Form 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission File Number 1-14150
THE COMPANY DOCTOR
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 72-1234136
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5215 North O' Connor Blvd., Suite 1800, Irving, Texas 75039
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (972) 401-8300
(Previous Address) (Previous Zip Code)
Check whether the Issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act, during the
past 12 months and (2) has been subject to the filing
requirements for the past 90 days. Yes X No .
State the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date:
There were 5,018,008 shares of the Issuer's common stock, at
par value of $.01 per share, outstanding as of September 30,
1996.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
September 30, June 30,
1996 1995
Unaudited
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents $3,093,283 $5,636,433
Restricted cash 500,000 500,000
Short-term investments 999,341 1,250,357
Accounts receivable
Trade, less allowance for doubtful
accounts of $259,000 at September 30,
1996 and $105,000 at June 30, 1996 2,048,824 1,097,308
Related parties 72,754 113,117
Other 122,628 85,348
Prepaid expenses 521,233 97,767
Total current assets 7,358,063 8,780,330
Property and equipment 2,384,159 1,536,898
Less accumulated depreciation and
amortization (1,242,964) (659,394)
1,141,195 877,504
Other assets
Intangibles, net 8,822,117 1,688,314
Other assets 785,308 563,406
Investments 1,610,225 1,630,453
Total other assets 11,217,650 3,882,173
$19,716,908 $13,540,007
Liabilities and Stockholders - (Deficit) Equity
Current liabilities
Notes payable $ 740,127 $ 1,271,357
Notes payable - due to sellers 3,222,967 987,010
Current maturities of capital
lease obligations 48,712 52,501
Accounts payable and accrued expenses 992,722 338,077
Claims payable 1,649,964 1,743,107
Total current liabilities 6,654,492 4,392,052
Long-term liabilities
Capital lease obligations, net of
current maturities 72,518 79,644
Notes payable - due to sellers 305,556 -
Total liabilities 7,032,566 79,644
Stockholders' equity
Preferred stock, $.01 par value,
5,000,000 shares authorized Series A
convertible, no shares issued - -
Common stock, $.01 par value;
25,000,000 shares authorized; 5,018,008
and 4,676,494 shares issued and
outstanding at September 30, 1996 and
June 30, 1996, respectively 50,180 46,765
Additional paid-in-capital 13,551,377 10,255,346
Accumulated equity (917,215) (1,233,800)
Total stockholders' equity 12,664,342 9,068,311
Total liabilities and stockholders
equity $ 19,716,908 $13,540,007
</TABLE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
1996 1995
(Unaudited)
<S> <C> <C>
Revenues $ 2,788,998 $ 949,640
Cost of services provided 1,214,036 421,924
General and administrative expenses 1,369,689 448,093
Marketing expenses 62,072 24,650
Development and acquisition costs 87,885 -
2,733,682 894,667
Income from operations 55,316 54,973
Other income (expense)
Interest expense (9,983) (25,980)
Interest income 96,252 -
Total other income (expenses) 86,269 (25,980)
Net income before income taxes 141,585 28,993
Income tax benefit 175,000 -
Net income $ 316,585 $ 28,993
Net income per common share $ .06 $ .01
Weighted average common shares
outstanding 5,545,647 2,209,616
</TABLE>
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
1996 1995
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 316,585 $ 28,993
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities
Depreciation and amortization 160,466 34,453
Deferred tax asset (175,000) -
Change in assets and liabilities
Accounts receivable (244,071) (79,092)
Prepaid expenses (418,075) (6,423)
Other assets (370,340) (23,350)
Checks written in excess of
bank balance - (18,265)
Accounts payable and accrued
expenses 406,929 119,727
Claims payable (93,143) -
(733,234) 28,050
Net cash (used in)
provided by operating
activities (416,649) 57,043
Cash flows from investing activities
Purchases of property and equipment (181,384) (5,957)
Cash acquired from medical practices 337,484 -
Purchase of investments 271,244 -
Purchase of intangibles 216,907 -
Net cash (used in)
provided investing
activities 644,251 (5,957)
Cash flows from financing activities
Proceeds from line-of-credit and
note payable 46,537 14,250
Proceeds from exercised warrants
and stock options 17,380 -
Payments on notes payable and
due to seller (2,823,754) -
Deferred offerings costs paid - (42,490)
Payments on equipment leases (10,915) (19,560)
Net cash provided
by (used in) financing
activities (2,770,752) (47,800)
Cash (decrease) increase (2,543,150) 3,286
Cash at beginning of period 5,636,433 -
Cash at end of period $ 3,093,283 $ 3,286
</TABLE>
Supplemental disclosures of interest paid:
Interest paid on borrowings for the three months ended September
30, 1995 and September 30, 1996 was $25,980 and $9,983,
respectively.
Continued from previous page.
Supplemental disclosure of noncash investing and financing
activities:
In the quarter ended September 30, 1996, the Company acquired
three medical practices, and reported each on a Form 8-K. The
purchase prices combined were allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Assets acquired
Cash $337,484
Accounts receivable 704,362
Property and equipment 138,731
Prepaid expense and other 6,116
1,186,693
Liabilities assumed
Accounts payable and accrued expenses 247,716
Net assets acquired 938,977
Fair value of common stock issued 3,282,066
Due to sellers - accounts and
notes payable - current 4,481,944
Due to sellers - notes payable
- long-term 305,556
$ 7,130,589
</TABLE>
Note 1 - Summary of Accounting Policies
The summary of the Issuer's significant accounting policies are
incorporated by reference to the Company's annual report on Form 10-
KSB of June 30, 1996.
The accompanying unaudited condensed financial statements reflect all
adjustments which, in the opinion of management, are necessary for a
fair presentation of the results of operations, financial position
and cash flows. The results of the interim period are not
necessarily indicative of the results for the full year.
Reclassifications
Certain amounts in the September 30, 1995 consolidated financial
statements have been reclassified to conform with the September 30,
1996 presentation.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
On September 30, 1996, the Company had cash and cash equivalents of
$3,093,283 and restricted cash of $500,000; in addition the Company
had other current assets totaling $3,764,780 resulting in total
current assets of $7,358,063. Current liabilities were $6,654,492
which resulted in a current ratio of 1.1 to 1. The Company also had
investments of $1.610 million in "other assets", which consisted of
U.S. treasury notes maturing in excess of one year from September 30,
1996, and therefore classified as long-term assets. However, these
U.S. treasury notes could be sold and converted to cash at any time,
and thus would effectively increase working capital to $2,313,796 and
increase the current ratio to 1.35 to 1.
The Company closed its initial public offering (IPO) in February
1996. The Company sold a total of 1,840,000 Units, each Unit
consisting of one share of Common Stock and one Warrant to purchase
an additional share of Common Stock. The Units were sold at a price
of $5.25 per Unit providing the Company with gross offering proceeds
of $9.66 million. After payment of expenses associated with the
offering, the Company received proceeds in excess of $7.5 million.
Since the IPO, the Company, has used part of the net proceeds from
the offering: 1) to finance the acquisition and capitalization of an
insurance company subsidiary; 2) to acquire five complementary
medical clinics; 3) to establish and begin managing a new start-up
facility; 4) to expand sales and marketing programs; and 5) for other
working capital purposes.
The transactions relating to the five medical practices now managed
by the Company were each reported on Form 8-K. The transactions were
effective 1) February 1996, in Lancaster, Texas (a Dallas suburb);
2) May 1996 in Baytown, Texas (a Houston suburb); 3) July 1996, in El
Paso, Texas and Carrollton, Texas (a Dallas suburb); and 4) August
1996 in central Fort Worth, Texas.
The acquisition of the insurance company subsidiary occurred on June
30, 1996, as reported on Form 8-K on July 9, 1996. The cash payments
due in four of the five medical practice transactions and the
insurance subsidiary acquisition were paid in the current quarter.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Forward-Looking Statements
The foregoing and subsequent discussion contains certain forward-
looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, which are intended to be covered by the safe harbors created
thereby. These forward-looking statements include the plans and
objectives of management for future operations, including plans and
objectives relating to the possible further capitalization of the
insurance subsidiary, acquisitions of additional complementary
medical practices and establishing and managing new facilities. The
forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties.
Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult
or impossible to predict accurately and many of which are beyond the
control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable,
any of the assumptions could be inaccurate and, therefore, there can
be no assurance that the forward-looking statements included in this
Form 10-QSB will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives
and plans of the Company will be achieved.
Results of Operations
Revenue
Revenues are derived primarily from the management of physician
practices engaged in the diagnosis, treatment and management of work-
related injuries and illnesses and from other occupational health
care services such as employment-related physical examinations, drug
and alcohol testing, functional capacity testing and other related
programs. The Company's business exhibits some seasonality. From
November through January, factors such as plant closings, vacations
and holidays result in fewer occupational injuries and illnesses.
Also, employers generally hire fewer employees in the calendar year's
fourth quarter, thus reducing the number of pre-hiring physical
examinations and drug and alcohol tests during this period. Patient
visits also decline in summer months due to plant closings, vacations
and fewer illnesses related to adverse weather. Accordingly,
revenues and net income during the Company's first and second fiscal
quarters of each year (quarters ended September and December), will
tend to be somewhat lower than the remaining quarters of the fiscal
year.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Results of Operations (continued)
Revenue (continued)
Net revenues for the three months ended September 30, 1996 increased
by $1,839,358 or 193.7% to $2,788,998 from the $949,640 revenue
level achieved for the same three month period ended September 30,
1995. The growth is attributable to four factors: 1) the further
development of the facilities managed by the Company ; 2) the
Company's ability to capture additional market share; 3) the addition
of the five medical practices, and 4) the start-up of a clinic in
south Fort Worth, Texas in April 1996. The Garland and Arlington,
Texas facilities opened in mid-1994, and those two facilities are
now past the start-up stages when revenues were minimal, and both
facilities are now fully operational. The addition of the five
medical practices since February 1996 generated approximately
$1,599,000 in the three months ended September 30, 1996, which
compares to none for the September 30, 1995 quarter.
Cost of Services Provided
Cost of services provided for the current quarter ended September 30,
1996, of $1,214,036, as a percent of net revenues was 43.5% which was
slightly lower than the 44.4% level of the same quarter one year ago.
General and Administrative
General and administrative expenses for the three months ended
September 30, 1996, of $1,369,689, as a percent of revenue, was
49.1%, which was a small increase of 1.9% from the 47.2% for the same
three month period a year ago. Actual dollars increased $921,596
over the prior year in conjunction with increased revenues and the
increased costs associated with becoming a public company, indirect
expenses related to the expansion activity since going public in
February 1996, and some general and administrative expenses for the
acquired insurance company subsidiary. The Company continues its
cost-containment efforts in the management of fixed and variable
costs.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Marketing Expenses
Marketing expenses was $62,072 at September 30, 1996 compared to
$24,650 at September 30, 1996 or 2.2% compared to 2.6% of revenues
during the respective periods. The addition of medical practices in
the quarter ended September 30, 1996 contributed to the rise in
marketing expense dollars and that expense is expected to continue to
rise in future periods as the Company expands in both its existing
and new markets.
Development and Acquisition Costs
The Company had no development and acquisition costs in the September
1995 quarter, but had $87,885 of such costs in the three months ended
September 30, 1996, or 3.2% of revenues. These costs were a result
of the Company's expansion activities in two major areas: (1)
pursuing and negotiating affiliations or acquisitions with physicians
who have established occupational medicine practices or patient bases
which can be served in an occupational medical setting; and (2)
development costs for the acquired insurance company subsidiary,
RMAC.
Other Income or Expense
Interest income for the quarter ended September 30, 1996 of $96,252
was 3.4% of revenue, as compared to none for the same quarter a year
ago. Interest income was earned from funds invested from the
proceeds of the IPO, and from the interest bearing investments in the
acquired insurance company subsidiary, which acquisition was on June
30, 1996. Interest expense declined in the three months ended
September 30, 1996 to $9,983 from the $25,980 for the three months
ended September 30, 1995 due to the refinancing of capital leases.
Net Income
As a result of the factors described above, in particular, the
combination of growth in revenues, additional medical practices, and
containment of costs, the Company had $316,585 of net income after
income tax benefits (of $175,000) in the three months ended September
30, 1996, or 11.4% of revenues, as compared to $28,993 net income, or
3.1% of revenues, in the three months ended September 30, 1995, an
increase of $287,592. At June 30, 1996, the Company had
approximately $1.149 million of net operating loss carryforwards (for
income tax reporting purposes) which expire in the year 2008 through
2010. However, the use of net operating loss carryforward may be
limited or reduced due to the change in ownership as a result of the
February 1996 public offering, and, accordingly, the Company may be
able to utilize only a portion of its net operating loss
carryforwards. The impairment of the tax benefit as a result of the
net operating loss carryforwards was reduced from $324,000 in the
three months ended September 30, 1996 due to the addition of medical
practices in that quarter, and the historical profitability of such
practices, resulting in a $175,000 deferred tax benefit on the income
statement.
PART II
Item 1 Legal proceedings - none
Item 2 Changes in securities - none
Item 3 Defaults upon senior securities - none
Item 4 Submission of matters to a vote of security holders -
none
Item 5 Other information - none
Item 6 Exhibits and reports on Form 8-K:
(a)Exhibits None
(b)Forms 8-K
Form 8-K July 9, 1996 Acquisition of Montfort Insurance
Company
Form 8-K August 15, 1996 Acquisition of C.A. Riser M.D.
Form 8K August 21, 1996 Acquisition of The Doctors Inn,
Incorporated
Form 8K August 28, 1996 Acquisition of Northside Family Medical
Clinic
Form 8K September 20, 1996 Acquisition of Beltline North
Occupational Health Clinic
Form 8K/A July 9, 1996 Financial statements and
proforma for acquisition of Montfort
Insurance Co.
Form 8K/A August 15, 1996 Finanical statements and
the Pro Forma for acquisitions of C.A. Riser
M.D.
THE COMPANY DOCTOR AND SUBSIDIARIES
SEPTEMBER 30, 1996
FORM 10-QSB
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Issuer has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE COMPANY DOCTOR
(Issuer)
Date: November 13, 1996 By: /s/ Fred G. Parrish
Fred G. Parrish
V.P., Chief Operating Officer,
Chief Financial Officer
Date: November 13, 1996 By: /s/ Donald F. Angle
Donald F. Angle, M.D.
Chairman, President, Chief Executive Officer,
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,136,433
<SECURITIES> 1,250,357
<RECEIVABLES> 1,400,773
<ALLOWANCES> 105,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,780,330
<PP&E> 1,536,898
<DEPRECIATION> 659,394
<TOTAL-ASSETS> 13,540,007
<CURRENT-LIABILITIES> 4,392,052
<BONDS> 0
0
0
<COMMON> 10,302,111
<OTHER-SE> (1,233,800)
<TOTAL-LIABILITY-AND-EQUITY> 13,540,007
<SALES> 4,193,906
<TOTAL-REVENUES> 4,193,906
<CGS> 1,433,170
<TOTAL-COSTS> 4,267,353
<OTHER-EXPENSES> (139,082)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,665
<INCOME-PRETAX> (17,030)
<INCOME-TAX> (100,000)
<INCOME-CONTINUING> 82,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,970
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
