taxes The Company recorded the development costs as expenses in
the period when incurred for financial statement purposes, per note 2 above.
However, for state income tax purposes, the development costs were recorded as
an intangible asset to be amortized over future years. The primary purpose for
this treatment for tax purposes is to retain the tax benefit of the development
costs. California tax law does not recognize operating loss carry-forwards as
the Federal tax code does. Therefore, by capitalizing and amortizing these
costs, the tax benefit of the development costs is retained for state tax
purposes rather than being lost forever, (which immediate expensing would
cause). This treatment will require a longer time before the tax benefit of the
costs is realized, but will increase the tax benefit realized over time.
California tax law was changed for tax years beginning after January 1,
1994. California tax law now recognizes net operating loss carryforwards on the
same basis as the federal tax code. The amounts recorded as deferred income tax
assets at September 30, 1995 and 1996, $295,354 and $301,104 respectively,
represent the amount of tax benefit of loss carry-forwards. The Company has
established a $301,104 valuation allowance against this asset, as currently it
is not more likely than not to be realized through the generation of sufficient
future taxable income within the carry-forward period.
(4) Exchange of notes payable for preferred stock On September 30, 1992,
the board of directors of the Company authorized the Company to issue 2,000,000
shares of no par value preferred stock. The Company then entered into an
agreement with the parties holding the notes payable to exchange the balance of
the notes for an equal amount of preferred stock of the Company. This issuance
of preferred is referred to as Series A, carries a $1 per share stated value and
a cumulative dividend rate of 6%, payable from earnings on or after January 1,
1995, to the extent cash is available and the board of directors declare such
payment. The remaining balance of preferred shares are to remain unissued for
possible future use.
(5) Stockholders' equity The Company has authorized 1,666,666 shares of no
par value common stock. In December 1990, the Company issued 11,000 shares to
the founders in exchange for $198 in cash. In April 1991, the Company issued
27,500 shares to the founders in exchange for $495 in cash. In June 1991, the
Company issued 511,500 shares to the founders in exchange for services valued at
$9,207. These services were valued at 50% of current full-time employment
consideration.
On September 30, 1992, the board of directors authorized an increase of
authorized shares from 100,000 shares to 1,666,666 by splitting the existing
shares 1 share for 16.66666 shares. On October 2, 1992, the board of directors
authorized the issuance of 533,333 additional shares of the Company's common
stock to the founding shareholders in consideration of past services to the
corporation with the same basis as their previously held shares, or 1.8 cents
per share. On December 20, 1993, the board of directors and stockholders of the
Company voted to increase the authorized number of shares of common stock of the
Company to 2,000,000 shares.
On December 31, 1993, the board of directors authorized the issuance of
130,000 additional shares of the Company's common stock to the founding
shareholders in consideration of past services to the corporation with the same
basis as their previously held shares, or 1.8 cents per share. In February 1994,
the Company sold 102,939 shares of the Company's common stock for $1,853 in
services rendered to the Company. These shares were valued by the board at 1.8
cents per share. On May 31, 1994, the board of directors and stockholders of the
Company increased the authorized number of shares of the Company to 15,000,000
shares.
(6) Repurchase of a founders stock for a note payable In August 1993, the
Company entered into an agreement to repurchase all the common stock held by one
of the founders pursuant to the Company's Founders Shareholder Agreement. The
90,738 shares were repurchased as treasury stock at a price of $0.018 per share,
for a total of $1,633.28. The Company issued a note payable to the stockholder
for this sum. This note carries a stated interest rate of 5.23%.
F-7
<PAGE>
NATIONAL SPECIALTY NETWORKS, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
(7) Common stock public offering The board of directors authorized the
Company to sell up to 500,000 shares of the Company's common stock in a
"self-underwritten" public offering pursuant to a Registration Statement on Form
SB-2 under the Securities Act of 1933. This offering is being made with a 90,000
share minimum, and is effective for one year from the effective date of the
registration, August 16, 1996. On December 31, 1993 the board of directors voted
to increase the number of shares to be sold to the public from 500,000 to
675,000.
On October 13, 1995, the Department of Corporations of the State of
California issued an effective order for the sale of the Company's securities in
the State of California. This order imposes certain financial qualifications on
California resident purchasers of the Company's securities.
(8) Completion of Concept Development The Company completed the development
stages of the STP and SPPO concepts and RMG completed the beta site testing of
the STP concept as of September 30, 1992. The Company is still classified as a
development stage enterprise as it is still in the process of raising the funds
to begin operations, and it has not yet begun its intended operations.
The Company has entered into an agreement with Ronning Management Group,
Inc. (RMG) whereby RMG has begun the marketing of STPs. RMG has entered into and
completed several contracts for STP development for third parties. The major
provisions of this agreement are:
a) As soon as NSN receives at least the minimum proceeds under the common
stock public offering (see note 7) RMG will transfer the STP technology (i.e.,
methodologies, processes, data base, charge cost model, etc.) and the rights to
develop STPs to NSN. NSN expects to extend employment offers to those RMG staff
members currently working on STPs.
b) RMG will also assign any existing STP contracts in progress to NSN.
Should any third party to an existing STP contract refuse to allow RMG to assign
such contract to NSN, RMG will subcontract the completion of the contract to
NSN, and remit 80% of the remaining contract revenue to NSN.
c) NSN will pay RMG a marketing royalty of 20% of NSN's receipts on any STP
contract assigned under b) above, as well as on the first 7 contracts NSN enters
into.
d) The three principals of RMG will become part-time consultants to NSN for
a period of 5 years. RMG will bill NSN for the hours worked by these individuals
for NSN at approximately 80% of RMG's normal billing rates. Annual billings by
RMG to NSN for these services are limited to the lesser of $420,000 or 33% of
NSN's STP contract revenues.
e) RMG and its principals agree not to compete with NSN in the provision of
consulting services to develop STPs for third parties.
f) The Company and RMG have developed cross-referral fee schedules, as well
as cross right of first refusal agreements pursuant to medical consulting
services requested by third parties during other engagements. The minimum cross
referral fees are set at 10% of revenues received by the other company.
g) NSN expects to develop a sales commission schedule for employees as well
as a separate schedule for third party brokers for the sale of STP contracts.
RMG and its employees will be covered by the schedule developed for third party
brokers.
The Company has also entered into an agreement with Medworth Futures, Inc.
which provides the following:
F-8
<PAGE>
NATIONAL SPECIALTY NETWORKS, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
(8) Completion of Concept Development, continued
a) MFI and its principal agree not to compete with NSN in either the
provision of specialty managed care or consulting services to develop STPs.
b) NSN expects to develop a sales commission schedule for employees as well
as a separate schedule for third party brokers for the sale of STP contracts.
NSN and its employees will be covered by the schedule developed for third party
brokers.
(9) Related party transactions The Company currently occupies office space
in MFI's offices on a rent-free basis. MFI allows this because the President and
sole stockholder of MFI is a stockholder in the Company, and the Company's
current principal activities at this stage are primarily related to its common
stock public offering.
F-9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
After the completion of its Offering, management intends to begin hiring
employees necessary to establish a STP consulting division, and to hire
qualified personnel for marketing, provider development, accounting, and systems
and administration. NSN does not currently employ any paid staff. In addition to
the current non-paid employees receiving appropriate salaries once the Company
is funded, management intends to initially hire approximately ten or fifteen new
employees to fill the required positions.
NSN has already developed systems for the operations of the Company, and
after the closing of its Offering, NSN plans to promptly complete the final
development of the financial systems and administrative procedures which will be
needed to operate the Company on the scale envisioned.
Management believes that should NSN realize at least the minimum proceeds
from its Offering, the Company will not need to seek any further funding for the
twelve-month period following the completion of its Offering. NSN believes that
the Company will meet future financial requirements through revenue from
operations.
NSN does not anticipate the need for any immediate further research
regarding of the basic STP program or SPPO networks. Management believes that
the STP program is sufficiently developed to commence STP operations immediately
without any further development. Once the Company is funded, one of its
principal objectives is the development of its initial SPPO networks, which are
not yet developed.
NSN does not intend to purchase any operating facilities for at least
twelve months after the completion of its Offering. NSN currently uses office
space free of charge pursuant to an informal month-to-month lease arrangement
with Medworth Futures, Inc., an affiliate of the Company. The Company intends to
lease new, larger facilities once full operations have commenced. NSN also
intends to purchase or lease a computer system and other office equipment should
the Company receive the maximum proceeds from its Offering.
Once the required personnel are hired and other initial objectives are
attained, management intends to notify the California hospitals which previously
responded to NSN's Request for Proposal program, and which indicated an interest
in becoming Centers of Excellence, that NSN has completed its Offering and will
be contacting them soon regarding the development of NSN's California SPPO
network.
NSN then intends to notify the HMOs, PPOs, insurance companies and large
self-insured employers which have previously expressed an interest in the NSN
model that NSN will contact them in the near future regarding possible
participation in NSN's California SPPO network. NSN intends to concurrently
contact similar West Michigan organizations regarding the future development of
a West Michigan SPPO network.
Management anticipates that the Company will then complete the selection
process for the Centers of Excellence in California. Once Centers of Excellence
have been contracted, NSN will begin STP development at those COE hospitals and
will commence negotiations between COEs, payers and NSN to form the California
SPPO network. NSN also anticipates beginning similar activities with respect to
the establishment and development of the West Michigan SPPO network.
Using a carefully designed and rigorous selection process, NSN intends to
identify the highest quality hospital in each community for each of fifteen
high-cost services experienced by employers and insurers, to designate each such
hospital as a Center of Excellence (COE), and to require each COE to implement
at least one STP in order to cut costs and avoid cost shifting. NSN will then
contract with each hospital at rates lower than the hospital currently offers in
conventional HMOs and PPOs, enabled by the hospital's improved profit margin
afforded by its STP development and implementation.
11
<PAGE>
Providers will pay a $120,000 fee for assistance in developing and
implementing STPs for a major medical specialty (such as coronary bypass
surgery) and a $1,500 monthly fee for ongoing network support. NSN will receive
a one-time fee of $75,000 from payers (such as HMOs, PPOs, and large
self-insured companies) for membership in, and the development of, each SPPO
network, and the Company will also receive a monthly access fee calculated on
either a per-employee-per-month basis or a twenty-five-percent-of-savings basis.
For example, using the per-employee- per-month basis, at a per-employee cost of
$2.20, a payer with 10,000 employees would pay NSN a total monthly access fee of
$22,000.
Management estimates that there are at least 15,000 companies and other
payers which are suitable prospects for joining NSN's SPPOs in the next four
years. This estimate is based on the number of employers with over 1,000
employees, as reported in Ward's Business Directory of U.S. Private and Public
Companies 1993 and in the Statistical Abstract of the United States 1992.
Management based these estimated fees on the actual experience of certain
Officers of NSN with respect to SPPOs, and also from actual statistics and the
results of the performance of contracted services by Ronning Management Group,
Inc. (RMG), an affiliate of NSN, which will fully transfer its STP business to
NSN once the Company commences operations.
NSN's plan of operation for the next several years includes the development
of SPPO networks for selected population centers throughout the United States
for fifteen high-cost tertiary healthcare services, and to sell access to these
SPPO networks to HMOs, PPOs and employer-sponsored managed care programs for
integration with their existing networks. However, only four entities (and a
benefits consulting company) have expressed any interest in membership in the
Company's SPPO networks since the Company was found in 1989. One of the
Company's priorities in the future will most certainly be its need to sell
access to its SPPOs to payers.
Management projects that NSN's potential for market acceptance and success
will be based on the Company's ability to convince its target customers,
employers who self insure or purchase healthcare benefits that are managed by
HMOs or PPOs that : (1) the conventional HMO/PPO approach to encouraging all
hospital networks to generalize and provide the full spectrum of services,
including high-cost tertiary services, breeds wasteful duplication, mediocrity
of performance in the services which are most difficult to perform, and minimal
opportunity to generate constructive competition on a service-by-service basis;
(2) its SPPOs, when integrated with conventional HMO/PPO networks, will reduce
duplication and unnecessary capacity by using fewer hospitals to perform each
specialty service; (3) its SPPOs will improve the quality of specialty care by
selecting Centers of Excellence based on demonstrated excellence; (4) its SPPOs
will improve specialty service cost performance beyond the reduction of
duplication noted above through implementing STPs in each COE hospital; and (5)
its SPPOs, when integrated with conventional HMO/PPO networks, will provide
lower prices, less cost-shifting, and overall reduced healthcare costs.
Management projects that the key capabilities NSN will need to develop and
sell SPPOs are (1) an experienced managed care and provider relations staff; (2)
an experienced managed care marketing/sales staff; (3) an efficacious process
for selecting COEs which is respected by both employers and providers; (4) a
process for developing STPS that is proven to reduce costs; (5) a means of
providing assistance to employers, HMOs and PPOs in conveniently directing
patients to COEs and in modifying their existing networks to accommodate SPPOs;
(6) a means of providing assistance to COE hospitals in developing patient
friendly administrative and clinical service so that patients learn to accept
some travel inconvenience; (7) management information systems that enable the
effective collection of payer and provider data and (8) the administrative
support of staff in the field and in main office; and an effective management
team.
The following chart describes the extent to which the above listed
capabilities have been developed as of the date of this report:
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Capability Extent Developed Comments/Basis
1. Managed care and Partial. Remainder to be recruited CEO, Senior Vice President are
provider relations staff after receipt of proceeds. experienced (see "Management").
2. Managed care Need to be recruited. Will commence hiring upon receipt
marketing/sales staff of proceeds.
3. COE selection process RFP document with selection RFP was generally well received
criteria have been developed. by hospitals. Process will be
Selection process initiated in continued upon receipt of proceeds.
California and terminated
(midway) in 1991 due to lack of
funding.
4. STP process Fully developed and tested in 21 Initial cost reduction results
hospital programs. indicate that STP are successful in
reducing costs.
5. Assistance to employers Fully developed. Available for review upon request.
6. Assistance to providers Fully Developed Available for review upon request.
7. Information systems Not developed. Will be acquired after receipt of
proceeds.
8. Management team Partially hired. Remainder to be recruited after
receipt of proceeds.
</TABLE>
PART II - Other Information
Item 1. Legal Proceedings.
The Company is not a party to any pending legal proceedings.
Item 2. Changes in Securities
None to report.
Item 3. Defaults Upon Senior Securities
None to report.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company did not submit any matters to a vote of security holders during
the first quarter.
Item 5. Other Information
None to report.
Item 6. Exhibits and Reports on Form 8-K and 8-K/A.
During the first quarter the Company did not file any reports on Form 8-K.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: November 14, 1996
NATIONAL SPECIALTY NETWORKS, INC.
a California Corporation
By: /s/ Ronald D. Osborne
Ronald D. Osborne
President, CEO and Chairman of the Board
By: /s/ Douglas E. Wells
Douglas E. Wells
Senior Vice President and Chief
Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF NATIONAL SPECIALTY NETWORKS, INC. FOR
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000895521
<NAME> National Specialty Networks, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,149
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,149
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,149
<CURRENT-LIABILITIES> 67,054
<BONDS> 0
0
915,714
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</TABLE>
