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, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period fromto
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 NorthO' Connor Blvd., Suite 1800, Irving, Texas 75039
- ---------- --------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (972) 401-8300
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 4,906,949 shares of the Issuer's common stock, at par value of
----------
$.01 per share, outstanding as of OCTOBER 31, 1997.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
THE COMPANY DOCTOR AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
----------- -----------
Unaudited
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 324,580 $ 414,422
Short-term investments - 350,000
Accounts receivable
Trade, less allowance for
doubtful accounts of $210,000
at September 30,
1997 and $210,000 at June 30, 1997 2,296,763 1,920,719
Related parties 218,782 215,189
Other 17,825 16,932
Prepaid expenses 332,064 144,034
-------- --------
Total current assets 3,190,014 3,061,296
Property and equipment 2,634,965 2,549,493
Less accumulated depreciation
and amortization (1,040,984) (939,935)
----------- ---------
1,593,981 1,609,558
Other assets
Restricted cash 586,758 618,881
Restricted short-term investments 850,300 400,768
Intangibles, net 9,408,036 9,528,963
Other assets 320,942 386,300
Investments 1,703,171 1,900,114
---------- ----------
Total other assets 12,869,207 12,835,026
----------- -----------
Total assets $ 17,653,202 $ 17,505,880
============= =============
LIABILITIES AND STOCKHOLDERS - EQUITY
Current liabilities
Notes payable $ 2,049,225 $ 2,049,744
Current maturities of capital
lease obligations 108,853 121,913
Accounts payable and accrued expenses 1,443,474 1,152,043
Claims payable 222,345 236,796
-------- --------
Total current liabilities 3,823,897 3,560,496
Long-term liabilities
Claims payable 1,031,395 1,065,962
Capital lease obligations, net
of current maturities 158,367 182,209
Notes payable 1,422,916 1,375,000
---------------- ---------
Total liabilities 6,436,575 6,183,667
---------- ----------
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;
4,906,949 shares issued and outstanding 49,070 49,070
Additional paid-in-capital 13,807,152 13,807,152
Accumulated equity (2,639,595) (2,534,009)
----------- ------------
Total stockholders' equity 11,216,627 11,322,213
----------- -----------
Total liabilities and stockholders
equity $ 17,653,202 $17,505,880
</TABLE>
<PAGE>
THE COMPANY DOCTOR AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
----------------------------
1997 1996
---------- ---------
(Unaudited)
<S> <C> <C>
Revenues $ 3,018,569 $ 2,788,998
Cost of services provided 1,470,417 1,386,648
General and administrative expenses 1,488,923 1,266,279
Marketing expenses 72,932 62,072
Development and acquisition costs - 87,885
--------- ---------
3,032,272 2,802,884
---------- ----------
Loss from operations (13,703) (13,886)
Other income (expense)
Interest expense (145,295) (45,706)
Interest income 49,719 96,252
Other gain 3,693 -
--------- --------
Total other income (expenses) (91,883) 50,546
-------- -------
Net (loss) income before income taxes (105,586) 36,660
Income tax benefit - 166,000
---------- ---------
Net (loss) income $ (105,586) $ 202,660
=========== ==========
Net (loss) income per common share $ (.02) $ .04
=========== ==========
Weighted average common shares outstanding 4,906,949 5,545,647
========== ============
</TABLE>
<PAGE>
THE COMPANY DOCTOR AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
-----------------------------
1997 1996
---------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net (loss) income $ (105,586) $ 202,660
------------ ----------
Adjustments to reconcile net (loss)
income to net cash used in operating
activities
Depreciation and amortization 219,331 160,466
Amortization of deferred loan costs 30,063 -
Deferred tax asset - (175,000)
Change in assets and liabilities
Accounts receivable (380,530) (244,071)
Prepaid expenses (188,030) (390,016)
Other assets 65,358 (382,149)
Accounts payable and accrued expenses 291,431 481,586
Claims payable (49,018) (93,143)
-------- --------
(11,395) (642,327)
-------- ---------
Net cash used in operating activities (116,981) (439,667)
--------- ---------
Cash flows from investing activities
Purchases of property and equipment (85,473) (181,384)
Cash acquired from medical practices - 337,484
Change in restricted investments (increase) (449,532) -
Change in restricted cash-non-current -
decline 32,123 -
Proceeds from investments 546,943 271,244
Purchase of intangibles (27,417) 216,907
-------- --------
Net cash (used in) provided investing
activities 16,644 644,251
------- --------
Cash flows from financing activities
Proceeds from line-of-credit and note payable 219,806 46,537
Proceeds from exercised warrants and stock
options - 17,380
Payments on notes payable and due to sellers (172,409) (2,800,736)
Payments on equipment leases (36,902) (10,915)
-------- --------
Net cash provided by (used in)
financing activities 10,495 (2,747,724)
------- ---------
Cash and cash equivalents decrease (89,842) (2,543,150)
Cash and cash equivalents at beginning of
period 414,422 5,636,433
-------- ----------
Cash and cash equivalents at end of period $ 324,580 $ 3,093,283
========== ============
</TABLE>
Supplemental disclosures of interest paid:
Interest paid on borrowings for the three months ended September 30, 1996
and September 30, 1997 was $9,983 and $115,232 respectively.
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>
Assets acquired
<S> <C>
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>
<PAGE>
THE COMPANY DOCTOR AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
- ---------------------------------------------
The summary of the Registrant's significant accounting policies are
incorporated by reference to the Company's annual report on Form 10-KSB of
June 30, 1997.
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, 1996 consolidated financial statements
have been reclassified to conform with the September 30, 1997 presentation.
<PAGE>
- ------
THE COMPANY DOCTOR AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- -----------------------
Forward-Looking Statements
- ---------------------------
The 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 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.
Liquidity and Capital Resources
- ----------------------------------
On September 30, 1997, the Company had cash and cash equivalents of $324,580
and in addition the Company had other current assets totaling $2,865,434
resulting in total current assets of $3,190,014. Current liabilities were
$3,823,897 which resulted in a current ratio of .83 to 1.0.
Over the next twelve months, the Company will need working capital for
operations and anticipates capital may be required for the Company's possible
expansion. New medical facilities usually require the leasing or purchase of
a minimum of $80,000 of medical equipment. The Company may continue to seek
additional practices for its management portfolio and must also continue to
meet capitalization requirements for RMAC, its wholly owned subsidiary
insurance company. The Company intends to continue to explore sources and
arrangements to obtain working capital and growth capital.
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 fiscal quarters ending December 31 and June 30 of each
year, will tend to be somewhat lower than the remaining quarters of the fiscal
year.
Net revenues for the three months ended September 30, 1997 increased by
$229,571 or 8.2% to $3,018,569 from the $2,788,998 revenue level achieved
for the same three month period ended September 30, 1996. The growth is
mainly attributable to the further development of the facilities managed by
the Company and the Company's ability to capture additional market share.
Cost of Services Provided
- ----------------------------
Cost of services provided for the quarter ended September 30, 1997, was
$1,470,417, as compared to $1,386,648 at September 30, 1996. As a percentage
of net revenues, such costs were 48.7% which was comparable to the 49.7% level
of the same quarter one year ago. The increase is attributable to an increase
in operating efficiencies due to increasing revenues.
General and Administrative
- ----------------------------
General and administrative expenses for the three months ended September 30,
1997, were $1,488,923 as compared to $1,266,279 at September 30, 1996. As a
percentage of revenue, those expenses were 49.3%, which was an increase from
the 45.4% for the same three month period in the prior year. The increase was
due to higher depreciation expense resulting from additions to fixed assets
and amortization costs resulting from acquisition related goodwill and
financing costs. The Company continues its cost-containment efforts in the
management of fixed and variable costs.
Marketing Expenses
- -------------------
Marketing expenses were $72,932 at September 30, 1997 compared to $62,072 at
September 30, 1996, or 2.4% compared to 2.2% as a percentage of revenues
during the respective periods. This 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 quarter ended
September 30, 1997, but had $87,885 of such costs in the three months ended
September 30, 1996. These costs in 1996 were a result of the Company's
expansion activities in two major areas: (1) pursuing and negotiating
affiliations or acquisitions with physicians who had established occupational
medicine practices or patient bases which could 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, 1997 was $49,719 or 1.7%
of revenue, as compared to $96,252 or 3.5% of revenue for the same quarter a
year ago. Interest income was earned from funds invested from the proceeds
of the Company's initial public offering, and from the interest bearing
investments in the acquired insurance company subsidiary. Interest expense
increased in the three months ended September 30, 1997 to $135,274 from
$45,706 for the three months ended September 30, 1996 primarily due to a term
loan and a revolving line of credit, which the Company obtained on April 15,
1997.
Net Income
- -----------
As a result of the factors described above, the Company recorded a net loss of
$105,585 in the three months ended September 30, 1997, or 3.5% as a percentage
of revenues, as compared to $202,660 net income (after a net income tax
benefit of $166,000), or 7.3% of revenues, in the three months ended September
30, 1996. The loss from operations was comparable for the three months ended
September 30, 1997 and 1996 at $13,703 and $13,886, respectively. At June 30,
1997, the Company had approximately $2.449 million (including $1.3 million for
the year ended June 30, 1997) of net operating loss carryforwards (for income
tax reporting purposes) which expire in the year 2008 through 2012. 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 net $166,000 deferred tax benefit on the income statement. This same item
had no effect on the income statement for the quarter ended September 30,
1997.
<PAGE>
PART II
Item 1. Legal proceedings - none
Item 2. Changes in securities and use of proceeds
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) The Company registered 1,840,000 units, each unit consisting
of one share of Common Stock and one warrant to purchase one
share of Common Stock, for sale to the public at a price
of $5.25 per unit on a Form SB-2 Registration Statement
(Reg. No. 33-99530-D) (the "Registration Statement") declared
effective on February 6, 1996.
The offering was completed in February 1996 and the Company
received gross proceeds of $9,660,000. Expenses incurred by
the Company in connection with the issuance and distribution
of the securities registered for underwriting discounts and
commissions were $869,400, expenses paid to or for underwriters
were $364,800, and other expenses were $525,124, for total
expenses of $1,759,324. None of such expenses were
direct or indirect payments to directors, officers, or their
associates or to persons owning ten percent or more of any
class of equity securities of the Company or to affiliates of
the Company. The resulting net offering proceeds to the Company
after payment of all expenses was $7,900,676.
Additionally, the Company recognized a $312,245 non-cash charge
to offering costs related to the imputed costs associated with
stock options granted to the underwriter in conjunction
with the offering.
From the effective date of the Registration Statement through
November 6, 1997, the net offering proceeds have been used
by the Company as follows: purchase and installation of
machinery and equipment, $1,060,600; acquisition of other
businesses, $2,683,600; repayment of indebtedness, $318,400;
working capital, $891,776; general and administrative expenses,
$305,200; opening new facilities, $237,500; marketing and
promotional, $123,500; and purchase and capitalization of
the insurance subsidiary, $2,275,100. None of such
expenditures were direct or indirect payments to directors,
officers or their associates or to persons owning ten
percent or more of any class of equity securities of the
Company or to affiliates of the Company except for
approximately $26,000 which was paid to officers and
directors for reimbursement of general and administrative
expenses and directors' fees. Furthermore, the use of proceeds
described above does not represent a material change in the
use of proceeds described in the prospective contained in the
Registration Statement and all of the offering proceeds have now
been applied.
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 None
<PAGE>
SIGNATURES
In accordance with 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.
THE COMPANY DOCTOR
(Issuer)
Date: November 13, 1997 By: /s/ Fred G. Parrish
Fred G. Parrish
V.P., Chief Operating Officer,
Chief Financial Officer
Date: November 13, 1997 By: /s/ Dale W. Willetts
Dale W. Willetts
Acting Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 324,580
<SECURITIES> 0
<RECEIVABLES> 2,743,370
<ALLOWANCES> 210,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,190,014
<PP&E> 2,634,965
<DEPRECIATION> 1,040,984
<TOTAL-ASSETS> 17,653,202
<CURRENT-LIABILITIES> 3,823,897
<BONDS> 0
0
0
<COMMON> 13,856,222
<OTHER-SE> (2,636,595)
<TOTAL-LIABILITY-AND-EQUITY> 17,653,202
<SALES> 3,018,569
<TOTAL-REVENUES> 3,018,569
<CGS> 1,470,417
<TOTAL-COSTS> 3,032,272
<OTHER-EXPENSES> (53,412)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,295
<INCOME-PRETAX> (105,586)
<INCOME-TAX> 0
<INCOME-CONTINUING> (105,586)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (105,586)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
