UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-24696
AMERICAN ENTERPRISE.COM, CORP.
(Name of small business issuer in its charter)
FLORIDA 59-3248917
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6800 North Dale Mabry Highway, Suite 100
TAMPA, FLORIDA 33614 33511
(Address of principal executive offices) (ZIP CODE)
(813) 882-6567
(Issuer's telephone number, including area code)
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
UNITS CONSISTING OF ONE SHARE OF COMMON STOCK, WITHOUT PAR VALUE,
AND ONE COMMON STOCK PURCHASE WARRANT
(TITLE OF CLASS)
COMMON STOCK, WITHOUT PAR VALUE
(TITLE OF CLASS)
COMMON STOCK PURCHASE WARRANTS
(TITLE OF CLASS)
Check whether the issuer (1) 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 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 [ ] No [X]
Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Issuer's revenues for the fiscal year ended December 31, 1999 were
$6,844,361.
As of March 31, 2000, there were outstanding 2,250,000 shares of Common
Stock, no par value. The aggregate market value of the voting stock held by
non-affiliates of the registrant based on the closing bid price reported on the
OTC Bulletin Board as of April 5, 2000, was $9,767,738.
DOCUMENTS INCORPORATED BY REFERENCE:
DOCUMENTS FORM 10-K REFERENCE
TRANSITION SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
Yes [ ] No [X]
Page 1 of 65 Pages
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AMERICAN ENTERPRISE.COM, CORP.
FORM 10-KSB ANNUAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 1999
TABLE OF CONTENTS
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PAGE NO.
PART I
Item 1 Description of Business....................................................................... 3
Item 2 Description of Property....................................................................... 17
Item 3 Legal Proceedings............................................................................. 18
Item 4 Submission of Matters to a Vote of Security Holders........................................... 19
PART II
Item 5 Market for Common Equity and Related Stockholder Matters...................................... 19
Item 6 Management's Discussion and Analysis or Plan of Operation..................................... 20
Item 7 Financial Statements ......................................................................... 28
Item 8 Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................................... 55
PART III
Item 9 Directors, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act ....................................................... 55
Item 10 Executive Compensation......................................................................... 56
Item 11 Security Ownership of Certain Beneficial Owners and Management................................. 57
Item 12 Certain Relationships and Related Transactions................................................. 58
Item 13 Exhibits and Reports on Form 8-K............................................................... 59
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PART I
CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION
AMERICAN ENTERPRISE.COM, CORP. f/k/a National Diagnostics, Inc. (the
"Company") has made forward-looking statements in this document that are subject
to risks and uncertainties. The statements contained in this report on Form
10-KSB that are not purely historical are 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, including statements regarding the Company's
expectations, hopes, beliefs, intentions, or strategies regarding the future.
Forward-looking statements include statements regarding, among other things: (I)
the potential loss of material customers; (ii) the failure to properly manage
growth and successfully integrate acquired businesses; (iii) the Company's
financial plans; (iv) trends affecting the Company's financial condition or
results of operations; (v) the Company's growth and operating strategies; (vi)
the impact of competition from new and existing competitors; (vii) potential
increases in the Company's costs; (viii) the declaration and payment of
dividends; (ix) the potential for unfavorable interpretation of existing
government regulations or new government legislation; (x) and the outcome of
certain litigation involving the company. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. All forward-looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statement. Among the factors that could cause actual results to differ
materially are the factors detailed in Items 1 through 3 and 7 of this report
and the risks discussed under the caption "Risk Factors" included in the
Company's filings under the Securities Act of 1933. Prospective investors should
also consult the risks described from time to time in the Company's Reports on
Form 10-QSB, 8-K, 10-KSB and Annual Reports to Shareholders.
ITEM 1 -- DESCRIPTION OF BUSINESS
GENERAL
On February 20, 2000, the Company combined on the basis of four (4)
shares of common stock in exchange for one (1) share of common stock thereby
resulting in 2,250,000 shares of authorized common stock, no par value and
2,250,000 shares issued and outstanding as of February 20, 2000, the record date
for such action. This recapitalization has been retroactively effected as a
one for four reverse stock split; accordingly, all shares and per share
information has been restated, herein.
American Enterprise.com, Corp., its wholly-owned subsidiaries, SunPoint
Diagnostic Center, Inc. ("SunPoint"), National Diagnostics/Orange Park, Inc.
("Orange Park"), National Diagnostics/Riverside, Inc. ("Riverside"), Alpha
Associates, Inc. ("Alpha Associates") and Alpha Acquisitions Corp. ("Alpha
Acquisitions"), and Brandon Diagnostic Center, Ltd., a limited partnership of
which Alpha Associates and Alpha Acquisitions are the general and limited
partner, respectively, provide diagnostic imaging services through several
outpatient centers located in the State of Florida. Sundance Partners (a
wholly-owned general partnership) owned the land and building associated with
the outpatient center leased to Orange Park. (As used herein, the term "Company"
refers to American Enterprise.com Corp, including its subsidiaries.) The
Company's principal facility is located in Brandon, Florida, just east of Tampa.
This facility accounted for 58% of the Company's net revenues in 1999. The
SunPoint facility is located in Ruskin, Florida. The Company acquired, through
its Orange Park subsidiary, substantially all of the assets of an existing
mobile diagnostic imaging business in greater metropolitan Jacksonville in
February 1995. In August, 1995 the company opened in the Jacksonville area a
third fixed site facility. In September 1995, the Company expanded its mobile
facilities by adding both a mobile MRI unit and
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mobile cardiology unit in the Jacksonville area. In July 1996, the Company
opened its fourth fixed site facility with its Riverside facility in
Jacksonville. This expansion from one facility to four was made financially
possible by the Company's initial public offering in September 1994 and other
credit arrangements. In April 1999, the Company closed its Orange Park facility
due to its inability to attain a satisfactorily level of performance. In August
1999, the Company opened a new fixed site facility in Tampa, Florida as a
division of its Brandon facility. By April 2000, the Company closed both it
Riverside facility and the Brandon branch office due to their failure to obtain
satisfactory levels of performance.
The Company provides full service diagnostic imaging services to
patients and physicians in a comfortable, service-oriented environment located
outside of an institutional setting. Diagnostic imaging services provided
include magnetic resonance imaging ("MRI"), computer tomography ("CT"),
ultrasound, nuclear medicine, general radiology and fluoroscopy, bone
densitometry, and mammography. The Company's diagnostic imaging procedures are
performed by trained radiologic technologists and board certified radiologists.
Medical services are provided at each facility by interpreting physicians, who
are board certified radiologists and members of physician groups with whom the
Company has entered into long-term contracts. The Company provides management,
administrative, marketing and technical services, as well as equipment and
facilities, to the interpreting physicians. The Company accepts Medicare,
Medicaid, Worker's Compensation and most commercial insurance. The Company has
contracted with many health maintenance organizations and preferred provider
organizations. In 1998 and 1999, the Company's total net revenues were
$8,774,000 and $ 6,844,000 respectively, reflecting approximately 69,000 and
56,000 respective diagnostic imaging procedures.
The Company was incorporated in Florida in June of 1994. The Company's
executive headquarters are located at 6800 North Dale Mabry Highway, Suite 100,
Tampa, Florida 33614, and its telephone number is (813) 882-6567. The Company
changed its name to American Enterprise.Com, Corp from National Diagnostics,
Inc. effective March 24, 2000.
On February 23, 1998, the Company entered into a definitive "Merger
Agreement", amended March 17, April 29, and July 24, 1998, with American
Enterprise Solutions, Inc. ("AESI"). The Company filed Form 8-K on March 10,
1998 (and subsequent amendments) describing the merger transaction. Upon merger,
the separate existence of AESI will cease and American Enterprise.com, Corp..
being the surviving corporation. On March 27, 1998, AESI acquired 500,000 shares
of the Company's Series A Preferred Stock valued at $2,000,000. Subsequently,
AESI converted a portion of its Preferred Stock for 1,446,643 shares of the
Company's Common stock, giving AESI a 65% controlling interest in the Company.
The closing date of the merger was extended in December 1999 to occur no later
than December 2000 upon satisfaction of the closing conditions.
AESI was founded in September 1997, for the purpose of acquiring
seasoned and profitable high growth firms with operations and facilities to
create Community Healthcare Delivery Systems. These systems are designed to
provide comprehensive delivery of all healthcare services while electronically
interactively linking with AESI's proprietary Internet/Intranet and virtual
network gateways. The network can link all of the healthcare industry's trading
partners, from patient/consumer/employees to the providers, payors, employers
and government agencies.
AESI consists of businesses acquired in 1998 and 1999, which
complements AESI's goal to create numerous Community Healthcare Enterprises (an
organization that owns and operates a complete community wide healthcare
delivery system). These businesses include: multi-specialty and primary care
physician groups; behavioral and mental healthcare facilities; a provider of
referral management services for physician groups and insurance companies; a
home healthcare and pediatric home healthcare provider; and a medical management
service group.
On March 30, 1998, Mr. Charles Broes and Mr. Cardwell C. Nuckols,
Ph.D., were appointed to the
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Company's Board of Directors. Mr. Broes and Dr. Nuckols serve as CEO and
Executive Vice President of AESI, respectively. On March 31, 1998, Mr. Broes and
Dr. Nuckols were appointed as Officers of the Company and currently serve in the
capacity as CEO and President, respectively.
DIAGNOSTIC IMAGING SERVICES INDUSTRY
OVERVIEW
During the past ten years, the diagnostic imaging services industry has
experienced substantial growth as well as a major shift from inpatient to
outpatient delivery of services. Due to the contrast and detail of a high
quality MRI scan, the use of MRI equipment frequently facilitates the
identification of disease and disorders of a patient and often reduces the
amount and cost of care needed to treat the patient and the need for certain
invasive procedures, like exploratory surgery. The number of MRI units in
operation has increased from fewer than 100 in 1984 to more than 5,500 in 1998.
This rapid growth resulted from increasing acceptance by physicians and patients
of MRI as well as an increasing need for MRI usage in imaging different body
organ systems and disease conditions. New software programs and hardware
capabilities, coupled with new contrast agents (chemicals administered to the
patient that enhance the signal generated by body tissues), are anticipated to
expand further the usage of the technology by physicians.
In addition, inpatient health care cost containment pressures have led
to the growth of outpatient delivery of services. Prior to 1983, most imaging
services were delivered to patients in a hospital radiology department. In 1983,
the federal government instituted the Prospective Payments System, which limited
the amount paid by Medicare to hospitals for inpatient care for most categories
of diseases. This restrictive reimbursement environment was a prime factor in
the shift from inpatient to freestanding, outpatient imaging centers, since
hospitals became less likely to purchase or lease expensive diagnostic imaging
equipment and commercial space.
Ownership of outpatient diagnostic imaging centers remains highly
fragmented, with no dominant national provider. Most of the equity in outpatient
centers is owned by hospitals, independent radiologists, management companies or
other groups. This fragmentation provides the Company with potential acquisition
opportunities.
EQUIPMENT AND MODALITIES
Diagnostic imaging systems are based on the ability of energy waves to
penetrate human tissue and generate images of the body, which can be displayed
either on film or on a video monitor. Imaging systems have evolved from
conventional X-rays to the advanced technologies of MRI, computerized
tomography, ultrasound, nuclear medicine, neurology and mammography. The
principal diagnostic imaging modalities used by the Company includes the
following:
MAGNETIC RESONANCE IMAGING. MRI is a sophisticated diagnostic
imaging system that utilizes a strong magnetic field in conjunction
with low energy electromagnetic waves, which are processed by a
dedicated computer to produce high resolution multiple images of body
tissue. A principal virtue of MRI imaging is that atoms in various
kinds of body tissue behave differently in response to a magnetic
field, enabling the differentiation of internal organs and normal and
diseased tissue. During an MRI procedure, a patient is placed in a
large, cylindrical magnet. Multiple images to various planes and
cross-sections can be created without moving the patient. The images
can be displayed on a computer screen, stored within the computer, or
transferred to film for interpretation by a physician and retention in
a patient's file. Unlike computerized tomography and general radiology
and fluoroscopy, MRI does
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not utilize ionizing radiation, which can cause tissue damage in high
doses. As with many other diagnostic imaging technologies, MRI is
generally non-invasive.
COMPUTERIZED TOMOGRAPHY. CT is used to detect tumors and other
conditions affecting the skeleton and internal organs. CT provides
higher resolution images than conventional X-rays, but generally not as
well defined as those produced by MRI. During a CT procedure, a patient
is placed inside a ring on which a rotating X-ray tube is mounted. A
dedicated computer directs the movement of the X-ray tube to produce
multiple cross sectional images of a particular organ or area of the
body.
ULTRASOUND. Ultrasound has widespread application,
particularly for procedures in obstetrics, gynecology and cardiology.
Ultrasound imaging relies on the computer-assisted processing of sound
waves to develop images of internal organs and the vascular system. The
sound waves are generated and recorded by probes that are either passed
over or inserted into the body. A dedicated computer processes sound
waves as they are reflected by body tissue, providing an image that may
be viewed immediately on a computer screen or recorded continuously or
in single images for further interpretation.
NUCLEAR MEDICINE. Nuclear medicine is used primarily to study
anatomy and metabolic functions. During a nuclear medicine procedure,
short-lived radioactive isotopes are administered to the patient by
ingestion or injection. The isotopes break down rapidly, releasing
small amounts of radioactivity that can be recorded by a gamma or
scintigraphic camera and processed by a computer to produce a flat
image of various anatomical structures.
GENERAL RADIOLOGY AND FLUOROSCOPY. The most frequently used
type of imaging equipment, radiology uses "X-rays" or ionizing
radiation to penetrate the body and record its images on film.
Fluoroscopy uses a video viewing system for real-time monitoring of the
organs being visualized.
BONE DENSITOMETRY. Bone Densitometry uses low field X-ray
imaging to diagnose osteoporosis.
MAMMOGRAPHY. Mammography is a specialized form of radiology
equipment using low dosage X-rays to visualize breast tissue. It is the
primary screening tool for breast cancer.
THE COMPANY'S GROWTH STRATEGY
Due to the recency of the pending merger between AESI and the Company,
the Company is not able to elicit the growth strategies for the numerous
businesses that will be part of the merger with AESI. The focus will be on the
Company's Diagnostic Division as it currently exists prior to the consummation
of the merger.
The Company's strategy for growth involves increasing the revenues and
profitability of its existing facilities, establishing and developing additional
diagnostic imaging centers and acquiring existing imaging facilities in certain
target markets. In addition, the Company plans to expand its existing operations
to include mobile diagnostic imaging capabilities.
EXPANSION OF EXISTING FACILITIES.
The Brandon facility is currently a full service imaging facility. In
early 1998, Brandon began offering bone density studies to diagnose
osteoporosis. In August 1999, Brandon opened a branch office in Tampa, Florida,
offering general radiology, mammography, and bone density.
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The SunPoint Diagnostic Center is a full-service imaging facility, with
the exception of MRI. The Company intends to add MRI capabilities to the
SunPoint facility at such time as the demand for such services warrants the
acquisition or lease of MRI equipment. See "The SunPoint Facility." In 1998,
SunPoint also began offering bone density studies for the diagnosis of
osteoporosis.
In April 1999, the Company closed its Orange Park fixed site facility
due to the facility not attaining a satisfactory level of performance.
CENTER DEVELOPMENT AND NEW CENTER ACQUISITIONS.
The Company continued to defer its external expansion in 1999, focusing
more directly on the continuing effort to build efficiencies, economies of
scale, and profitability into existing start-ups. With the resources that will
be available to the Company as a result of the merger with AESI, the Company
intends, subsequent to the merger, to embark on its external growth strategies
in 2000. Due to the synergies, which will be experienced with other businesses
in the AESI fold, new growth strategies will be developed which will include all
other business merged into the Company.
The Company's external growth strategy includes the development and/or
acquisition of diagnostic imaging facilities in target areas identified by
management initially in the State of Florida, with the potential for expansion
to other regions in the United States where AESI already has a presence. The
Company intends to operate each newly developed or acquired facility through a
separate, wholly-owned subsidiary. In seeking suitable locations for the
development of new centers or the acquisition of existing centers, the Company
will focus primarily on demographic studies and its analysis of local
competition, physician referral patterns and imaging services supply and demand.
Also, the Company will focus on its ability to either utilize the professional
services of its existing interpreting physicians to interpret test results or
affiliate with other qualified interpreting physicians. Installation and
maintenance costs on equipment can be substantial, particularly with respect to
MRI units. Consequently, new facilities initially will include most or all of
the modalities offered by the existing Brandon facility, with the exception of
MRI. MRI has historically accounted for approximately 20-34% of the Company's
revenues. MRI procedures are expensive to perform and have historically
generated high margins for the Company. Due to the significant capital
expenditure required to install and maintain MRI equipment a minimum average
number of procedures must be performed daily at each facility offering MRI to
cover fixed costs associated with MRI equipment. As a result, the Company
currently intends to perform all MRI procedures required by its facilities not
offering MRI directly either at the Company's nearest full service facility or
via a mobile MRI unit acquired by the Company. The Company expects to provide
MRI services in this manner until such time as management determines that the
demand for MRI procedures at a particular facility is at a level that will
generate revenue sufficient to cover fixed costs associated with MRI equipment
and generate the necessary margin rates.
The Company also believes that it can successfully acquire existing
imaging centers. Acquisition opportunities that were tied to the enactment of
federal and state laws and regulations restricting physician referrals to health
care facilities in which such physicians have a financial interest and limiting
permissible affiliations between tax exempt hospitals and "for profit"
outpatient medical centers have diminished. See "Business-Government
Regulation." The required divestitures of physician-owned centers have already
occurred. Nevertheless, management believes that acquisition opportunities
continue to exist due to the fragmented nature of the imaging center business.
No assurances can be given that adequate financing will be available to
fund the development or acquisition of this or any other new facilities.
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INCREASED MOBILE DIAGNOSTIC IMAGING CAPABILITIES.
The Company's growth strategy also includes expanding its mobile
diagnostic imaging capabilities. The Company currently provides mobile
ultrasound, mobile nuclear cardiology imaging, mobile MRI services, and mobile
bone density diagnostic imaging services.
There can be no assurances that the Company can or will successfully
implement its internal growth or external growth strategies.
IMAGING EQUIPMENT.
The Company obtains its imaging equipment from large, well-established
companies, including Siemens Medical Systems Inc., Toshiba, Inc., Lo-Red Co. and
Raytheon, Inc. The Company is not dependent on any one supplier and believes
that it has satisfactory relationships with its suppliers.
Equipment acquisition costs can vary dramatically, depending upon the
model and peripheral equipment acquired. The Company reviews the technological
capabilities of new product offerings in order to improve and upgrade equipment
when necessary. Currently, equipment costs range as follows:
EQUIPMENT PRICE RANGE
MRI $700,000 to $1,400,000
CT 300,000 to 700,000
Ultrasound 100,000 to 250,000
Nuclear Medicine 250,000 to 400,000
Radiology 40,000 to 75,000
Fluoroscopy 200,000 to 350,000
Mammography 50,000 to 105,000
Bone Densitometry 25,000 to 70,000
Installation and maintenance costs on the equipment can be substantial,
particularly with respect to MRI units. Installation costs can range from
$35,000 to $125,000 for an MRI unit, depending on the particular installation
circumstances.
The Company generally obtains financing for its equipment from lenders
and lessors, with the equipment and other assets serving as security for the
loans. Leases for smaller medical equipment average three years and leases for
larger medical equipment are for seven years. Certain of such loans are
personally guaranteed by Mr. Alliston.
OPERATIONS
The Company provides diagnostic imaging services to patients referred
by physicians who are either in private practice or affiliated with managed care
providers or other groups. Patients are scheduled for an appointment, informed
of any medications needed for the test, and pre-qualified with respect to their
medical requirements and insurance coverage by Company personnel. Procedures are
designed to avoid the admission and administrative complexities of in-hospital
diagnostic imaging services. All of the Company's imaging services are performed
on an outpatient basis by trained medical technologists under the direction of
the interpreting
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physician. Following the diagnostic procedures, the images are reviewed by the
interpreting physicians, who prepare a report of these tests and their findings.
These reports are transcribed by Company personnel and then delivered to the
referring physicians. The interpreting physicians are board certified
specialists in radiology, nuclear medicine, nuclear cardiology or
neuroradiology, as appropriate. Such interpreting physicians are members of an
independent health care provider group with which the Company has entered into a
long-term contract, and are not employees of the Company. The Company is not
engaged in the practice of medicine. In an effort to contain radiology physician
costs, in the first quarter 2000, the Company added to its staff its own
radiologists.
Typically, patients are charged an all-inclusive fee for the imaging
studies. The administrative staff was responsible for billing and collecting the
fee. In January 1999, the Company outsourced its billing and collections to
American Enterprise Service Group, Inc., a wholly owned subsidiary of AESI.
The Company contracts for interpreting physician services for which
typically the interpreting physician receives a fixed fee or a fixed percentage
of monthly collections. The Company believes that the structure of its
compensation arrangement with its interpreting physicians encourages high
quality service and fairly compensates these physicians for the interpretation
services they provide. The Company's agreement with its interpreting physicians
is typically for a three-year term and requires each physician to obtain medical
malpractice insurance. Effective the first quarter 2000, the Company added to
its staff its own radiologists and obtained medical malpractice insurance.
THE BRANDON, FLORIDA FACILITY
The Brandon, Florida facility was established in 1991 as a full-service
diagnostic facility specializing in outpatient radiology. In 1994, it became a
wholly-owned subsidiary of American Enterprise.com, Corp. The Brandon facility
generally provides medical diagnostic services to the general population living
within approximately ten miles of Brandon, Florida. The Brandon, Florida area
population, currently in excess of 250,000, consists primarily of an expanding
base of middle-income families and retirees. In 1998 and 1999, the Brandon
facility generated net revenues of approximately $4,500,000 and $4,002,000,
respectively.
The Brandon facility currently has one unit for each of MRI, CT and
nuclear medicine and two units for each of mammography, radiology, ultrasound
and fluoroscopy.
Patients at the Brandon facility are invoiced in the name of Brandon
Diagnostic Center. The interpreting physician's P.A. with which the Company has
currently contracted for interpreting physician services at the Brandon facility
receives a fixed percentage fee for services performed. Effective first quarter
2000 the Company employed its own radiologists under a fixed salary arrangement.
Brandon facility's interpreting physician is certified by the American
Board of Radiology. The interpreting physician's P.A. is responsible for
subcontracting with additional physicians to assure adequate coverage during
peak times, absences, etc. The Brandon facility has forty-eight employees.
The Brandon facility is open from 7:30 a.m. to 6:00 p.m. Monday,
Wednesday and Friday, 7:30 a.m. to 8:00 p.m. on Tuesday and Thursday, 8:00 a.m.
to 2:00 p.m. on Saturdays and on an as-needed basis on Sundays.
THE SUNPOINT FACILITY
The Company, through its SunPoint subsidiary, opened its SunPoint
Diagnostic Center in Ruskin, Florida, approximately twenty miles south of
Brandon, in November 1994. This facility is located near the Sun
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City Center retirement community. The Ruskin area has a total population of
approximately 45,000, including roughly 38,000 retirees. The SunPoint facility
is a full-service imaging facility, with the exception of MRI. It currently has
one unit for each of CT, ultrasound, nuclear medicine, mammography, radiology
and fluoroscopy. The equipment located at the SunPoint facility is obtained from
the same manufacturers as the Brandon facility equipment.
Consistent with the Company's expansion strategy, the Company intends
to add MRI capabilities to the SunPoint Diagnostic Center only as the demand for
such services develops and warrants the acquisition of MRI equipment. Until such
time, all MRI procedures required by SunPoint facility patients will be
performed at the nearby Brandon facility. All SunPoint patients requiring MRI
procedures are offered a free shuttle service to and from the Brandon facility.
The operational procedures at the SunPoint facility are virtually
identical to those described above under "Operations". The patients are invoiced
in the name of SunPoint Diagnostic Center. The SunPoint facility is staffed by
fifteen employees and one interpreting physician, who rotates with the other
interpreting physician serving the Brandon facility. The interpreting
physician's P.A. with which the Company has currently contracted for
interpreting physician services at the SunPoint Diagnostic Center receives a
fixed percentage fee for services rendered. Effective first quarter 2000 the
Company employed its own radiologists under a fixed salary arrangement.
The SunPoint facility is currently open from 7:30 a.m. to 5:30 p.m.
Monday through Friday, and on an as needed basis on Saturdays.
THE ORANGE PARK FACILITY
In February, 1995, the Company, through its Orange Park subsidiary,
acquired substantially all of the assets of Medical Imaging Consultants, Inc.
and certain of its affiliates, providers of both mobile and fixed site
ultrasound and related diagnostic testing services in the cardiac, cerebral
vascular and neurophysiology areas.
Orange Park provided mobile and fixed diagnostic services in Clay,
Duval, Nassau and St. Johns counties in northeastern Florida in 1998. Its
principal facility is located in Orange Park, Florida, where it has three mobile
units for neurology, two units for ultrasound, one each for nuclear cardiology
and MRI. All equipment at the Orange Park facility is either owned directly or
leased through an independent leasing company. The Orange Park facility became a
full service imaging facility, with its mobile facilities, by September 1995.
The Company has one unit for each for CT, ultrasound, mammography, radiology,
and fluoroscopy at its Orange Park subsidiary. This mobile unit is used to
provide MRI services at Orange Park and any future facilities developed by the
Company in northeastern Florida. See "-The Company's Growth Strategy-Center
Development and New Center Acquisitions." The Orange Park fixed site facility
was closed in April 1999 due to continual losses. The operations were
consolidated with Riverside. The facility was foreclosed on in July 1999. The
equipment was either sold or utilized elsewhere in the Company.
Orange Park followed the same operational procedures as the Company's
other facilities, except that patients are invoiced directly in the name of
Orange Park. All interpreting services were provided by eight interpreting
physicians who are members of an independent health care provider group with
which the Company has entered into a long-term contract. These physicians were
not employees of the Company and the Company was not engaged in the practice of
medicine. The interpreting physician group with which the Company had contracted
for interpreting physician services at the Orange Park facility received a
monthly fee equal to 17% of
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the monthly collections.
In 1997, the Orange Park facility was awarded the Certificate of
Accreditation from the Joint Commission of Accreditation of Healthcare
Organizations.
THE RIVERSIDE FACILITY
The Company, through its Riverside subsidiary, opened in July of 1996
the Riverside Diagnostic Center in the Riverside area of Jacksonville, Florida.
The facility is located in proximity of a thousand bed hospital in a residential
area of Jacksonville. The Riverside facility is a full-service imaging facility,
inclusive of mobile MRI services. It currently has one unit each for CT,
ultrasound, nuclear cardiology, nuclear medicine and radiology and two units
each for mammography and fluoroscopy.
Riverside follows the same operational procedures as the Company's
other facilities, except that patients are invoiced directly in the name of
Riverside. The Riverside facility is currently staffed by eighteen employees.
All interpreting services are provided by a group of physicians who received a
fixed percentage fee for services performed.
The Riverside facility operated from 7:30 a.m. to 5:30 p.m. Monday
through Friday. In April 2000, the facility was closed due to continued losses.
The Riverside facility had been awarded the Certificate of Accreditation from
the Joint Commission of Accreditation of Healthcare Organizations.
MARKETING
The Company provides diagnostic imaging services to patients referred
by physicians who are either in private practice or affiliated with managed care
providers or groups. Consequently, the Company's marketing program focuses on
establishing and maintaining referring physician relationships by efficiently
providing needed medical services to patients of those physicians, and
maximizing reimbursement yields. The Company's marketing program targets
selected market segments consisting of local physicians who may have a need for
diagnostic imaging services. The Company utilizes a variety of marketing
techniques in its market areas to educate physicians in the availability and
capabilities of the various imaging technologies, including personal visits by
the Company's clinical coordinators to local physicians and their staffs, direct
mailings of marketing brochures and participation in seminars on recent
developments in diagnostic imaging and related technology.
The Company's clinical coordinators seek to maintain the satisfaction
of referring physicians by frequent contact with them, both to ascertain the
physicians' needs and, when appropriate, to seek suggestions on how to improve
the Company's delivery of services. The Company continually seeks to improve the
quality of its services by encouraging interaction between referring physicians
and interpreting physicians. The Company has also developed a database
containing referring physician and patient information in order to more
effectively coordinate its marketing activities with respect to its referring
physicians. The Company has joined the Florida Imaging Network, Inc., an
association established to develop and operate a statewide diagnostic imaging
services network to interface with managed care providers in the State of
Florida. The Company believes that this provides an additional method of
expanding its referral base.
REIMBURSEMENT, BILLING AND COLLECTION
The Company charges patients a fee for each imaging study performed,
which is billed in the name of
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the applicable diagnostic center or the interpreting physician group. The
Company generally accepts assignment by the patient of payment from insurers and
is reimbursed for services performed by payment, directly and indirectly, from
third-party commercial insurers, managed care organizations, government payors,
workmen's compensation and other sources. In many instances, the patient is
responsible for payment of a co-payment or deductible and, in some instances,
the patient remains responsible for payment of the entire fee. The extent to
which services provided by the Company are reimbursable depends upon a number of
factors, including the type of insurance coverage carried by the patient, the
type of imaging services provided to the patient, prevailing practices in the
relevant geographic area and the identity of the third-party payor.
The following table sets forth the approximate percentages of
collections received during 1999 in each of the following categories:
PERCENT OF
SOURCE COLLECTIONS
Managed Care/HMO 30%
Private Insurance 44
Medicare/Medicaid 18
Private Pay 6
Workers Compensation 2
The Company maintains a competitive billing strategy based upon
evaluation of available pricing data. The Company maintains sufficient price
flexibility to enable it to compete with other MRI imaging services provided in
the local community.
Obtaining the maximum amount of allowable reimbursement and
collecting receivables on a timely basis are critical to the Company's success
and are a priority of management. In late 1998 and early 1999, the Company
outsourced its billing and collection process with an affiliated subsidiary of
AESI, which specializes in medical billings and collections.
Third-party payors, including Medicare, Medicaid and certain
commercial payors, have taken extensive steps to contain or reduce the costs of
health care. A significant change in coverage or a reduction in payment rates by
third-party payors could have a material adverse effect upon the Company's
business. In both 1998 and 1999, less than 1% of the Company's total revenues
were derived from providing imaging services to patients involved in personal
injury claims. The Company sometimes experiences significant collection delays
in connection with these services due to the fact that the Company may not be
paid for its services until the underlying legal action is resolved.
COMPETITION
The outpatient diagnostic imaging industry is highly competitive. The
Company believes that its principal competitors are hospitals, independent or
management company-owned imaging centers, some of which are owned, in whole or
in part, by physician investors, and mobile diagnostic units. Some of these
competitors have greater financial and other resources than the Company. The
Company's competitors in the immediate Brandon area are a 120-bed hospital
providing full inpatient service and an outpatient diagnostic center opened in
January of 1997. The Brandon facility has experienced a 12% decline in net
revenues in 1999 compared to 1998. The Company's sole competitor in the Ruskin
area is a 50-bed hospital also providing full inpatient
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service. The Company has many competitors in the Jacksonville area, including
hospitals, independent or management company-owned imaging centers and mobile
diagnostic units.
The Jacksonville operation experienced a decline of 46% in net
revenues in 1999 compared to 1998. A significant portion of this decrease is the
result of the Company closing one of two Jacksonville fixed site diagnostic
centers in March 1999. In April 2000 the Company closed its remaining fixed site
facility in Jacksonville and is assessing its market position for future
operations in the Jacksonville area.
The Company believes that as a result of its operating efficiencies,
it can provide outpatient diagnostic services more competitively than other
local providers. Principal competitive factors include quality and timeliness of
test results, type and quality of equipment, facility location, convenience of
scheduling and availability of patient appointment times.
GOVERNMENT REGULATION
The health care industry is highly regulated at the federal, state
and local levels. Although the following is not an exhaustive discussion, it
summarizes the key regulatory factors that affect the Company's operations and
development activities.
CERTIFICATES OF NEED AND LICENSING. Under Certificate of Need laws, a
health care provider is typically required to substantiate the need for, and
financial feasibility of, certain expenditures related to the construction of
new facilities, commencement of new services or purchases of medical equipment
in excess of statutory thresholds. The provision of outpatient health services,
including outpatient MRI, is exempt from Certificate of Need review in the State
of Florida. The operations of outpatient imaging centers are subject to federal
and state regulations relating to licensure, standards of testing, accreditation
of certain personnel and compliance with governmental reimbursement programs.
The Company is required to obtain and maintain general business licenses from
certain counties in which it operates centers, as well as licenses from the
State of Florida for the handling and disposal of radioactive materials used in
nuclear medicine procedures. Radioactive materials are currently delivered daily
to the Company's Brandon, SunPoint and Orange Park facilities. Medical waste
contaminated with radioactive material is placed in locked hazardous waste
containers and picked up daily for disposal by a licensed hazardous waste
vendor. The Company is subject to surprise inspection by nuclear inspectors.
Although the Company believes that it has obtained all necessary licenses, the
failure to obtain a required license could have a material adverse effect on the
Company's business. The Company believes that diagnostic testing will continue
to be subject to intense regulation at the federal, state and local levels and
it cannot predict the scope and effect thereof.
MEDICARE/MEDICAID ANTI-KICKBACK PROVISIONS. The Medicare/Medicaid
Anti-Kickback Statute (the "Anti-Kickback Statute") prohibits the offering,
payment, solicitation or receipt of any form of remuneration in return for the
referral of Medicare or Medicaid patients for any item or service that is
covered by Medicare or Medicaid. Violation of the Anti-Kickback Statute is
punishable by substantial fines, imprisonment for up to five years or both. In
addition, the Medicare and Medicaid Patient and Program Protection Act of 1987
(the "Protection Act") provides that persons guilty of violating the
Anti-Kickback Statute may be excluded from participating as providers or
suppliers in the Medicare or Medicaid programs. Investigations leading to
prosecutions and/or program exclusion may be conducted by the Office of the
Inspector General ("OIG") of the United States Department of Health and Human
Services ("HHS"), the United States Department of Justice and State of Florida
agencies.
Under the Anti-Kickback Statute, law enforcement authorities, HHS and
the courts are increasingly scrutinizing arrangements between health care
providers and referral sources (such as physicians) in order to
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ensure that the arrangements are not designed as a mechanism to exchange
remuneration for patient referrals. This scrutiny is not limited to financial
arrangements that involve a direct payment for patient referrals, but extends to
payment mechanisms that carry the potential for inducing Medicare or Medicaid
referrals, including situations where physicians hold investment interests in,
or compensation arrangements with, a health care entity to which such physicians
refer patients.
SAFE HARBOR REGULATIONS. The Protection Act directed the OIG to
publish regulations delineating health care payment practices that would not be
subject to criminal prosecution and would not provide a basis for program
exclusion under the Anti-Kickback Statute. In 1991, the OIG published final safe
harbor regulations that specify the conditions under which certain kinds of
financial arrangements, including (i) investment interests in public companies,
(ii) investment interests in small entities, (iii) management and personal
services contracts, and (iv) leases of space and equipment, will be protected
from criminal prosecution or civil sanctions under the Anti-Kickback Statute.
The OIG has stated that failure to satisfy the conditions of an applicable "safe
harbor" does not necessarily indicate that the arrangement in question violates
the Anti-Kickback Statute, but means that the arrangement is not among those
that the "safe harbor" regulations protect from criminal or civil sanctions
under that law.
One provision of the Safe Harbor Regulations includes a public
company exception applicable to investment in the Company by referring
physicians. The Company currently does not qualify for this exception. A return
on investment, such as a dividend or interest, is not a prohibited payment if,
within the previous fiscal year or 12 month period, the public company possesses
more than $50 million in undepreciated net tangible assets which are related to
the furnishing of health care items and services and the Company meets all five
of the following standards:
i) Equity securities must be registered with the Commission under
15 U.S.C. 78l(b) or (g);
ii) The investment interest of an investor in a position to make
or influence referrals to, furnish items or services to, or
otherwise generate business for, the Company must be obtained
on terms equally available to the public through trading on a
registered national securities exchange or on NASDAQ;
iii) The Company or any investor must not market or furnish the
Company's items or services to passive investors
(non-management shareholders) differently than to
non-investors;
iv) The Company must not loan funds to or guarantee a loan for an
investor who is in a position to make or influence referrals
to furnish items or services to, or otherwise generate
business for the entity if the investor uses any part of the
loan to make the investment; and
v) The amount of payment to the investor in return for the
investment interest must be directly proportional to the
amount of the investor's capital investment.
The Company does not meet the $50 million net tangible assets criterion
and, therefore, in order to avoid any issue as to fraud and abuse compliance, a
physician who owns any of the Company's securities might be prohibited from
making any patient referrals to the Company's diagnostic imaging facilities,
whether or not the remaining standards have been complied with.
With respect to the arrangements between the Company and its
interpreting physicians, there is a safe harbor for personal service agreements
which requires that such arrangements be in writing and last for at least one
year, and that the compensation paid to the physicians be based on the fair
market value of the professional
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services they provide and not on any referrals or business generated between the
parties. To the extent that the compensation arrangements with the interpreting
physicians do not fit within all of the requirements of the safe harbor, they
are not per se illegal, but in order to avoid all risk of fraud and abuse
issues, the interpreting physicians would not be permitted to make any referrals
to the Company for imaging services.
FLORIDA PROHIBITION OF REFERRALS. On March 13, 1992, the Florida
Legislature passed the "Patient Self-Referral Act of 1992" (the "1992 Act"),
which took effect April 9, 1992. The Act, as amended in 1993, prohibits
physicians' referrals of patients for designated health services, including
diagnostic imaging services, to facilities in which they own an investment
interest. Therefore, physicians who own Common Shares or Common Share Purchase
Warrants in the Company are prohibited from making any patient referrals to the
Company's diagnostic imaging facilities.
MEDICARE REIMBURSEMENT. Diagnostic imaging services provided to
Medicare beneficiaries are reimbursed based on Medicare's Resource-Based
Relative Value Scale, which sets limits on reimbursement for both the technical
and physician components of these services. There is no guarantee that the
amount paid by Medicare, either now or in the future, will be adequate to meet
the Company's costs of providing the imaging services. There is also no
guarantee that the U.S. Government will not enact new laws or adopt regulations
restricting the ability of free-standing diagnostic imaging centers from
providing services to Medicare or Medicaid patients, although the Company is
currently unaware of any proposal to do so. In 1999, based on a sample of the
Company's 10 most common procedures, the Medicare allowable increased
approximately 3%.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993. As part of the Omnibus
Budget Reconciliation Act of 1993, Congress passed the "Stark II" law, which
prohibits a physician from referring Medicare and other federal program patients
for designated health services, including imaging services, to certain entities
with which the physician or a member of his or her immediate family has a
financial relationship. A "financial relationship" would include either an
ownership interest in, or compensation arrangement with, the entity. The Stark
II law has been incorporated into Section 1877 of Title XVIII of the Social
Security Act. The Company, as a provider of radiology and other diagnostic
services, would be such an entity, and therefore, a physician with such a
financial relationship with the Company could not make referrals of Medicare or
Medicaid business to the Company, unless the relationship falls within one of
the limited exceptions offered by Stark II. These limitations became effective
January 1, 1995.
Stark II provides an exception for referrals by a physician who, or a
member of whose immediate family, owned investment securities in a public entity
which may be purchased on terms generally available to the public, but only if
the entity met the following criteria: (i) its securities are listed on a
recognized stock exchange or traded on NASDAQ; and (ii) the entity has at the
end of its most recent fiscal year or on average during the previous three
fiscal years, stockholder equity exceeding $75 million. The Company does not
meet these criteria and, therefore, a physician who owns Common Shares or Common
Share Purchase Warrants of the Company is prohibited from making Medicare and
other federal program patient referrals to any of the Company's diagnostic
imaging facilities. The Company also is prohibited from presenting a claim for
services rendered in connection with such a prohibited referral. It would not be
necessary for the Company to have knowledge that the referral was unlawful in
order for there to be a violation for which the penalty could be denial of
payment for the claim or a refund to the payer. Penalties of up to $15,000 for
each violation and exclusion from Medicare and other programs could be assessed
if a bill is presented and the entity knows or should have known that it is the
result of a prohibited referral.
Physicians with compensation arrangements with the Company, such as its
interpreting physicians, also are subject to the foregoing referral prohibition,
unless the arrangement fits within a Stark II exception. Stark II permits
personal arrangements between such physicians and the Company if various
criteria are met, including
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that the arrangement is set out in writing, has a duration of at least one year
and the compensation paid to the physicians represents the fair market value of
the professional services provided and does not take into account the volume or
value of any referrals or other business generated between the parties. Stark II
also specifically states that a prohibited referral does not include a request
by a radiologist for diagnostic radiology services if such services are
furnished by or under the supervision of that radiologist.
To its knowledge the Company currently does not have any physicians who
are significant shareholders and, therefore, the Company's revenue growth has
been derived entirely from non-investor physician referrals. In the event the
Company has physician shareholders in the future, federal and state law will
prohibit referrals by such investors to any of the Company's imaging centers.
As a provider of diagnostic services, the Company is required to report
the names and unique identification number of physicians who, or whose immediate
family members, have an investment interest in or compensation arrangement with
the Company. The Company's current shareholders are not physicians and,
therefore, do not provide referrals in potential violation of the foregoing
provisions.
Although the Company believes that it is in substantial compliance with
all applicable federal and state laws and regulations, there can be no assurance
that such laws or regulations will not be modified or enacted, interpreted or
applied in the future in such a way as to have a material adverse impact on the
Company. Additionally, there can be no assurance that federal or state
governments will not impose additional restrictions upon all or a portion of the
Company's businesses, which might adversely affect the Company's operations.
EMPLOYEES
As of December 31, 1999, the Company had 81 employees (all full time),
including 47 administrative personnel, 2 sales and marketing persons and 32
technical personnel. All personnel are leased employees. The Company is not a
party to any collective bargaining agreement and considers its relationship with
its employees to be amicable.
INSURANCE
The Company carries comprehensive and general liability coverage, fire
and allied perils coverage in amounts deemed adequate by management. The Company
is not engaged in the practice of medicine and, therefore, does not carry
medical malpractice insurance. See "Risk Factors." There is no assurance that
potential claims will not exceed the coverage amounts that the cost of coverage
will not substantially increase or require the Company to insure itself or that
certain coverages will not be reduced or become unavailable. The Company also
requires that physicians practicing at the imaging centers carry medical
malpractice insurance to cover their individual practices. The interpreting
physicians are responsible for the costs of this insurance.
The Company does not carry workers' compensation insurance, effective
January 1, 1999, since it leases all of its employees.
ITEM 2 -- DESCRIPTION OF PROPERTY
The Company's executive offices were relocated to Tampa, Florida,
sharing space with AESI and other subsidiaries of AESI in August 1998.
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The Company's primary diagnostic facility is located in Brandon,
Florida and occupies approximately 11,325 square feet of space. The Company
entered into a lease with respect to such facilities on September 1, 1994,
expiring August 31, 1997, which is followed by a renewal option of five years.
The Company exercised its option to renew and incurred, pursuant to the lease
agreement, a one-time 10% escalation upon exercise of the renewal option. The
new lease consolidated prior leases pertaining to the Brandon facility's then
existing space and provided additional space to accommodate the Company's Center
for Women. Under both prior leases and its existing lease, the Company paid an
aggregate of approximately $177,000 (including common area maintenance and real
estate taxes) in fiscal 1999 for space at such facility. Pursuant to the lease
terms, the annual rental for the Brandon facility is subject to an annual
escalation of up to four percent based upon the Consumer Price Index.
The Company also has entered into a lease relating to its 6,390 square
foot SunPoint facility in Ruskin, Florida. The initial term of the Ruskin lease
is five years, beginning September 1, 1994, with one five-year renewal option.
The Company exercised its option to renew. Pursuant to the lease terms, the
annual rental for the Ruskin facility is subject to a four percent annual
escalation after 1996. Rent expense with common area maintenance approximated
$66,000 in 1999.
The Orange Park mobile operations and fixed site facility were based in
a 5,100 square foot medical building located in Orange Park, Florida. The
facility was owned by Sundance Partners, a Florida general partnership that is
owned 100% by the Company. A triple net lease was entered into with an initial
term of ten years, beginning April 1, 1995. Rent expense for 1999 approximated
$38,000, which is eliminated upon consolidation. In April 1999, the Company
closed this facility due to continual losses. The property was lost to
foreclosure in July of 1999.
The Company entered into a triple net lease for its Riverside facility
(which opened in July of 1996) with Sundance Partners II, a Florida general
partnership in which the general partners are officers/directors and majority
shareholders of the Company. The facility was a newly constructed 7,100 square
foot stand-alone medical center constructed to Company specifications. The lease
has an initial term of five years with a one-time renewal option for five more
years. Base rental payments are $110,050 annually. The base rent shall escalate
up each year by $.25 per square foot. Rent expense for 1999 approximated
$125,000. In March 2000, the Company purchased Sundance Partners II as an
investment and in April 2000, the Company closed the fixed site facility.
The Company believes its present and anticipated leased facilities to
be in excellent condition and suitable for their intended operations.
ITEM 3 -- LEGAL PROCEEDINGS
On May 20,1998, Carnegie Capital, Ltd. ("Carnegie Capital") filed suit
in the Circuit Court of the Fourth Judicial Circuit for Clay County, Florida,
for foreclosure against the Company and its wholly owned partnership, Sundance
Partners for alleged default of a second mortgage note held by Carnegie Capital.
The debt outstanding at December 31, 1998, approximates $127,000 plus interest
approximating $8,300, which the Company has provided for. The property involved
is the fixed site facility occupied by the Company's Orange Park diagnostic
subsidiary. The Company filed a counter suit alleging certain improprieties on
the part of Carnegie Capital. On October 6, 1998, The Company entered into a
stipulation agreement where in the Company agreed to pay $9,077.78 per month
through January 15, 1999 with the remaining balance to be paid in full by
January 31, 1999.
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The Company did not make its final two payments and Carnegie Capital was awarded
a final judgment of foreclosure on March 14, 1999. Carnegie Capital agreed to
stay its foreclosure action until June 11, 1999, pending the sale of the
property by the Company. Due to a technical defect in the title, the sale did
not occur and in July 1999, the property was foreclosed. In December 1999,
Carnegie Capital filed for a deficiency judgment. The amount of the deficiency
was not specified. A trial is scheduled for August 21, 2000, and the Company
believes it will prevail with a successful outcome.
In November 1999, X-Ray Equipment Company, Inc. filed suit in
Division E, Circuit Court in Hillsborough County, Florida, to take back certain
medical equipment valued at approximately $1,125,000 allegedly sold to Trinity
Diagnostic Imaging, Inc. (a wholly owned subsidiary of AESI) and to be used by
the Company's subsidiaries. In January 2000, the Company entered into a
stipulated agreement to pay X-Ray Equipment Company $250,000 toward the purchase
of the equipment, the balance to be paid by March 14, 2000. The Company failed
to make the payments and in March the Company returned the equipment under a
writ of replevin to X-Ray Equipment Company, Inc. The Company has established
what it believes to be an adequate reserve in the event of an adverse outcome
from the suit.
In February 2000, Siemens Credit Corporation, filed suit in Division H,
Circuit Court of the 13th Judicial Circuit in Hillsborough County, Florida for
breach of certain Work Out agreements, and lease contracts. Principal parties to
the suit include the Company and its parent AESI, and certain past officers of
the Company. The suit alleges damages of approximately $4.5 million and replevin
of certain leased medical equipment. A similar suit was filed in the 4th
Judicial Circuit in Duval County, Florida, against the Company's subsidiary,
National Diagnostics/Riverside, Inc. alleging damages of $1.3 million and
replevin of certain leased medical equipment. In November 1998, the Company
refinanced with Siemens its major lease obligations. The company fell behind in
its lease obligations and in March 1999, the Company entered into another
agreement (the "Work Out" agreement) with its major lessor, which would allow
the Company to make installments through September 1999, for its arrearages. The
Company had fallen behind in its payments in accordance with the Work Out
agreement. The Company is currently in the process of obtaining a reconciliation
of the alleged amounts due. In the event of an adverse outcome to the above
litigation, the results could have a material impact of the Company's financial
position, results of operations, or liquidity.
In February 2000, Provident Bank of Florida, filed suit in Division H,
Circuit Court in Hillsborough County, Florida, for monies due as a result of the
failure to make payments under certain note and loan agreements. The suit
alleges damages of approximately $193,000 and replevin of certain collateralized
equipment. The principal parties to the suit are the Company, certain
subsidiaries, and the Company's parent AESI. The Company is currently in the
process of obtaining a reconciliation of the alleged amounts due.
In February 2000, Copelco Capital, Inc. request a default judgment in
Division C, Circuit Court of Hillsborough County, Florida against the Company
for defaulting under a settlement agreement by which the Company agreed to cure
its default of certain equipment lease agreement. The Company, upon the
successful completion of AESI's efforts to raise capital and financing, expects
to negotiate a final settlement before Copelco reclaims its leased equipment.
Highland Properties of Gulfcoast, Ltd filed suit in the Circuit Court
of Hillsborough County, Florida seeking damages approximating $75,000 and
possession of certain leased spaces for unpaid rent. The Company negotiated a
settlement where in the rent and costs will be paid by April 30, 2000, failing
which Highland Properties of Gulfcoast, Ltd. will be entitled to a judgment for
possession and damages. In the event the Company fails to satisfy the
settlement, the results could have a material impact of the Company's financial
position, results of operations, or liquidity.
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The Company is involved as plaintiff in various legal actions,
including those specifically addressed herein, arising in the ordinary course of
business. While management cannot predict the outcome of these matters,
management believes, after consultation with legal counsel, that the ultimate
resolution of these actions will not have an adverse effect on the Company's
financial position, results of operation, or liquidity, unless otherwise
indicated above.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999. In February 2000 the majority security holders
voted to change the name of the Company to American Enterprise.com Corp, and
effect a reverse 4 to 1 stock split.
PART II
ITEM 5 -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From October 12, 1994 through August 18, 1997, the Company's Common
Shares had been traded separately in the NASDAQ SmallCap Market under the symbol
"NATD". Since August 18, 1997 the Company's Common Shares have been traded
separately on the Over The Counter Bulletin Board. Effective March 27, 2000, the
trade symbol was changed to "AMER". The following table sets forth the high and
low bid prices for Common Shares as reported by NASDAQ and OTCBB for the periods
indicated post 4 to 1 reverse split effective February 20, 2000. These prices
are not necessarily indicative of prices at which actual buy and sell
transactions could occur.
HIGH LOW
1998
First Quarter $5-1/4 $3-3/4
Second Quarter $5-7/8 $3-1/4
Third Quarter $4 $2
Fourth Quarter $3-1/4 $1-1/16
1999
First Quarter $4-1/4 $1-3/16
Second Quarter $8-1/4 $2-3/8
Third Quarter $5 $3-3/8
Fourth Quarter $10 $2-7/8
On April 12, 2000, the closing bid quote for the Common Shares was
$10.00 per share post reverse split, and there were 32 holders of record of
Common Shares. The majority of over 280 individual shareholders held their stock
in a "street name" i.e., the name of the brokerage or clearing house.
The Company has not paid cash dividends on its Common Shares and does
not anticipate doing so in the foreseeable future. The Company intends to retain
earnings, if any, for future growth and expansion opportunities. Payment of cash
dividends in the future, as to which there can be no assurance, will be
dependent upon the Company's earnings, financial condition, capital requirements
and other factors determined to be relevant by the Board of Directors.
In March of 1998 the Company entered into a private placement Stock
Purchase Agreement with AESI.
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The preferred stock issue was in exchange for "cash, assets, and credit
underwriting" valued at $2,000,000. The assets were inclusive of 8,000,000
common shares of Halis, Inc. (HLIS:OTCBB).
Five hundred thousand shares of Series A Preferred Stock of the
Company were issued with voting rights of eight votes per preferred share and
conversion rights at the rate of 11.03 shares of NDI common stock per preferred
share. In March of 1998, AESI exercised its right to convert 131,185 shares of
the Company's Preferred Stock into 1,446,643 shares of Common Stock. This
effectively gave AESI 65% of the voting rights for the Company's Common Stock.
In April 1998, the Board of Directors of the Company approved the merger with
AESI whereby AESI is the acquiror for accounting purposes. In order to affect
the merger, the Company's authorized shares of common stock will be increased.
AESI, owning approximately 65% of the outstanding shares of the Company's common
stock and 100% of the outstanding preferred stock has provided written consent
and approval of the merger which under Florida Business Corporation Act
precludes the need for further stock holder approval. The closing date of the
merger was extended in December 1999 to occur no later than December 2000 upon
the satisfaction of the closing conditions.
ITEM 6 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
Company's audited consolidated financial statements included elsewhere herein.
Due to the Company's net loss for 1999 of $2,739,000, and operating losses for
1998, which resulted in an accumulated deficit of $9,376,761, at December 31,
1999, our independent certified public accountants have qualified their
accountants' report dated April 11, 2000, on the Company's 1999 financial
statements as to a going concern uncertainty. The following commentary within
"Management Discussion and Analysis" addresses the Company's operations for 1999
and its plan to improve future results.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998.
The following table sets forth selected operating results as a
percentage of net revenues for 1999 as compared to 1998.
FISCAL 1999 FISCAL 1998
----------- -----------
Net Revenue 100.0% 100.0%
Direct Operating Expenses 64.5 61.4
General and Administrative Expense 55.0 46.8
Depreciation and Amortization 15.1 15.1
Operating loss 34.6 23.4
Interest Expense 10.4 8.6
Interest Income 2.2 0
Other Income 2.8 1.4
Income Taxes (benefit) 0 0
Net Loss (40.0) (30.5)
Net revenues for fiscal 1999 were $6,844,000 as compared to $8,774,000
for fiscal 1998, representing an approximately 22% decrease. This decrease was
primarily attributable to the Orange Park and Riverside facilities (the Orange
Park facility was closed in March 1999). Orange Park mobile operations started
up in
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February 1995, opening a fixed site facility in August; and in September a
mobile MRI facility and a mobile cardiology unit were placed in service.
Riverside operations started up in July 1996. The Orange Park and Riverside
facilities accounted for approximately $1,390,000 of the decrease in revenues.
Excluding the effect of the Orange Park closing, a decline of $264,000 or 4% was
experienced by the other facilities. The Company attributes this decline to the
competition the Centers are experiencing (see further discussion under
Liquidity).
The Company's net accounts receivable decreased $78,000 to $1,881,000
from $1,959,000 at December 31, 1999 and 1998 respectively. This is the result
of a decline in revenues and an increase in contractual allowances. The cash
position of the Company remained unchanged from 1998 to 1999; all available
funds being utilized for current operations.
Direct operating expenses decreased by approximately 18% to $ 4,413,000
for 1999 from $5,386,000 for 1998. Excluding the effects of the closed Orange
Park facility, direct costs decreased $264,000 or 4%. This decrease is primarily
the result of decreased supply costs. Direct costs as a percentage of net
revenue increased approximately 3% from the preceding year. This is attributable
to various costs that do not vary proportionately with net revenue.
General and administrative expenses decreased approximately 8% to
$3,764,000 for 1999 as compared to $4,109,000 for 1998. This decrease was
primarily attributable to the reduction of personnel and the related payroll and
benefit costs associated with such personnel. Such personnel costs decreased
approximately $501,000 to $1,575,000. The personnel were reduced in response to
the decrease in revenues and closure of the Orange Park Center
Depreciation and amortization decreased 22% to $1,035,000 in 1999 as
compared to $1,330,000 during 1998. The dollar decrease was principally
attributable to normal amortization and disposition of certain equipment with a
net book value of approximately $560,000.
Interest expense decreased to $713,000 in 1999 from $753,000 in 1998 as
a result of lower interest rates for the company's receivable financing.
The decrease in net revenues was only slightly offset by a decrease in
expenses resulting in a net loss of $2,739,000 for 1999 compared to a net loss
of $2,679,000 in 1998. This is primarily attributable to the newer operations,
which bear the costs of a fully operational diagnostic facility while building
its patient and referring physician base from day one. Orange Park completed its
third full year of operation in 1998 and was closed in March of 1999 after a
first quarter loss of $ 669,000. Riverside in its third full year of operation
has a loss of $1,105,000. The ramp up of revenues for the new starts did not
meet the Company's expectations. The Company has responded to the continued
Riverside losses by closing the operation in April 2000. The Company is
continuing in its efforts to attain profitability through personnel
re-alignment, cost reductions and operational efficiencies.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997.
The following table sets forth selected operating results as a
percentage of net revenues for 1998 as compared to 1997.
21
<PAGE>
FISCAL 1998 FISCAL 1997
----------- -----------
Net Revenue 100.0% 100.0%
Direct Operating Expenses 61.4 53.6
General and Administrative Expense 46.8 44.3
Depreciation and Amortization 15.1 14.5
Operating loss 23.4 (12.5)
Interest 8.6 7.0
Other Income 1.4 0.2
Income Taxes (benefit) 0 0
Net Loss (30.5) (19.2)
Net revenues for fiscal 1998 were $8,774,000 as compared to $9,942,000
for fiscal 1997, representing an approximately 12% decrease. This decrease was
primarily attributable to the Orange Park and Riverside facilities; although a
modest decline of less than 2% was experienced in Brandon and SunPoint
facilities. Orange Park mobile operations started up in February 1995, opening a
fixed site facility in August; and in September a mobile MRI facility and a
mobile cardiology unit were placed in service. Riverside operations started up
in July 1996. The newer facilities accounted for approximately $1,062,000 of the
decrease in revenues. The Brandon facility's net revenues decreased $62,000 or
approximately 1% to $4,531,000 in 1998. SunPoint's revenues decreased $43,000 or
approximately 3% to $1,462,000 in 1998.
The Company's net accounts receivable decreased $100,000 to $1,959,000
from $2,059,000 at December 31, 1998 and 1997 respectively. This is the result
of a decline in revenues and an increase in contractual allowances. The cash
position of the Company remained unchanged from 1997 to 1998, all available
funds being utilized for current operations.
Direct operating expenses increased slightly by approximately 1% to $
5,386,000 for 1998 from $5,331,000 for 1997. This increase is primarily the
result of increased supply costs and higher costs for radiology. Direct costs as
a percentage of net revenue increased approximately 8% from the preceding year.
This is attributable to various costs that do not vary proportionately with net
revenue.
General and administrative expenses decreased approximately 7% to
$4,109,000 for 1998 as compared to $4,406,000 for 1997. This decrease was
primarily attributable to the reduction of personnel and the related payroll and
benefit costs associated with such personnel. Such personnel costs decreased
approximately $435,000 to $1,894,000 inclusive of executive compensation. The
personnel were reduced in response to the decrease in revenues. General and
administrative expenses also decreased slightly due to cost savings.
Depreciation (depreciation expense approximating $1,226,000) and
amortization decreased 8% to $1,330,000 in 1998 as compared to $1,445,000 during
1997. The dollar decrease was principally attributable to normal amortization.
Interest expense increased to $753,000 in 1998 from $695,000 in 1997 as
a result of higher interest costs charged due to technical default of Company
indebtedness, such as in the receivable financing.
The decrease in net revenues was only slightly offset by a decrease in
expenses resulting in a net loss of $2,679,000 for 1998 compared to a net loss
of $1,910,000 in 1997. This is primarily attributable to the newer operations,
which bear the costs of a fully operational diagnostic facility while building
its patient and referring physician base from day one. Orange Park in its third
full year of operation has a loss of $ 843,000. Riverside in its second full
year of operation has a loss of $904,000. The ramp up of revenues for the new
starts did not meet the Company's expectations. The Company has responded in the
last quarter of 1998 and first quarter of 1999 by realigning and terminating
personnel and consolidating its operations. In early 1999, the Company entered
into an agreement to sell its Orange Park facility, but will continue to
maintain a presence at the site with
22
<PAGE>
its mobile facilities.
LIQUIDITY AND CAPITAL RESOURCES
Medical equipment, capital improvements, acquisitions and new center
development historically have been funded through third-party capital lease and
debt obligations and internally generated cash flow. The leases are generally
secured by the equipment, and sometimes other assets, of particular facilities.
Interest rates in connection with the leases and borrowing range from fixed
rates of up to 15% to a variable rate equal to the bank prime rate, plus 1 to
2%. The Company at December 31, 1999 was in default of its capital lease
obligations due to late payments of approximately $389,000 and has not paid a
term loan of $1.6 million owed to the Company's major lessor as a result of its
liquidity problems discussed more fully below. Generally, while in default the
lessor may accelerate the lease obligation (at December 31, 1999 total long-term
portion of all leases approximated $1,662,000). The major lessor filed suit in
February 2000 to accelerate the lease obligations (see Item 3, Legal
Proceedings). Generally, the other remaining lessors (approximately 17% of the
total lease obligations outstanding at December 31, 1999) have been cooperating
with the Company, generally allowing not more than 60 days past due on lease
payments. A financial institution also filed suit in February 2000 to accelerate
the Company's indebtedness of approximately $193,000, due to late payments of
approximately $77,000. The Company is currently reviewing its alternatives to
cure its defaulted indebtedness. Debt conversion to capital and refinancing upon
the successful completion of capital raising efforts by AESI are also being
considered. There is no assurance the Company will be successful in achieving
these goals.
Capital expenditures, including capital lease obligations, for the
years ended December 31, 1999 and 1998 totaled approximately $141,000 and
$48,000, respectively.
In October 1997, the Company refinanced with HealthCare Financial
Partners, Inc. ("HCFP", a lender specializing in medical receivables), its
existing $2,000,000 line of credit. An additional term loan for $235,000
($220,000 at January 1, 1998) calling for 24 monthly installments of $9,792 with
interest were also financed by HCFP. The lender had a first security interest on
all accounts receivable and the term loan was personally guaranteed by certain
principals. Interest was at prime plus 2.0%. During the year 1998, the Company
completed paying off $136,000 representing an amount the Company had drawn in
excess of its borrowing base. Commensurate with the Company converting the
Company's Convertible Preferred Stock (issued in a private placement to AESI) to
Common, which gave AESI 65% controlling interest, HCFP considered the Company to
be in technical default of its loan covenants, since HCFP did not approve of the
change of control. Thereupon, HCFP accelerated payment of term loan and charged
default interest rates of approximately 15% on the loans. The company
successfully paid off the term loan by September 1998. In November of 1998 HCFP
waived the default arising from the change in control; reestablished the
interest rate at prime plus 5%, and loaned the Company an additional $80,000 to
be used in operation, with a payback of $5,000 per day. The Company paid off the
loan by January 31, 1999 and refinanced its line of credit with a new lender in
February, terminating its relationship with HCFP. The refinancing of the
receivables was made through AES Funding Corp. ("AESFC") a subsidiary of AESI
(see Note 4 to the financial statements.) The obligation bears interest at 1.5%
over prime and allowed the Company to better leverage its receivables. Proceeds
of the refinancing were applied to paying off HCFP (approximately $1,188,000),
with the balance (approximately $33,000) utilized in current operations.
In March 1998, the Company entered into a private placement Stock
Purchase Agreement with AESI. The preferred stock issue was in exchange for
"cash, assets, and credit underwriting" valued at $2,000,000. The assets were
inclusive of 8,000,000 common shares of Halis, Inc. (HLIS:OTCBB).
Five hundred thousand shares of Series A Preferred Stock of the
Company were issued with voting
23
<PAGE>
rights of eight votes per preferred share and conversion rights at the rate of
11.03 shares of the Company's common stock per preferred share. In March of
1998, AESI exercised its right to convert 131,185 shares of the Company's
Preferred Stock into 1,446,643 shares of Common Stock. This effectively gave
AESI 65% of the voting rights for the Company's Common Stock. Concurrent with
the consummation of the merger with AESI, the Board of Directors will call for
all the preferred shares issued to be converted into common stock. Upon
completion of the merger the company's "old" shareholders (those of record
before the Preferred Stock Issue and merger) effectively will hold approximately
12% interest in ("new") AECC common stock. AESI shareholders will effectively
hold approximately a 90% interest in the Company's new common stock.
In July 1998, the company exchanged its Halis, Inc. common shares for a
note from AESI ($2,000,000 less current advances and indebtedness through
December 31, 1999 of $1,089,000) collateralized by the shares of an AESI
acquired operating subsidiary that offers medical management, billing and
collection services.
Due to the unsatisfactory performance and continued losses from the
Company's newest centers, the Company has continued to experience difficulty in
meeting timely its current obligations to its lessors (discussed above) and
trade creditors. At year end, the Company has past due payables in the amount of
approximately $1,809,000. Most of the vendors have accepted late payments.
However, certain vendors will ship only on a cash on delivery basis. The Company
has been able to operate to date with no lost revenues. In the fourth quarter of
1999 through December 31, 1999, the Company successfully converted approximately
$ 200,000 of indebtedness to common stock with the issuance of 25,000 common
shares of the Company.
In 1999 the Company's cash position remained unchanged with all
available cash utilized in its operations and debt retirement. Operations
utilized approximately $73,000; investing activities utilized approximately
$24,000, while net financing activities provided approximately $97,000.
Subsequent to the Private Placement, AESI has advanced net cash of
approximately $812,000 to the Company and assumed Company indebtedness for
management, accounting, billing and collections services rendered by a
subsidiary of AESI (more fully discussed below) to help the Company meet its
operating needs. The advance is inclusive of $475,000 paid to the Company's
major lessor to bring the Company current on its lease obligations in October of
1998.
In early 1999 the Company entered into a sale agreement for its Orange
Park fixed site facility. The relatively new operation continued with a
disappointing ramp up of revenues. Due to a technical flaw in the title
(subsequently cured) the sale did not take place and the fixed site facility was
foreclosed in July 1999, with a sustained loss approximating $34,000 due to the
foreclosure. The operations were consolidated with its Riverside facility.
Senior management was reduced and replaced. However, due to Riverside's
continued losses, in April 2000, it also was closed. The equipment will be
utilized in the remaining facilities. In July of 1999, a division of the Brandon
Center was opened in Tampa. Due to a disappointing ramp up of revenues, it was
closed in February 2000. In response to the decline in revenues that the Brandon
facility has experienced, the Company has made operational improvements in the
first quarter 2000 which the Company expects will reverse the decline. For
example, the Company hired its own radiologists with fixed salary and
discretionary bonus arrangements. The prior fee arrangement with outside
radiologists was based on a percent of collections for services rendered.
Additionally, it is expected that the radiologist/physician relationships will
improve.
Effective January 1, 1999 the Company contracted with AESI Service
Group, Inc. (a subsidiary of AESI) for management services, billing and
collections. The Company believes debt re-alignment, equipment refinancing,
operational efficiencies, consolidation, management re-alignment, capital
infusion alternatives which may include selling additional stock, acquisitions,
and new start ups will all play a role in returning the Company to satisfactory
operation levels. There is no assurance that these goals will be met.
24
<PAGE>
The Company's determination whether to proceed with new facilities in
Florida or elsewhere in the United States will depend on management's
consideration of such factors as (i) the demographics of a particular area, (ii)
competition from other diagnostic service providers in such area, (iii)
physician referral patterns, (iv) the mix of managed care providers,
Medicare/Medicaid patients and patients insured by commercial insurance
carriers, (v) estimates of potential sales in relation to the capital investment
required to establish a facility, (vi) the availability of commercial lease
property for a start-up facility, and (vii) financial analysis of potential
acquisition targets.
The Company has over the last few years experienced increased pressures
on reimbursement from third parties. The Company expects such pressures to cause
reduced pricing in the aggregate for diagnostic procedures in the future. Due
primarily from the Company's revenue mix the effects of reduced pricing have
been minimized. Approximately 52% of the company's revenue has been derived from
private insurance carriers, individuals, worker's compensation and other sources
that have not experienced reimbursement pressures characteristic of managed care
providers, Medicare and Medicaid.
YEAR 2000 ISSUES
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The Year 2000
modifications were properly completed by the Company and the Company did not
experience any significant Year 2000 problems.
SEASONALITY
The Company, in 1999 and 1998, has experienced a 10% increase in
revenues during the first quarter of the fiscal year due to increased activity
during the winter months because Florida experienced an influx of tourists and
temporary residents from the Northeast.
EFFECTS OF INFLATION
The impact of inflation and changing prices on the Company has been
primarily limited to salary, medical and film supplies and rent increases and
has not been material to the Company's operations to date. Management is aware
of increased inflationary expectations and realizes that the Company may not be
able to raise the prices for its diagnostic imaging procedures in an amount
sufficient to offset inflation. The Company, however, does believe that this can
be offset by increased volume.
NEW ACCOUNTING PRONOUNCEMENTS
The AICPA's Accounting Standards Executive Committee has issued SOP
98-5, reporting on the Costs of Start-Up Activities. The SOP requires that costs
of start-up activities, including organization costs, be expensed as incurred.
It applies to all nongovernmental entities. Start-up activities are broadly
defined and include one-time activities related to opening a new facility,
introducing a new product or service, conducting business in a new territory,
conducting business with a new class of customer or beneficiary, initiating a
new process in an existing facility, commencing some new operation, and
organizing a new entity. SOP 98-5 is
25
<PAGE>
generally effective for financial statements for fiscal years beginning after
December 15, 1998, with initial application reported as the cumulative effect of
a change in accounting principle. The Company has had the policy of capitalizing
pre-opening costs. At December 31, 1998 and 1999, there exist $0 unamortized
cost. Therefore, the adoption of SOP 98-5 did not have an effect on the
Company's financial statements.
In June 1998, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES (SFAS No. 133) was issued and was required to be adopted in years
beginning after June 15, 1999. In June 1999, SFAS No. 137 was issued, deferring
the effective date of SFAS No. 133 for one year. This statement requires all
derivatives to be recorded on the balance sheet at fair market value. This
results in the offsetting changes in fair value or cash flows of both the hedge
and the hedged item being recognized in earnings in the same period. Changes in
fair value of derivatives not meeting the Statement's hedge criteria are
included in income. The Company currently does not have any derivative
instruments and is not involved in hedging activities and therefore does not
expect the Statement to have an impact on its results of operations or financial
position.
26
<PAGE>
ITEM 7 -- FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS............................29
CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 and 1998.....................................30
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1999 and 1998...............................32
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998...............................33
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years ended December 31, 1999 and 1998...............................36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................................37
27
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
AMERICAN ENTERPRISE.COM, CORP.
We have audited the accompanying consolidated balance sheets of American
Enterprise.com, Corp. (formerly known as National Diagnostics, Inc.) and
Subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' (deficit), and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American
Enterprise.com, Corp. and Subsidiaries as of December 31, 1999 and 1998 and the
consolidated results of their operations and their consolidated cash flows for
the years then ended in conformity with generally accepted accounting principles
in the United States.
The accompanying financial statements have been prepared, assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $2,739,072 during the year ended December 31,
1999, and as of that date, the Company has a retained earnings (accumulated
deficit) of $(9,376,761) and current liabilities exceed current assets by
$8,610,043. The Company's present financial condition has resulted in the
Company being in default of its major lease and loan agreements. The Company's
ability to fund its operations and meet its obligations in 2000 will be
dependent upon the Company improving its overall level of profitability. In
addition, the success of the Company could, among other things, require
obtaining additional financing or an infusion of capital. These factors, among
other, addressed in Note 2(l) The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
GRANT THORNTON LLP
Tampa, Florida
April 11, 2000
28
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31
1999 1998
------------ ------------
Current assets:
Related party receivable from accounts receivable financing $ 1,880,745 $ -
Accounts receivable, net of allowances of
$887,300 in 1998 - 1,958,813
Due from related party 185,636 -
Prepaid expenses and other current assets 19,350 63,033
------------ ------------
Total current assets 2,085,731 2,021,846
------------ ------------
Property and equipment 9,457,187 10,023,116
Less: accumulated depreciation and
amortization (6,386,445) (5,800,043)
------------ ------------
Net property and equipment 3,070,742 4,223,073
------------ ------------
Other assets:
Excess of purchase price over net assets acquired,
net of accumulated amortization of $117,360 and
$96,360 in 1999 and 1998, respectively 302,567 323,567
Other 50,622 85,507
------------ ------------
Total other assets 353,189 409,074
------------ ------------
$ 5,509,662 $ 6,653,993
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
29
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
DECEMBER 31
1999 1998
------------ ------------
Current liabilities:
Line of credit, related party $ 1,493,389 $ -
Line of credit, third party - 1,130,863
Note payable 1,633,511 1,633,511
Notes due to related party 128,450 87,500
Current installments of long-term debt 192,512 686,085
Current installments of obligations under
capital leases 2,873,535 799,319
Accounts payable 2,179,713 1,863,185
Accrued radiologist fees 304,574 360,501
Accrued expenses, other 1,890,090 905,955
------------ ------------
Total current liabilities 10,695,774 7,466,919
Long-term liabilities:
Obligations under capital leases,
excluding current installments - 2,137,486
Deferred lease payments - 113,360
------------ ------------
Total liabilities 10,695,774 9,717,765
------------ ------------
Commitments and contingencies - -
Stockholders' equity (deficit):
Preferred stock, no par value, 1,000,000
shares authorized, 500,000 shares issued
and 368,815 outstanding 1,475,260 1,475,260
Common stock, no par value, 2,250,000
shares authorized, 2,245,000 and 2,220,000
issued and outstanding in 1999 and 1998 449 444
Additional paid-in capital 3,625,775 3,424,213
Note receivable from stockholder (910,835) (1,326,000)
Retained earnings (accumulated deficit) (9,376,761) (6,637,689)
------------ ------------
Net stockholders' equity (deficit) (5,186,112) (3,063,772)
------------ ------------
$ 5,509,662 $ 6,653,993
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
30
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
<S> <C>
DECEMBER 31
1999 1998
------------ ------------
Net revenue $ 6,844,361 $ 8,774,419
------------ ------------
Operating expenses:
Direct operating expenses 4,412,681 5,385,967
General and administrative 3,764,298 4,108,572
Depreciation and amortization 1,035,462 1,329,988
------------ ------------
Total operating expenses 9,212,441 10,824,527
------------ ------------
Operating loss (2,368,080) (2,050,108)
Interest expense 713,081 752,530
Interest income 149,098 -
Other income 192,991 123,245
------------ ------------
Loss before income taxes (2,739,072) (2,679,393)
Income taxes - -
------------ ------------
Net loss (2,739,072) (2,679,393)
------------ ------------
Dividends to preferred shareholders (intrinsic value of
beneficial conversion to common shareholders - (25,568,750)
------------ ------------
Net loss available to common shareholders $ (2,739,072) $(28,248,143)
============ ============
Net loss per common share - basic and dilutive $ (1.23) $ (15.06)
============ ============
Weighted average number of common
shares outstanding - basic and dilutive 2,220,822 1,875,165
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
31
<PAGE>
MERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED
DECEMBER 31
1999 1998
----------- -----------
Cash flows provided by operating activities:
Net loss $(2,739,072) $(2,679,393)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,035,462 1,329,988
Loss on foreclosure 34,952 -
Increase (decrease) in accounts receivable allowances 120,700 (124,642)
(Increase) decrease in accounts receivable (405,356) 224,476
Decrease in related party receivable from accounts
receivable financing 362,724 -
Decrease in prepaid expenses and
other assets 63,493 85,872
Increase in accounts payable and
accrued expenses 1,686,857 1,753,479
Decrease due to related party (174,458) -
(Decrease) in deferred lease payments (57,990) (61,776)
----------- -----------
Net cash provided by (used) operating activities (72,688) 528,004
----------- -----------
Cash flows provided by in investing activities:
Purchases of property and equipment (141,083) (48,192)
Disposal of property and equipment 116,610 -
Proceeds from note due related party - 199,000
Deposits
- (12,648)
----------- -----------
Net cash provided by (used in) investing activities (24,473) 138,160
----------- -----------
Cash flows provided by financing activities:
Proceeds from borrowings (repayment) on line of credit, third party 90,137 (178,749)
Proceeds from borrowings (repayment) on line of credit, related party 272,389 -
Proceeds from note receivable from stockholder 137,611 -
Repayment of long-term borrowings (85,223) (321,225)
Proceeds of borrowing from related parties 50,250 224,000
Repayment of borrowings from related parties (9,300) (199,000)
Principal payments under capital lease obligations (358,703) (191,190)
----------- -----------
Net cash provided by (used in) financing activities 97,161 (666,164)
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
(continued)
32
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED
DECEMBER 31
1999 1998
--------------- ----------
Net increase (decrease) in cash - -
Cash at beginning of period - -
--------------- ----------
Cash at end of period $ - $ -
=============== ==========
Supplemental disclosure of cash flow information:
Interest paid $ 385,738 $ 657,314
=============== ==========
Income tax paid $ - $ -
=============== ==========
Non-cash investing financing activities:
Capital lease obligations assumed inclusive of $25,822
due to a related party $ 265,8$ -
=============== ==========
Preferred stock issued for non-cash item (See Note 12) - $2,000,000
=============== ==========
</TABLE>
In 1998 the note receivable from stockholder of $2,000,000 (see Note
12) was reduced by offsetting the $674,000 inter-company payable to the
stockholder. The inter-company payable was created by a $199,000 cash
advance from the stockholder and the stockholders direct payment of
$475,000, made on behalf of the Company, to reduce certain debt.
In 1999, the note receivable was further reduced by offsetting $415,165
inter-company payable to the stockholder.
In 1998, 131,185 of the 500,000 shares of preferred stock issued in
March of 1998 for $2,000,000 in consideration were converted into
1,446,643 shares of the Company's Common Stock.
In November of 1998, the Company refinanced its major lease obligations
with its lessor. The lessor accepted a note for past arrearages through
June, 1998 on certain of its capital lease and maintenance obligations.
The $1,633,511 note matured June 1, 1999 with interest at 10% annum due
at maturity. AESI (having a 65% common stock interest in the Company)
has guaranteed the lease obligations and in October 1998 contributed
$475,000 toward satisfying the Company's arrearages from June through
October 1998. The Company is currently in default of the agreements and
has not paid the term loan (see Notes 7 Leases and Note 11 Legal
Issues).
The accompanying notes are an integral part of the consolidated financial
statements.
(continued)
33
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
In February of 1999 the Company refinanced its line of credit
approximating $1,210,000 with a new line from AES Funding, Inc. (a
company wholly owned by American Enterprise Solutions, Inc.)
collateralized by accounts receivable (see Note 4).
In July 1999 the real estate for the previously closed Orange Park
facility was foreclosed in satisfaction of two mortgage notes
approximating $408,000.
In December of 1999, the Company issued 25,000 shares of common stock
valued at its approximate market value of $202,000 (also approximates
value of services provided). The stock was issued as payment for
services rendered by the Company's legal counsel.
The accompanying notes are an integral part of the consolidated financial
statements.
34
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS NOTE
PREFERRED COMMON PAID-IN (ACCUMULATED RECEIVABLE
STOCK STOCK CAPITAL DEFICIT) STOCKHOLDER
----- ----- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1997 $ - $ 155 $ 2,899,762 $ (3,958,296) $ -
Issuance of preferred stock
(500,000 shares) 2,000,000 - 25,568,750 - -
Preferred stock dividend (intrinsic
value of beneficial
conversion features) - - (25,568,750) - -
Note receivable - stockholder
(related to preferred stock) - - - - (2,000,000)
Conversion of preferred stock to
common stock (131,185 preferred
shares for
1,446,643 common shares) (524,740) 289 524,451 - -
Reduction of note receivable -
stockholder - - - - 674,000
Net Loss - - - (2,679,393) -
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 1,475,260 444 3,424,213 (6,637,689) (1,326,000)
Debt conversion to common stock
(25,000 common shares) - 5 201,562 - -
Reduction of note
receivable-stockholder - - - - 415,165
Net Loss - - - (2,739,072) -
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 $ 1,475,260 $ 449 $ 3,625,775 $ (9,376,761) $ (910,835)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
35
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) ORGANIZATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of AMERICAN
ENTERPRISE.COM, CORP. (f/k/a National Diagnostics, Inc. See Note 15)
and its subsidiaries (Company): Alpha Associates, Inc. (Associates);
Alpha Acquisitions Corp. (Acquisitions); SunPoint Diagnostic Center,
Inc. (SunPoint); National Diagnostics/Orange Park, Inc. (Orange Park);
and National Diagnostics/Riverside, Inc. (Riverside). Associates and
Acquisitions hold 100% of the partnership interests in Brandon
Diagnostic Center, Ltd. (Brandon). The Company and Orange Park hold
100% of the partnership interests in Sundance Partners (a real estate
holding partnership.) The Company provides medical imaging services to
patients at its centers or mobile facilities in Brandon (Brandon),
Ruskin (SunPoint), and greater Jacksonville area (Orange Park and
Riverside), Florida.
In February 1998, the Company signed a definitive merger agreement
with American Enterprise.com (AESI), (formerly American Enterprise
Solutions, Inc.), a private company recently formed in August 1997 to
acquire and develop community health care enterprises. In conjunction
with the merger agreement, the parties in March 1998 executed a stock
purchase agreement whereby AESI acquired 500,000 shares of the
Company's preferred stock for consideration valued at $2,000,000.
Holders of the preferred stock voting as a separate class have a right
to 8 votes per share. In March 1998, AESI converted 131,185 shares of
the preferred stock into approximately 65% of the company's outstanding
shares of common stock. As part of the merger, the remaining 368,815
shares of preferred stock, representing 100% of the outstanding
preferred stock will be converted so that 5,514,352 in total common
stock would be issued. AESI will then own approximately 85% of the
Company. In March 1998 AESI's current C.E.O. and board member and
another AESI approved board members were appointed to the Company's
Board of Directors filling two of the three positions of the Board. In
April 1998, the Board of Directors of the Company approved the merger
with AESI whereby AESI is the acquiror for accounting purposes. In
order to affect the merger, the Company's authorized shares of common
stock will be increased. AESI, owning approximately 65% of the
outstanding shares of the Company's common stock and 100% of the
outstanding preferred stock has provided written consent and approval
of the merger which under Florida Business Corporation Act precludes
the need for further stock holder approval. The closing date of the
merger was extended in December 1999 to occur no later than December
2000 upon the satisfaction of the closing conditions. The Company in
February 2000 completed a 4 to 1 stock split in contemplation of
completing its merger with AESI (see Notes 1c and 15).
In preparing financial statements in conformity with generally accepted
accounting principles in the United States, management makes estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. An example of such
an estimate is the Company's determination of its contractual
adjustments and doubtful accounts provision. Actual results could
differ from those estimates.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries and their affiliates. All
significant inter-company balances and transactions have been
eliminated.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) PROPERTY AND EQUIPMENT
36
<PAGE>
Property and equipment is stated at cost. Depreciation expense
is charged to operations over the estimated useful service
period of the assets using the straight-line method. Property
and equipment held under capital leases are generally
amortized straight-line over the shorter of the lease term or
estimated useful life of the asset. The Company uses
accelerated depreciation for tax purposes.
b) INCOME TAXES
Income taxes are provided based upon provisions of Statement
of Financial Accounting Standards No. 109, "ACCOUNTING FOR
INCOME TAXES". Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
c) REVERSE STOCK SPLIT
On February 20, 2000, the Company combined on the basis of
four (4) shares of common stock in exchange for one (1) share
of common stock thereby resulting in 2,250,000 shares of
authorized common stock, no par value and 2,250,000 shares
issued and outstanding as of February 20, 2000, the record
date for such action. This recapitalization has been
retroactively effected as a 1 for 4 reverse stock split in
these financial statements; accordingly, all share and per
share information has been restated, herein.
d) EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED
Excess of purchase price over net assets acquired is amortized
using the straight-line method over 20 years. Management
reviews the performance of the related assets on a quarterly
basis to determine if impairment has taken place. Impairment
of goodwill was realized in the Orange Park facility in 1998
due to loss of revenues and unsatisfactory results of
operations. Approximately $55,000 un-amortized goodwill was
written off in 1998. Amortization expense for the excess of
purchase price over net assets acquired for 1999 and 1998 was
$21,000 and $80,144 (including $55,000 write-off),
respectively.
e) CASH AND CASH EQUIVALENTS
For financial statement purposes cash equivalents include
short-term investments with an original maturity of ninety
days or less. At December 31, 1999 and 1998, respectively, the
Company had no cash equivalents.
f) ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF
On a quarterly basis, the Company evaluates the projected
undiscounted cash flows of each business unit to determine,
when indicators of impairment are present, whether or not
there has been permanent impairment of its long-lived assets,
and accrues expenses for the amount, if any, determined to be
permanently impaired. Except for the write off of goodwill
(see note 2d), no other impairment losses were incurred during
1999 and 1998.
g) REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE
Revenues are recognized on the date services and related
products are provided to patients and are recorded at amounts
estimated to be received under reimbursement arrangements with
third party payors, including
37
<PAGE>
private insurers, prepaid health plans, Medicare and Medicaid.
Net revenue represents gross revenue less contractual
adjustments. The Company's management at least quarterly
determines the adequacy of the accounts receivable valuation
allowances by, among other procedures, reviewing historical
experience for changes in factors affecting billing and
collections (e.g. third party reimbursement arrangements). For
all years presented, approximately 15% to 18% of the Company's
revenues are reimbursed under arrangements with
Medicare/Medicaid. No other third party payor group represents
10% or more of the Company's revenues. Therefore,
concentration of credit risk with respect to the remaining
accounts receivable is limited due to the large number of
payors representing the patient base.
The Brandon facility contributed approximately 46% and 58% of
total revenues for 1999 and 1998, respectively.
h) ACCOUNTING FOR STOCK BASED COMPENSATION
The Company applies the disclosure provisions Statement of
Financial Accounting Standard (SFAS) No. 123, "Accounting for
Stock-Based Compensation," as it relates to employment awards.
The Company applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in
accounting for its plans and accordingly, does not recognize
compensation expense for its employee stock-based compensation
plans other than for restricted stock.
i) LOSS PER COMMON SHARE
The Company reports its earnings per share in accordance with
SFAS No. 128, "Earnings Per Share". Basic loss per share is
the same as the diluted loss per share since the Company had a
net loss for the year ended December 31, 1999 and 1998.
Outstanding stock options and warrants have not been
considered in these computations since the effect of their
inclusion would be antidilutive.
The following table reconciles the numerator and denominator
of the basic and dilutive EPS computation:
<TABLE>
<CAPTION>
<S> <C> <C>
Numerator: 1999 1998
------------ ------------
Net loss $ (2,739,072) $ (2,679,393)
Dividends to preferred shareholders (intrinsic value
of beneficial conversion features) - (25,568,750)
------------ ------------
Net loss available to common shareholders $ (2,739,072) $(28,248,143)
============ ============
Denominator:
Weighted average number of common shares used in basic EPS 2,220,822 1,875,165
Effect of dilutive stock options and warrants - -
------------ ------------
Weighted number of common shares and dilutive potential
common stock used in diluted EPS 2,220,822 1,875,165
============ ============
</TABLE>
In both 1998 and 1999, the options and warrants would have had
an anti-dilutive effect on EPS and are, therefore, not
included in the denominator (see Note 12).
j) FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1999 and 1998, the carrying amount of cash,
accounts receivable, accounts payable and
38
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accrued expenses approximate fair value because of the
short-term maturities of these assets.
The carrying amounts of current obligations approximate the
fair market value due to either the short-term maturity of the
obligation or the interest rate changes with market interest
rates. Carrying amounts of long-term obligations approximate
the fair market value due to either the fact that the
obligation was recently financed or refinanced, or in the case
of other obligations, the interest rates approximate that
which the Company is able to obtain currently.
k) NEW ACCOUNTING PRONOUNCEMENTS
The AICPA's Accounting Standards Executive Committee has
issued SOP 98-5, Reporting on the Costs of Start-Up
Activities. The SOP requires that costs of start-up
activities, including organization costs, be expensed as
incurred. It applies to all non-governmental entities.
Start-up activities are broadly defined and include one-time
activities related to opening a new facility, introducing a
new product or service, conducting business in a new
territory, conducting business with a new class of customer or
beneficiary, initiating a new process in an existing facility,
commencing some new operation, and organizing a new entity.
SOP 98-5 is generally effective for financial statements for
fiscal years beginning after December 15, 1998, with initial
application reported as the cumulative effect of a change in
accounting principles. At December 31, 1998 and 1999 there
exists no un-amortized cost. Therefore, the adoption of SOP
98-5 has no significant effect on the Company's financial
statements.
In June 1998, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES (SFAS No. 133) was issued and was required
to be adopted in years beginning after June 15, 1999. In June
1999, SFAS No. 137 was issued, deferring the effective date of
SFAS No. 133 for one year. This statement requires all
derivatives to be recorded on the balance sheet at fair market
value. This results in the offsetting changes in fair value or
cash flows of both the hedge and the hedged item being
recognized in earnings in the same period. Changes in fair
value of derivatives not meeting the Statement's hedge
criteria are included in income. The Company currently does
not have any derivative instruments and is not involved in
hedging activities and therefore does not expect the Statement
to have an impact on its results of operations or financial
position.
l) OPERATIONAL MATTERS AND LIQUIDITY
The Company has a net loss for 1999 of $2,739,072 and at
December 31,1999 has a retained earnings accumulated deficit
of $9,376,761, a working capital deficit of $8,610,043 and is
involved in litigation with its major medical equipment lessor
due to late payments. In view of these matters, recoverability
of a major portion of the recorded asset amounts shown in the
accompanying balance sheet is dependent upon continued
operation of the Company, which in turn is dependent upon the
Company improving its overall level of profitability. In
addition, the success of the Company could also, among other
things, require obtaining additional financing or capital
infusions and obtaining a satisfactory solution to its
litigation with its major medical lessor. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be
necessary should the Company be unable to continue in
existence.
In response to the Company's continued losses from its Orange
Park and Riverside facilities, the Company began to
consolidate its Jacksonville operations in the first quarter
of 1999 to more efficiently utilize its fixed assets and human
resources. In March of 1999 the Company closed its Orange Park
facility and entered into
39
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
a sales agreement. Ultimately, the sale did not close due to a
technical fault in the title (subsequently cured) and the
property was foreclosed. The Company sustained a loss of
$34,000 due to the foreclosure. The Company continued to
downsize its staffing in Jacksonville in response to closing
the facility and decreased revenues. Pieces of equipment from
the site were utilized elsewhere in the Company where the
demand for services warranted. The Company, with the
underwriting of AESI, entered into an agreement in April of
1999, allowing the Company to cure its arrearages with its
major lessor. However, as noted above, the Company fell behind
in its new agreements and the lessor has initiated suit in
February 2000. Additionally, in February of 1999, the Company
refinanced its account receivables, allowing the Company to
better leverage its trade receivables. The Company also closed
its Riverside facility in April 2000 in response to its
continued losses and a branch site of its Brandon location
which performed unsatisfactorily. The Company expects
operationally to improve in the 2nd and 3rd quarter of 2000 as
a result of closing certain loss facilities. The Company
expects to resolve its differences with its major lessor
either upon refinancing or upon other alternatives contingent
upon the successful completion by AESI of its capital raising
efforts.
m) DIRECT OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
For Financial statement purposes, the Company classifies
certain costs and expenses as either direct operating expenses
or as general and administrative expenses. Direct operating
expenses include costs directly incurred in producing
revenues, such as physician and technician compensation,
medically related expenses, medical equipment rentals, and
medical supplies. General and administrative expenses include
all other costs (excluding depreciation, interest and taxes)
not considered direct costs.
(3) CASH MANAGEMENT
Effective January 1, 1999, the Company entered into agreements
with AES Service Group, Inc. (a wholly owned subsidiary of
AESI) to provide billing, collection and other cash management
services. Accordingly, the Company does not maintain its own
separate operating cash accounts for cash receipts and
disbursements. Cash receipts and disbursements received and
paid respectively, on behalf of the Company by AESI are
accounted for by inter-company accounts (due to/from). There
is no actual Company cash in flow/out flow. For statement of
cash flow purposes changes in operating assets/liabilities
such as accounts receivable, accounts payable, accrued
expenses, and due to/from related party are accounted for as
cash items to reflect the Company's operating and financing
activities.
(4) ACCOUNTS RECEIVABLE FINANCING
In February 1999 the Company's accounts receivable financing
(line of credit) with its lender totaling $1,221,000 was fully
repaid. The arrangement was terminated and replaced through
AESI's accounts receivable financing with another lender. AESI
established a subsidiary, AES Funding, Inc. (Funding), to
service the new financing. Under the financing agreement,
certain AESI subsidiaries, including the Company, transfer all
of their customer accounts to Funding to collateralize the
debt. The transfer is recorded at book value, gross account
balance less estimated allowance for contractual adjustments
and bad debt provisions. The accounts receivable are divided
into two categories, eligible and ineligible as defined by the
financing agreement with the lender, indicating which accounts
receivable are used to determine Funding's borrowing base. In
accordance with the financing agreement the eligible accounts,
which represent a substantial portion of all accounts are sold
(as defined by SFAS No. 125, "Accounting for
40
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Transfer and Servicing of Financial Assets and Extinguishment
of Liabilities") to Funding, and the ineligible accounts are
contributed as capital to Funding. If the cash collected on
the ineligible accounts is not required to pay down Funding's
outstanding debt then the cash is remitted to the respective
company. This occurs when the eligible accounts provide the
lender sufficient coverages. Since inception of the financial
program, ineligible accounts collateralized have not been
needed to reduce outstanding debt. The ineligible accounts
receivable contributed to Funding in essence are reflected in
the Company's records as an investment in Funding, which is
subsequently reduced by collection of these accounts (i.e.,
recognized as a return of capital). As actual cash is not
remitted to the Company, the corresponding effect is to
increase the amount due from related party.
Under the financing program, Funding's outstanding debt is
allocated to AESI's participating subsidiaries, such as the
Company, based on their relative borrowing base. At December
31, 1999, the Company's balance sheet reflects a related party
financing obligation of $1,493,387.
The initial term of Funding's and AESI's agreement with its
lender is through January 2002, with automatic annual
extensions unless terminated by either party. The interest
rate is prime (Citibank N.A.'s prime rate) plus 1.5%. At
December 31, 1999, Funding and AESI are not in compliance with
certain loan covenants of the financial agreement. In this
event, the lender has the right to call the loan. AESI is not
aware of the intent of the lender to exercise the right and is
currently striving to achieve compliance. The Company's
allocation of the debt of $1,493,387 is classified on the
balance sheet as a current liability due to the non-compliance
issue.
At December 31, 1999, approximately $150,000 of net ineligible
accounts receivables, were contributed to Funding and have not
yet been collected. The Company and Funding fully expect that
these accounts will be substantially collected and such
collections will be applied to the due from related party
account.
(5) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31 Estimated
----------- service
1999 1998 life (years)
----------- ----------- -----------
Land $ - $ 85,000 -
Buildings - 253,041 39
Medical Equipment 7,896,822 7,889,923 7
Office furniture and equipment 697,064 733,203 7
Leasehold improvements 667,675 836,732 3-5
Vehicles 195,626 225,217 5-7
----------- -----------
$ 9,457,187 $10,023,116
=========== ===========
41
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Depreciation and amortization expense totaled $999,387 and
$1,329,988 for the year ended December 31, 1999 and 1998,
respectively.
(6) LONG-TERM DEBT
<TABLE>
<CAPTION>
<S> <C>
Long-term debt is summarized as follows: December 31
-----------
1999 1998
--------- ---------
Installment loans payable which consist of a number of separate
installment loan contracts collateralized by equipment and vehicles.
The loans require monthly installments of principal and interest over
terms that vary from two to five years. At December 31, 1999, the
loans bear interest at rates ranging from 9.0% to 12.25%. $ 192,512 $ 275,069
Mortgage notes payable in monthly installments of $3,821 including
interest at 8.75% and 11%; maturing through April, 2020;
collateralized by mortgaged real estate property. The loans were
satisfied through foreclosure (see Note 11e,
Legal Actions) - 411,016
Total long-term debt 192,512 686,085
Less current installments of long-term debt 192,512 686,085
--------- ---------
Long-term debt, excluding current installments $ - $ -
========== =========
</TABLE>
At December 31, 1999 the Company was in default of certain loan
covenants due to late payments of approximately $43,000. Generally,
when in default the lender may accelerate the loan. The Company has not
received a waiver of default from its lenders and has therefore
reclassified the long-term portion of debt approximating $61,000 to
short-term (see Note 10e Legal Actions).
(7) LEASES
The Company has entered into capital leases for medical
equipment, which expire in 2003. The gross amount of equipment and
related accumulated depreciation recorded under capital leases are as
follows:
42
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1999 1998
------------ ------------
Medical equipment $ 6,562,835 $ 6,574,000
Less accumulated depreciation 4,541,162 4,085,000
------------ ------------
$ 2,021,673 $ 2,489,000
============ ============
The present value of future minimum capital lease payments based on
interest rates ranging from 9% to 14.5% is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year ending December 31: 2000 $ 1,211,535
2001 736,000
2002 650,000
2003 276,000
------------
Present value of minimum capital lease payments 2,873,535
Less current installments of obligations under capital leases 2,873,535
------------
Obligations under capital leases, excluding
current installments $ -
============
</TABLE>
In November 1998, the Company refinanced with its major lessor (Siemens
Credit Corporation) its major medical lease obligations. The Company
converted a portion of their lease obligations in 1998 to a term loan
with a maturity date of June 1999. The Company fell behind in its lease
obligations and in March 1999, the Company entered into another
agreement with its major lessor, which would allow the Company to make
installments through September 1999, for its arrearages. The Company
has fallen behind in its payments in accordance with the latest
agreement. At December 31, 1999, the Company is in arrears
approximately $389,000 on its lease obligations and has not paid the
term loan of $1.6 million. Generally, while in default, the lessor may
accelerate the lease obligation. The major lessor filed suit to
accelerate the lease obligations (see Note 11 Legal Actions). The other
lessors have been cooperating with the Company; generally not allowing
not more than 60 days past due on lease payments. Since the Company has
not obtained waivers of default, the Company has reclassified its
long-term lease obligations, approximating $1,662,000, to current. On
behalf of the Company, AESI had earmarked funds for the satisfaction of
the arrearages; however, the expected funds have been delayed. The
Company expects to negotiate additional refinancing of its major lease
obligations pending the successful completion of AESI's private
placements of $35 million in the second quarter of year 2000.
The Company is obligated under non-cancelable operating leases
(including one equipment lease with Siemens Credit Corporation) that
expire through 2006.
43
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease payments under these leases are as follows:
Year ending December 31: 2000 1,270,000
2001 1,132,700
2002 872,000
2003 521,000
2004 287,800
Thereafter 503,600
-------------
$ 4,587,100
=============
Rental expense related to these non-cancelable leases was
approximately $1,349,000 and $1,183,000 for the years ended December
31, 1999 and 1998, respectively. During fourth quarter of 1999, the
Company increased rent expense approximately $125,000 related to
previous quarters. The Company is in default of many of the above
leases due to late payment.
(8) NOTES DUE TO RELATED PARTIES
Note payable to related parties are as follows:
<TABLE>
<CAPTION>
<S> <C>
December 31
1999 1998
----------- -----------
Note payable with interest at 9%,
payable on demand $ 112,750 $ 62,500
Notes payable with interest at 7%
payable on demand 15,700 25,000
----------- -----------
$ 128,450 $ 87,500
=========== ===========
Interest expense to related parties approximated $9,400 and $5,800
for the years ended December 31, 1999 and 1998, respectively.
(9) INCOME TAXES
The provision for income tax expense (benefit) at December 31,
consists of the following:
1999 1998
------------ -----------
Current $ - $ -
-----------
Deferred -
------------ -----------
$ - $ -
============ -----------
</TABLE>
The income tax provision for 1999 and 1998 reconciled to the tax
computed at the statutory rate of 34% is as follows:
44
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
----------- -----------
Income taxes at statutory rate $ (931,300) $ (911,000)
State income taxes (137,200) (134,200)
Current year net operating loss not utilized 1,059,232 1,033,354
Non deductible expenses 9,268 11,846
----------- -----------
$ - $ -
=========== ===========
The deferred tax asset and liability consist of the following
December 31
-----------
1999 1998
----------- -----------
Assets
Net operating loss carry forward $ 3,340,300 $ 2,277,200
Allowance for doubtful accounts 453,100 346,000
Deferred rents 21,600 42,800
Other 1,000 1,000
Pre-opening costs 9,600 35,900
Acquisition basis difference - 114,700
----------- -----------
3,825,600 2,817,600
Less: valuation allowance (3,585,700) (2,526,800)
----------- -----------
239,900 290,800
----------- -----------
Liabilities
Fixed assets 239,900 288,400
Goodwill - 2,400
----------- -----------
239,900 290,800
----------- -----------
Net deferred taxes $ - $ -
=========== ===========
</TABLE>
Management, using SFAS 109 criteria and placing greater weight on the
1998/1999 taxable losses along with expectations for 2000, concluded
that the above valuation allowance at December 31, 1999, was
reasonable. The net increase in the valuation allowance in 1999
approximated $1,059,000.
At December 31, 1999 approximately $ 8,565,000 in net operating carry
forwards remain which will expire if not utilized by 2013. The
Company's preferred stock issuance in 1998 resulted in change of
ownership pursuant to Internal Revenue Code Section 382, which places
a yearly limitation on the utilization of the Company's net operating
losses.
(10) CONCENTRATION OF ACCOUNTS RECEIVABLE
The Company's accounts receivable are due from the following:
45
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31
1999* 1998
---------- ----------
Commercial insurance carriers $ 1,240,845 $ 1,201,100
Managed care providers 648,100 937,800
Private patients 165,200 166,213
Worker's compensation 88,600 87,500
Medicare/Medicaid 899,900 453,500
---------- ----------
3,042,645 2,846,113
Less allowances:
Contractual adjustments 1,085,900 676,100
Doubtful accounts 76,000 211,200
---------- -----------
$ 1,880,745 $ 1,958,813
=========== ===========
*At December 31, 1999 the $1,880,745 accounts receivable balance is
actually due from AES Funding (see Note 4, Accounts Receivable
Financing).
(11) COMMITMENTS AND CONTINGENCIES
a) GUARANTEES
A term loan and certain equipment loans of the Company approximating
$102,000 are fully guaranteed by an officer/stockholder.
b) EMPLOYMENT CONTRACTS
The President and Chief Executive Officer operated under three year
employment contracts that became effective July 1, 1995. The
President and Chief Executive Officer received salaries of $150,000
and $75,000, respectively, plus certain benefits and bonus
arrangement. No bonus was awarded in 1998 or 1999. The Chief
Executive Officer resigned and the employment contract was terminated
effective January 19, 1998. Total compensation earned by the Chief
Executive Officer and President under the existing contracts for the
year ended December 31, 1998 was approximately $169,000.
Effective January 1, 1999 the Company contracted with AESI for all of
its management, accounting, and billing and collection services. See
professional services agreements.
The Company entered into an employment agreement with the President
of Orange Park for a three year period commencing February 1, 1995.
The executive received as compensation an annual salary of $100,000
plus certain benefits and a bonus arrangement. No bonus was awarded
in 1998 or 1999. The employment agreement was extended through June
1998. The employment of this executive ended the 1st quarter of 1999.
c) PROFESSIONAL SERVICES AGREEMENT
The Company enters into agreements with independent physician groups
to provide radiological services. The
46
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
physicians are paid with a percentage of the net receipts or fixed
fee amount. The contracts are generally three years or less. The
Company is not engaged in the practice of medicine.
The Company entered into radiological service contracts that were
effective for the period February 1 through June 30, 1997, for its
Brandon, SunPoint and Orange Park facilities. The contracts were
terminated by the Company effective June 30, 1997 due to
non-performance of all representations made by the contracted
radiologist group. A settlement of $238,000 was reached wherein the
Company agreed to pay for services rendered. The agreement called for
the assumption of a $48,000 liability due to tenant locums used by
the Centers; a $50,000 payment due March 15, 1998, and the balance of
$140,000 to be paid evenly in 12 monthly installments thereafter. The
Company adequately reserved for these amounts in 1997 and assumed the
liability. The indebtedness was paid in full by March 1999.
In November of 1998, the Company entered into a five year
professional services agreement for radiological services with a
company that specializes in radiological services. The agreement may
be terminated at any time without cause upon 180 day prior written
notice. The fees for services are based on 14% of gross receipts for
services rendered.
Physician service expense under the current and previously existing
contracts for the years ended December 31, 1999 and 1998 was
approximately $1,014,000 and $1,293,000 respectively. In the fourth
quarter, the Company recognized $85,000 of radiology costs related to
the third quarter.
The Company entered into a Service Agreement effective January 1,
1999 with AES Service Group, Inc., (the "Service Group", a wholly
owned subsidiary of AESI) for all of its management, accounting,
billing, and collection services. Appropriate company personnel were
terminated with or without reassignment to affiliated AESI companies.
The compensation for such services is 6% of gross collections and
approximated $424,000 in 1999.
(d) YEAR 2000 ISSUE
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000.
The Year 2000 modifications were properly completed by the Company
and the Company did not experience any significant Year 2000
problems.
(e) LEGAL ACTIONS
On March 14, 1999, Carnegie Capital, Ltd. ("Carnegie Capital") was
awarded a final judgment of foreclosure on the Company's Orange Park
facility due to arrearages. Carnegie Capital agreed to stay its
foreclosure action until June 11, 1999, pending a sale of the
property by the Company. Due to a technical defect in the title, the
sale did not occur and in July the property was foreclosed. In
December 1999, Carnegie Capital filed for a deficiency judgment. The
amount of the deficiency was not specified. A trial is scheduled for
August 21, 2000, and the Company believes it will prevail with a
successful outcome.
In November 1999, X-Ray Equipment Company, Inc. filed suit to take
back certain medical equipment valued at approximately $1,125,000
allegedly sold to Trinity Diagnostic Imaging, Inc. (a wholly owned
subsidiary of AESI) and to be used by the Company's subsidiaries. In
January 2000, the Company entered into a stipulated agreement to pay
X-Ray Equipment Company $250,000 toward the purchase of the
equipment, the balance to be paid by March 14, 2000. The Company
failed to make the payments and in March the Company returned the
equipment under a writ of replevin to X-Ray Equipment Company, Inc.
The Company has established at December 31, 1999, what it believes to
be an adequate reserve in the event of an adverse outcome from the
suit.
47
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 2000, Siemens Credit Corporation, filed suit for breach
of certain Work Out agreements, and lease contracts. Principal
parties to the suit include the Company and its parent AESI, and
certain past officers of the Company. The suit alleges damages of
approximately $4.5 million and replevin of certain leased medical
equipment. A similar suit was filed in the Circuit Court of the
Fourth Judicial Circuit of Duval County, Florida against the
Company's subsidiary, National Diagnostics/Riverside, Inc. alleging
damages of $1.3 million and replevin of certain leased medical
equipment. In November 1998, the company refinanced with Siemens its
major lease obligations. The Company fell behind in its lease
obligations and in March 1999, the Company entered into another
agreement (the "Work Out" agreement) with its major lessor, which
would allow the Company to make installments through September 1999,
for its arrearages. The Company had fallen behind in its payments in
accordance with the latest agreements. The Company is currently in
the process of obtaining a reconciliation of the alleged amounts due.
In the event of an adverse outcome to the above litigation, the
results could have a material impact of the Company's financial
position, results of operations, or liquidity.
In February 2000, Provident Bank of Florida, filed suit in the
Circuit Court of the 13th Judicial Circuit of Hillsborough County,
Florida, for monies due as a result of the failure to make payments
under certain note and loan agreements. The suit alleges damages of
approximately $193,000 and replevin of certain collateralized
equipment. The principal parties to the suit are the Company, certain
subsidiaries, and the Company's parent AESI. The Company is currently
in the process of obtaining a reconciliation of the alleged amounts
due.
In February 2000, Copelco Capital, Inc. request a default judgment in
Division C, Circuit Court of Hillsborough County, Florida against the
Company for defaulting under a settlement agreement by which the
Company agreed to cure its default of certain equipment lease
agreement. The Company, upon the successful completion of AESI's
efforts to raise capital and financing, expects to negotiate a final
settlement before Copelco reclaims its leased equipment.
Highland Properties of Gulfcoast, Ltd filed suit in the Circuit Court
of Hillsborough County, Florida seeking damages approximating $75,000
and possession of certain leased spaces for unpaid rent. The Company
negotiated a settlement where in the rent and costs will be paid by
April 30, 2000, failing which Highland Properties of Gulfcoast, Ltd.
will be entitled to a judgment for possession and damages. In the
event the Company fails to satisfy the settlement, the results could
have a material impact of the Company's financial position, results
of operations, or liquidity.
The Company is involved as plaintiff in various legal actions,
including those specifically addressed herein, arising in the
ordinary course of business. While management cannot predict the
outcome of these matters, management believes, after consultation
with legal counsel, that the ultimate resolution of these actions
will not have an adverse effect on the Company's financial position,
results of operation, or liquidity, unless otherwise indicated above.
(12) SHAREHOLDERS' EQUITY
COMMON STOCK
On February 20, 2000, the Company combined on the basis of four (4)
shares of common stock in exchange for one (1) share of common stock
thereby resulting in 2,250,000 shares of authorized common stock, no
par value and 2,250,000 shares issued and outstanding as of February
20, 2000, the record date for such action.
48
<PAGE>
On March 27, 1998 a portion of the Company's Preferred Shares were
converted to 1,446,643 Common shares giving AESI 65% of the total
2,220,000 shares of Common Stock outstanding on March 27, 1998.
In December 1999, the Company issued 25,000 shares of common stock
valued at its approximate market value of $202,000 (also approximates
value of services provided). The stock was issued as payment for
services rendered by the Company's legal counsel. Approximately
$71,000 relates to a previously contested balance, which the Company
took as a one-time charge to operations in the fourth quarter. The
remaining balance had been previously accrued for.
PREFERRED STOCK
SERIES A PREFERRED STOCK
In March 1998, the Company's articles of incorporation were
amended to provide the authorization of 1,000,000 shares
Series A Preferred Stock at no par value. The shares are
entitled to receive dividends on a non-cumulative basis to the
extent declared on the common stock, and the dividends cannot
be in excess of $.10 per share. The liquidation and redemption
price on each share of preferred stock is $4.00 and $4.30,
respectively. Holders of the preferred stock voting as a
separate class have the right to 8 votes per share, and have
the right to elect 50% of the authorized number of members of
the Board of Directors. In addition, the preferred stock can
be converted at any time into common stock at a ratio of 11.03
shares of common stock per share of preferred stock. In
conjunction with the company's merger with AESI in March 1998,
the company issued 500,000 shares of Series A Preferred Stock
to AESI for consideration valued at $2,000,000. AESI converted
131,185 shares of preferred stock into 1,466,643 shares of the
company's common stock.
BENEFICIAL CONVERSION FEATURE
In March, 1997, the Securities and Exchange Commission (SEC)
announced its position on accounting for the issuance of
convertible preferred stock with a non-detachable conversion
feature that is deemed "in the money" at the date of issue (a
"beneficial conversion feature"). The beneficial conversion
feature is initially recognized and measured by allocating a
portion of the preferred stock proceeds equal to the intrinsic
value of that feature to additional paid-in capital. This
initial value is calculated at the date of issue as the
difference of the conversion price and the quoted market price
of the company's common stock into which the security is
convertible, multiplied by the number of shares into which the
security is convertible. The discount resulting from the
allocation of proceeds in the beneficial convertible feature
is treated as dividend and is recognized as a return to the
preferred shareholder over the minimum period in which the
preferred shareholders can realize that return (i.e. from the
date the securities are issued to the date they are first
convertible). The accounting for the beneficial conversion
feature requires the use of an unadjusted quoted market price
(i.e., no valuation discounts allowed) as the full value used
in order to determine the intrinsic value dividend. The
intrinsic value of the dividends to the preferred shareholder
is deducted from the net income before calculating the net
loss per common share. The intrinsic value of beneficial
conversion features to preferred shareholders in 1998 is
$25,568,750 (based on 500,000 shares of preferred stock valued
at $4.00 a share each immediately convertible into 11.03
shares of common stock, which in March of 1998 had an
unadjusted quoted market price of $5.00 a share).
NOTE RECEIVABLE - STOCKHOLDER
49
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In conjunction with the Company's merger agreement with AESI in March
1998, the Company issued 500,000 shares Series A Preferred Stock to
AESI in consideration for $2,000,000 in cash, assets and credit
underwriting in order to maintain the Company's financial stability.
In order for AESI to satisfy this obligation to the Company, AESI
initially transferred its ownership in 8,000,000 shares of restricted
common stock of Halis, Inc. (a public company) that AESI held, along
with another 4,048,325 shares, as an investment which accounted for
approximately 27% of Halis, Inc.'s outstanding shares of common stock
at that time. AESI's CEO and Vice Chairman was also a director of
Halis, Inc.; in addition, another officer/director of AESI was an
officer of one of Halis, Inc.'s subsidiary. The shares of common
stock of Halis, Inc. were valued by the company at $2,000,000 based
on Halis, Inc.'s quoted market price less a 10% discount factor to
reflect its restricted nature and the fact that it represented a
large block of stock. This valuation also approximated AESI's cost of
the Halis, Inc.'s common stock. It was AESI's intent to provide the
company with permanent capitalization of $2,000,000. While the
company did not specifically use the common stock as collateral or
such, or sell all or a portion of the common stock of Halis, Inc., it
was generally available to do so. Since AESI's acquisition of its
interest in the Company, it has successfully assisted the Company in
refinancing its line of credit and certain of the capital leases.
In July 1998, AESI exchanged all the common stock of Halis, Inc. that
AESI and the company held for all the outstanding shares of common
stock of one of Halis, Inc.'s wholly-owned subsidiaries. AESI and the
Company substituted a promissory note for $2,000,000 collateralized
by the common stock of the former wholly owned subsidiary of Halis,
Inc. for the shares of Halis, Inc. that were being held by the
company. The note bears interest at 7% per annum, with both principal
and interest due July 1, 2000. With both parties' approval, payments
can be made in advance. Through December 31, 1999, the note balance
has been reduced to $911,000 as the parties agreed to offsetting the
intercompany account balance due AESI and subsidiary at that time. As
the note relates to the issuance of the Company" capital stock, the
note is presented in the Statement of Stockholders' Equity as a
contra account.
STOCK OPTIONS
On April 21, 1995 the Board of Directors approved an Employee Stock
Option Plan ("employee plan") and a Non-employee Director Stock
Option plan ("director plan") for the purpose of competing
successfully in attracting, motivating, and retaining employees and
non-employee directors with outstanding abilities. Options granted
under the employee plan are intended to be incentive stock options.
The total number of shares to which options may be granted under the
employee and director plans are 50,000 shares. Generally, the
exercise price shall be fixed at no less than 100% of the average
fair market value of the shares at date of option.
No options were granted in 1998 or 1999 under the employee or
director plans.
A summary of the status of the Company's outstanding stock options as
of December 31, 1999, and 1998, and changes during the years ending
on those dates is presented below.
50
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Weighted Average
Shares Exercise Price
------ --------------
Options outstanding, December 31, 1997 18,750 $ 23.80
Options granted - -
Options expired (16,250)
------- ---------
Options outstanding, December 31, 1998 2,500 $ 12.00
Options granted - -
Options exercised - -
Options expired -
Options outstanding, December 31, 1999 2,500 $ 12.00
======= =========
The following table summarizes information concerning currently
outstanding and exercisable stock options.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Weighted Weighted
Range of Number Remaining Contract Average
Exercise Prices Outstanding Life (Years) Exercise
--------------- ----------- ------------------ --------
Outstanding Options:
$12.00 2,500 8 $12.00
Exercisable Options:
$12.00 2,500 8 $12.00
</TABLE>
The Company has adopted only the disclosure provisions of SFAS No.
123 "Accounting of Stock-Based Compensation," as it relates to
employment awards. It applies APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting
for its plans. The Company did not grant any options to employees
during 1998 and 1999. Accordingly, SFAS No. 123 pro forma disclosures
are not necessary.
WARRANTS
A summary of the status of the Company's outstanding warrants as of
December 31, 1999 and 1998, and changes during the years ending on
those dates is presented below.
Weighted Average
Warrants Exercise Price
-------- --------------
Warrants outstanding, December 31, 1997 21,301 $12.00
Warrants granted - -
Warrants expired (21,301) -
------- ------
Warrants outstanding, December 31, 1998 - -
Warrants granted - -
Warrants exercised
------- ------
Warrants outstanding, December 31, 1999 - -
======= ======
In March of 1996, the Company entered into an agreement with Judson
Enterprises, LTD to provided financial, consulting and banking
services. As compensation for these services the Company agreed to
pay Judson Enterprises, Inc. $16,000 and issue warrants for the
purchase of 20,000 shares of common stock. Ten thousand (10,000) of
the unissued warrants expired March 1999. The remaining indebtedness,
including the obligation to issue warrants, was satisfied in March
2000, with the issue of 1,400 shares of AESI common stock.
(13) RELATED PARTIES
The Company through its Orange Park facility utilizes various
diagnostic and office equipment leased by Neurophysiology Associates,
Inc. ("NPA"). NPA is 100% owned by the President and Chief Operating
Officer of Orange Park (terminated in March, 1999). The Company
agreed to compensate NPA in no more or less favorable terms than the
original lease calls for. Monthly payments approximated $950 in 1999
and 1998. Annual rent expense approximated $5,700 and $11,400 in 1999
and 1998, respectively. Certain payments by the Company were made
directly to the third party lessor. The leases were terminated in
July 1999.
51
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company had a month to month rental arrangement for its regional
office (approximately 2,200 square feet) in northeast Florida with
Medical Consultants Inc. The President and Chief Operating Officer of
Orange Park (terminated in March, 1999) is 100% owner of Medical
Consultants, Inc. The agreement called for rental payments of $1,500
per month. Rent expense for these spaces in 1998 totaled $7,500. The
office was closed in May 1998.
In July 1996, a triple net lease became effective between the Company
and Sundance Partners II (a Florida general partnership owed by a
Company Director) for a free standing 7,100 medical facility used for
Riverside's Diagnostic Center. The facility is located in the
Riverside area of Jacksonville, Florida. The lease term is for an
initial five years with a one time option to extend for a five year
period. Rent expense for 1999 and 1998 approximated $125,000 and
$119,000, respectively. Sundance Partners II is 100% owned by the
Company's President. In March 2000 the Company purchased the
partnership for investment purposes.
One of the Company's former directors is a partner of Foley and
Lardner LLP, a law firm (the" Firm") that is one of the Company's
outside legal advisors. In December 1999, the Firm accepted the
Company's stock valued at approximately $202,000 for legal services
previously rendered to the Company and AESI. Approximately $71,000
was in settlement of a previously contested amount, and approximately
$37,000 was charged by the Company to AESI for the Firm's services
rendered thereto.
In March 1997, the Company borrowed $125,000 from a related party
corporation (majority owned by Mr. Alliston and a past CEO/Director).
The loan was due April 29, 1997. The loan was paid down and a
remaining $62,500 remains to be paid and appears in the balance sheet
as "Note Due Related Party".
The Company had contracted with Healthy Services, Inc., which
performed bone density diagnostic services. Mr. Curtis Alliston
(President and COO) owned 50% interest in Healthy Services. The
Company billed and collected for the services rendered and retained a
percentage of collections varying from 25% to 50%. Total net fees
earned by Healthy Services for 1998 approximate $122,000. In November
of 1998 Healthy Services was acquired by AESI; subsequently, certain
diagnostic equipment was transferred to the Company at no gain by
AESI and the service contracts were cancelled.
About the time that AESI acquired its 65% interest in the Company,
AESI began to advance monies to the Company on an as needed basis to
accommodate the Company's cash needs. Certain monies were repaid.
AESI advanced a total of $1,209,500 in 1998, inclusive of $475,000 it
paid on behalf of the Company to its major creditor to bring the
Company current through October of 1998 with its work-out agreement.
The Company paid AESI back $535,500. At December 31, 1998, AESI and
the Company agreed to reduce the note receivable from AESI (See Note
12) by the inter-company balance of $674,000.
In 1999 AESI continued to advanced monies to the Company, inclusive
of assuming debt of $277,554 owed by the Company for management,
billing and collection services provided by an AESI subsidiary. At
December 31, 1999, AESI and the Company agreed to reduce the note
receivable by the inter-company balance of $415,165.
(14) EMPLOYEE BENEFIT PLAN
52
<PAGE>
AMERICAN ENTERPRISE.COM, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On January 1, 1999 the Company adopted a contributory retirement plan
under Section 401-(k) of the Internal Revenue Code, for the benefit
of all employees meeting certain minimum service requirements.
Eligible employees can contribute up to 20% of their salary but not
in excess of $10,000 in 1999. The Company's contribution under the
plan amounts to 2% of the employees' contribution. In 1999 the
company contributed $16,000 to the plan.
(15) SUBSEQUENT EVENTS
In February 2000, the Company changed its name to American
Enterprise.com Corp from National Diagnostics, Inc. In contemplation
of completing its merger with AESI, the Company initiated a 4 to 1
reverse stock split for its common shares effective February 20,
2000.
On March 1, 2000 the Company entered into an agreement to purchase a
100% interest in Sundance II Partnership which owns the real estate
and lease for the Company's Riverside facility in Jacksonville,
Florida. The partnership was previously owned 100% by the Company's
President and a company in which the President has sole ownership.
The purchase price of $488,000 is to be paid with the issue of 61,000
shares of the Company's common stock priced at $8.00 per share after
the 4 to 1 reverse split.
In response the loss sustained by the Company's new branch office of
the Brandon facility (located in Tampa and opened July, 1999) the
company closed the new branch office in March 2000. In response to
the Company's continued losses from the Riverside facility, the
Company closed the Riverside facility in April 2000. The equipment
will be utilized elsewhere in the Company where demand warrants.
In the first quarter of 2000, the Company became party to certain
litigation (see Note 11 Legal Actions).
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9 - DIRECTOR, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Prior to January 19, 1998, the Board of Directors consisted of Curtis L.
Alliston and Jugal K. Taneja. Mr. Taneja resigned as director and officer
effective January 19, 1998. In March 1998, Chuck Broes and Cardwell C. Nuckols
were elected to the Board of Directors. Subsequently, Mr. Broes was appointed
Chief Executive Officer and Mr. Nuckols was appointed Treasurer.
CHUCK BROES. Mr. Broes, age 61, is a business and healthcare visionary with over
30 years of experience in the healthcare and technology industries, in both
domestic and foreign markets. He has had and continues to serve in influential
positions, including COP, CEO, COO, CIO and board member of both private and
public companies. He currently serves as COB and CEO of Optimark Data Systems,
Inc. (ODS-on the Vancouver Stock Exchange). Mr. Broes also sits on several
private company Boards and the Ethics Committee of Moffitt Cancer Center. Mr.
Broes served ten years as the visionary of Wellmark, Inc., a subsidiary of
Primark Corporation (NYSE), one of the nation's first healthcare information
clearing houses. He was point man for a coalition of healthcare, technology,
business and financial experts, specializing in corporate reengineering,
business incubating, investment and merchant banking and acquisition and mergers
via strategic partnering.
53
<PAGE>
Mr. Broes has participated in 28 projects, including the turnaround of two
public companies, and moving one private company near bankruptcy to be NASDAQ
publicly traded. He also achieved the turnaround of another near bankrupt
company to a positive state where it was acquired by a public company. Mr. Broes
is CEO of American Enterprise Solutions, Inc. (AES). Mr. Broes' areas of
expertise include strategic analysis to establish a vision, market development
to target product and service placement, and strategic partnering to leverage
the market position and in corporate financing.
Mr. Broes has been on numerous local and national radio and TV shows, served as
keynote speaker at healthcare conferences, given healthcare visionary lectures
across the country and conducted information technology seminars coast to coast.
In addition, Mr. Broes has served as a quoted source in many healthcare
publications, including: HEALTHWEEK, COMPUTERS IN HEALTH CARE, COMPUTERS
INFOMATICS, MODERN HEALTHCARE, and other prestigious publications.
CARDWELL C. NUCKOLS, PH.D., age 50, Dr. Nuckols is the President and sits on the
Board of Directors of American Enterprise Solutions, Inc. (AESI).
An internationally recognized expert in such areas as behavioral medicine and
addictions treatment, Cardwell C. Nuckols, Ph.D. has been a clinical and
developmental consultant for over twenty years. During this time, he has
consulted with The Central Labor Council (AFL-CIO), United Auto Workers, DuPont,
General Motors, United Airlines and other industries in the area of enhancing
productivity. He served as a trainer and consultant to the Federal Bureau of
Investigation, federal court systems and branches of the armed forces
specializing in the areas of antisociality, violence and trauma. Dr. Nuckols has
also served as hospital administrator, having led numerous successful start-up
and turn-around efforts in the health care area.
Dr. Nuckols' educational background includes advanced work in medical research,
pharmacology, and psychology. Dr. Nuckols is widely published, having authored
more than 30 journal articles, 14 books and workbooks, 21 videos and 17
audiotape series.
Dr. Nuckols received the Gooderham Award for outstanding contributions in the
alcohol and drug addiction field. He was recently selected by the American
Society of Addiction Medicine to assist in the development of patient placement
criteria for dual disorder patients. Dr. Nuckols is also Chairman of the
editorial review board of COUNSELOR Magazine.
CURTIS L. ALLISTON, age 57, currently is a director of the Company. He also
serves as a director and the President and Chief Executive Officer of Brandon
Clinical Associates, Inc., a home health care group, and President and Chief
Executive Officer of Alliston Enterprises, an investment and construction
Company. From 1988 to 1992, he served as President and Chief Executive Officer
of Tampa Medical Group Management, a medical practice management firm, and
President and Chief Executive Officer of Bay Cardiac Imaging, a mobile cardiac
ultrasound service provider. Mr. Alliston was the founder of Positron Partners,
Inc., a joint venture specializing in positron emission tomography, and served
as its President and Chief Executive Officer from 1990 to 1992. Also, from 1990
to 1993, Mr. Alliston served as the President and Chief Executive officer of
Cleveland Avenue Real Estate Partners, a medical real estate investment group.
RON BAUGH. Age 52, served as President of National Diagnostics of Orange Park,
Inc. and in charge of all Jacksonville operations. Mr. Baugh's employment
terminated in March 1999. Prior to joining the Company in 1995, Mr. Baugh spent
seven years in clinical medicine and healthcare delivery and became a specialist
in diagnostic vascular ultrasound and neurodiagnostic testing. He served as
Administrator of the Florida Neurological Institute, an outpatient diagnostic
center, Vice President of American Medical Imaging Corporation and as a board
member. He is a Fellow of the American Academy of Physician Assistants and past
President of the Middleburg Rotary Club.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and holders of more than 10% of the Common Stock to file
with the Securities Exchange commission initial reports of beneficial ownership
and reports of changes in beneficial ownership of Common Stock and any other
equity securities of the Company. To the Company's
54
<PAGE>
knowledge, based solely upon a review of the forms filed with the Company by
such person, all such Section 16(a) filing requirements were complied with by
such persons in 1999 except for the following: Mr. Broes and Mr. Nuckols have
not filed but intend to file Forms 3 and 5 to comply with section 16(a) in the
future. Mr. Alliston intends to file Form 5 to comply with section 16(a) in the
future.
ITEM 10 -- EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation paid
to or earned by the Company's Chief Executive Officer and President and
President of Orange Park. No other executive officer earned more than $100,000
for the fiscal years ended December 31, 1998 and 1999. The directors of the
Company receive no compensation.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
FISCAL ALL OTHER SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
<S> <C> <C>
Chuck Broes 1999 -2 - - -
Chief Executive Officer 1998 - - - -
Curtis L. Alliston, 1999 -2 - - -
President and Chief 1998 150,000 - 14,891(1)
Operating Officer 1997 150,000 - 7,950(1) -
</TABLE>
(1) Represents automobiles expense allowance.
(2) The Officer received no compensation from the Company. Effective
January 1, 1999 the Company operated under a Services Agreement with
its parent, AESI. AESI and affiliates provide management, accounting,
billing and collection services in consideration for 6% of gross
collections. The Officer has an employment agreement with AESI to
provide his service to AESI and its affiliates. The Company is not able
to identify or quantify what portion of the fee is for executive
services.
No options were granted to or exercised by executive officers in 1999.
- ----------
ITEM 11 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the Record Date, December 31, 1999, with respect
to: (i) each of the Company's directors; (ii) each of the Company's executive
officers named in the Summary Compensation Table; (iii) all directors and
executive officers of the Company as a group; and (iv) each person known by the
Company to own beneficially more than 5% of the Common Stock. Except as
otherwise indicated, each of the shareholders listed below has sole voting and
investment power over the shares beneficially owned.
55
<PAGE>
BENEFICIALLY OWNED
NAME SHARES PERCENT
Curtis L. Alliston(1)(2) ............................... 152,375 6.8%
Chuck Broes (3) .......................................... - -
Cardwell C. Nuckols, Ph.D. (3) ........................ - -
American Enterprise Solutions, Inc. ...................... 1,446,643 64.4%
Directors and executive officers as a group (3 persons)(4) 1,599,018 71.2%
- ----------
* Less than 1%
(1) Includes 21,875 shares of Common Stock held by Alliston Family Limited
Partnership, which was established for the benefit of Mr. Alliston's
children, over which Mr. Alliston exercises voting rights.
(2) The business address of Mr. Alliston is 6800 North Dale Mabry, Tampa,
FL 33614.
(3) Mr. Broes and Mr. Nuckols are CEO and President, respectively, and
Directors of American Enterprise Solutions, Inc. Their business address
is 6800 North Dale Mabry, Tampa, Florida 33614
(4) Includes notes (1) through (3) above.
ITEM 12 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
The Company has an Employee Stock Option Plan ("employee plan") and a
Non-employee Director Stock Option plan ("director plan"). Options granted under
the employee plan are intended to be incentive stock options. The total number
of shares to which options may be granted under the employee and director plans
are 50,000 shares. Generally, the exercise price shall be fixed at no less than
100% of the average fair market value of the shares at date of option. At
December 31, 1999 there are no outstanding options under the Director Plan and
there are 2,500 outstanding options under the Employee Plan.
In March of 1996, the Company entered into an agreement with Judson Enterprises,
LTD to provided financial, consulting and banking services. As compensation for
these services the Company agreed to pay Judson Enterprises, Inc. $16,000 and
issue warrants for the purchase of 20,000 shares of common stock. Ten thousand
(10,000) of these unissued warrants expired March 1999. The remaining
indebtedness, including the obligation to issue warrants, was satisfied in March
2000 with the issue of 1,400 shares of AESI stock.
The Company through its Orange Park facility utilized various diagnostic and
office equipment leased by Neurophysiology Associates, Inc. ("NPA"). NPA is 100%
square feet owned by the President and Chief Operating Officer of Orange Park.
The Company had agreed to compensate NPA in no more or less favorable terms than
the original lease called for. Monthly payments approximated $1,920 in 1998.
Annual rent expense approximated $11,400 in 1998. Certain payments by the
Company were made directly to the third party lessor. Rent was earned by or paid
to NPA in 1999 approximated $5,700.
In July of 1996, a triple net lease became effective between the Company and
Sundance Partners II (a Florida general partnership) for a free standing 7,100
square foot medical facility used for Riverside's Diagnostic Center. The
facility is located in the Riverside area of Jacksonville, Florida. The lease
term is for an initial five years with a one time option to extend for a five
year period. Rent expense for 1999 and 1998 approximated $125,000 and $119,000,
respectively. Sundance Partners II was 100% owned jointly by the Company's
President and a company owned solely by the President. In March 2000 the Company
acquired 100% interest in the partnership.
One of the Company's former directors is a partner of Foley and Lardner, a law
firm (the "Firm") that is one of the Company's legal counselors. In December
1999, the Firm accepted the Company's stock valued at approximately $202,000 for
legal services previously rendered to the Company and AESI. Approximately
$71,000 was in settlement of a previously contested
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amount, and approximately $37,000 was charged by the Company to AESI for the
Firm's services rendered thereto.
In March 1997, the Company borrowed $125,000 from a related party corporation
(majority owned by the former CEO and Mr. Alliston). The loan was due April 29,
1997. The loan was paid down and a remaining $62,500 remains to be paid and
appears in the balance sheet as "Note Due Related Party".
The Company had contracted with Healthy Services, Inc., which performed bone
density diagnostic services. Mr. Curtis Alliston (President and COO) owned 50%
interest in Healthy Services. The Company billed and collected for the services
rendered and retained a percentage of collections varying from 25% to 50%. Total
net fees earned by Healthy Services for 1998 approximate $122,000. In November
1998, Healthy Services was acquired by AESI; subsequently, certain diagnostic
equipment was transferred to the Company at no gain to AESI and the service
contracts were cancelled.
The Company engaged Alan Serna (D.B.A.: Clearway Cleaning) to perform janitorial
services and laundry services or the corporate office, Brandon and SunPoint
facilities. Mr. Serna is the step son-in-law of Mr. Alliston. Total janitorial
and laundry expense approximated $48,000 and $93,000 in 1999 and 1998,
respectively.
About the time that AESI acquired its 65% interest in the Company, AESI began to
advance monies to the Company on an as needed basis to accommodate the Company's
cash needs. Certain monies were repaid. AESI advanced a total of $1,209,500 in
1998, inclusive of $475,000 it paid on behalf of the Company to its major
creditor to bring the Company current through October of 1998 with its work-out
agreement. The Company paid back $535,500; with a net advance of $674,000 made
to the Company by AESI. The advances are shown netted against the $2,000,000
receivable received by the Company from AESI in exchange for the securities it
had earlier received in exchange for the Company's 500,000 Preferred Shares.
Through December 31, 1999, the note has been reduced to $910,835.
Effective January 1, 1999 the Company contracted with AESI Service Group, Inc.
(a subsidiary of AESI) for management services, billing and collections. Total
service fees approximated $424,000 in 1999.
ITEM 13 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) List of exhibits filed as part of this report:
Exhibit
Number Description
3.i.1 Articles of Incorporation of the Company (Exhibit 3.1 to the Company's
Form SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
reference herein).
3.i.2 Articles of Amendment of Articles of Incorporation of the Company
(Exhibit [3.i.2] to the Company's Form 8-K dated March 24, 2000 is
incorporated by reference herein).
3.i.3 Re-stated Articles of Amendment of Articles of Incorporation of the
Company (Exhibit [3.i.3] to the Company's Form 8-K dated March 24, 2000
is incorporated by reference herein).
3.2 By-laws of the Company (Exhibit 3.2 to the Company's Form SB-1
Registration Statement (Reg. No. 33-80612) is incorporated by reference
herein).
4.1 1995 Employee Stock Option Plan. (Exhibit 4.1 of Company's Form S-8
Registration No.33-80293 is incorporated by reference herein).
4.2 1995 Non-Employee Director Stock Option Plan. (Exhibit 4.2 of Company's
Form S-8 Registration No. 80293 is incorporated by reference herein).
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4.3 Warrants Agreement (Exhibit 4.4 to Amendment No. 3 to the Company's
Form SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
reference herein).
10.3 Lease Agreement dated April 1, 1995 by and between National
Diagnostics/Orange Park, Inc. and Sundance Partners. (Exhibit 10.3 of
Company's Form 10-QSB for the period ended March 31, 1995 is
incorporated by reference herein).
10.4 Employment Agreement by and between the Company and Curtis L. Alliston
dated November 10, 1995. (Exhibit 10.1 of Company's Form 10-QSB for the
period ended September 30, 1995 is incorporated by reference herein).
10.5 Employment Agreement by and between the Company and Jugal K. Taneja
dated November 10, 1995. (Exhibit 10.2 of Company's Form 10-QSB for the
period ended September 30, 1995 is incorporated by reference herein).
10.6 Lease Agreement dated July 12, 1995 between National Diagnostics/Orange
Park, Inc. and Siemens Medical Systems, Inc. effective September 14,
1995. (Exhibit 10.3 of Company's Form 10-QSB for the period ended
September 30, 1995 is incorporated by reference herein).
10.7 Purchase Agreement dated February 19, 1996 between the Company,
National Diagnostics/Orange Park, Sundance Partners, and partners
(Exhibit 10.9 of the Company's Form 10-KSB for the period ended
December 31, 1995 filed on April 1, 1996 is incorporated by reference
herein).
10.8 Agreement of Partnership of Sundance Partners (a Florida partnership)
dated March 1, 1995. (Exhibit 10.10 of the Company's Form 10-KSB for
the period ended December 31, 1995 filed on April 1, 1996 is
incorporated by reference herein).
10.9 Lease Agreement dated September 3, 1991 and modification thereto dated
August 8, 1992 by and between Brandon Diagnostic Center, Ltd. and Bay
Land Investment, Inc. relating to a portion of the Company's Brandon,
Florida facility. (Exhibit 10.2 to the Company's Form SB-1 Registration
Statement (Reg. No. 33-80612) is incorporated by reference herein).
10.10 Lease Agreement dated February 1, 1992 and modification thereto dated
August 8, 1992 by and between Brandon Diagnostic Center, Ltd. and Bay
Land Investment, Inc. relating to a portion of the Company's Brandon,
Florida facility. (Exhibit 10.3 to the Company's Form SB-1 Registration
Statement Reg. No. 33-80612) is incorporated by reference herein).
10.11 Lease Agreement dated January 15, 1993 by and between Brandon
Diagnostic Center, Ltd. and Bay Land Investment, Inc. relating to a
portion of the Company's Brandon, Florida facility. (Exhibit 10.4 to
the Company's Form SB-1 Registration Statement (Reg. no. 33-80612) is
incorporated by reference herein).
10.12 Lease Agreement dated May 4, 1994 by and between Alpha Associates, Inc.
and Sun Point Associates, Inc. and Sun Point Associates relating to the
Company's Ruskin, Florida facility. (Exhibit 10.5 to the Company's for
SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
reference herein).
10.13 Equipment Lease Agreement dated September 11, 1991 by and between
Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
supplements thereto relating to the Company's magnetic resonance
imaging equipment. (Exhibit 10.6 to the Company's Form SB-1
Registration Statement (Reg. No. 33-80612) is incorporated by reference
herein).
10.14 Equipment Lease Agreement dated September 11, 1991 by and between
Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
supplement thereto relating to the Company's computer tomography
equipment. (Exhibit 10.7 to the Company's Form SB-1 Registration
Statement (Reg. No. 33-80612) is incorporated by reference herein).
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10.15 Equipment Lease Agreement dated November 18, 1991 by and between
Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
supplements thereto relating to the Company's nuclear medicine
equipment. (Exhibit 10.9 to the Company's Form SB-1 Registration
Statement (Reg. No. 33-80612) is incorporated by reference herein).
10.16 Lease Agreement dated September 1, 1994 by and between Highland
Properties of Gulf Coast, Ltd. and Brandon Diagnostic Center, Ltd.
relating to the Company's Brandon, Florida facility. (Exhibit 10.21 to
Amendment No. 3 to the Company's Form SB-1 Registration Statement (Reg.
No. 33-80612 is incorporated by reference herein).
10.17 Asset Purchase Agreement effective November 1, 1993 by and between
Alpha Acquisitions Corp. and Equipment Company of Brandon, Inc.
pertaining to the acquisition by Alpha Acquisitions Corp. of the 40%
limited partnership interest in Brandon Diagnostic Center, Ltd.
(Exhibit 10.22 to Amendment No. 3 to the Company's Form SB-1
Registration Statement (Reg. No. 33-80612) is incorporated by reference
herein).
10.18 Unit Purchase Option dated September 27, 1994 relating to 50,000 Units
(Exhibit 4.5 to Amendment No. 2 to the Company's Form SB-1 Registration
Statement (Reg. No. 33-80612) is incorporated by reference herein).
10.19 Equipment Lease Agreement dated July 19, 1994 by and between Medical
Consultants of Middleburg, Inc. and Copelco Capital Corporation
relating to Orange Park's ultrasound equipment. (Exhibit 10.17 to the
Company's Form 10-KSB for December 31, 1994 is incorporated by
reference herein).
10.20 Master Lease Agreement dated June 27, 1994 by and between Alpha
Associates, Inc. d/b/a Brandon Diagnostic Center and Copelco Leasing
Corporation and schedules thereto relating to SunPoint's diagnostic
imaging equipment. (Exhibit 10.18 to the Company's Form 10-KSB for
December 31, 1994 is incorporated by reference herein).
10.21 Equipment Lease Agreement dated August 1, 1994 by and between Brandon
Diagnostic Center, Ltd. and Siemens Credit Corporation relating to
SunPoint's diagnostic imaging equipment. (Exhibit 10.19 to the
Company's Form 10-KSB for December 31, 1994 is incorporated by
reference herein).
10.22 Asset Purchase Agreement, dated February 6, 1995 and effective as of
January 31, 1995, as amended, by and among Middleburg Medical Imaging
Consultants, Inc. (renamed National Diagnostics/Orange Park, Inc.),
Medical Consultants of Middleburg, Inc. and Medical Imaging
Consultants, Inc. (Exhibit 10.20 to the Company's Form 10-KSB for
December 31, 1994 is incorporated by reference herein).
10.23 Employment Contract, dated February 6, 1995 and effective as of January
31, 1995, by and between Ronald D. Baugh and Middleburg Medical Imaging
Consultants, Inc. (Exhibit 10.21 to the Company's Form 10-KSB for
December 31, 1994 is incorporated by reference herein).
10.24 Professional Services Agreement, dated November 30, 1994, by and
between the Company and Drs. Hurt, Isaacs, Johnston and Cranford, P.A.
(Exhibit 10.23 to the Company's Form 10-KSB for December 31, 1994 is
incorporated by reference herein).
10.25 Services Agreement, dated November 17, 1994, by and between Diagnostic
Cardiology Associates, P.A. and the Company. (Exhibit 10.24 to the
Company's Form 10-KSB for December 31, 1994 is incorporated by
reference herein).
10.26 Lease Agreement dated August 15, 1995 between National
Diagnostics/Riverside, Inc. ("Riverside") and Sundance Partners II
relating to the Company's Riverside fixed site facility. (Exhibit 10.33
to the Company's 10-QSB for June 30, 1996 is incorporated by reference
herein).
10.27 Equipment Lease Agreement dated July 15, 1996 between National
Diagnostics/Riverside, Inc. and Siemens Credit
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Corporation relating to Riverside's computer tomography equipment.
(Exhibit 10.34 to the Company's 10-QSB for September 30, 1996 is
incorporated by reference herein).
10.28 Equipment Lease Agreement dated August 12, 1996 between National
Diagnostics/Riverside, Inc. and Siemens Credit Corporation relating to
the Riverside's ultrasound equipment. (Exhibit 10.35 to the Company's
10-QSB for September 30, 1996 is incorporated by reference herein).
10.29 Promissory Note and Business Loan Agreement dated September 9, 1996
between Brandon Diagnostic Center, Ltd. and South Hillsborough
Community Bank related to equipment refinancing. (Exhibit 10.36 to the
Company's 10-QSB for September 30, 1996 is incorporated by reference
herein).
10.30 Equipment Lease Agreement dated September 11, 1996 between National
Diagnostics/Riverside, Inc. ("Riverside") and Siemens Credit
Corporation relating to Riverside's Sireskop C. (Exhibit 10.37 to the
Company's 10-QSB for September 30, 1996 is incorporated by reference
herein).
10.31 Promissory Note and Business Loan Agreement dated December 23, 1996
between Brandon Diagnostic Center, Ltd. and South Hillsborough
Community Bank related to the purchase of Stereotactic Mammography
equipment. (Exhibit 10.37 to the Company's Form 10-KSB for December 31,
1996 is incorporated by reference herein).
10.32 Equipment Lease Agreement dated January 22, 1997 between Brandon
Diagnostic Center, Ltd. ("Brandon") and Siemens Credit Corporation
relating to Brandon's Sireskop CX. (Exhibit 10.38 to the Company's Form
10-KSB for December 31, 1996 is incorporated by reference herein).
10.33 Professional Services Agreement dated May 15, 1997 by and between the
Company and University of Florida, for and on behalf of the Board of
Regents of the State of Florida, for the Benefit of the Department of
Radiology/UFHSCJ, College of Medicine, University of Florida. (Exhibit
10.44 to the Company's Form 10-QSB for June 30, 1997 is incorporated by
reference herein.)
10.34 Professional Services Agreement dated August 1, 1997 by and between the
Company and Nancy C. Lawhon, M.D., P.C. (Exhibit 10.47 to the Company's
Form 10-QSB for June 30, 1997 is incorporated by reference herein).
10.35 Loan and Security Agreement, dated October 3, 1997 by and between the
Company, SunPoint Diagnostic Center, Inc., National Diagnostics/Orange
Park, Inc., National Diagnostics/Riverside, Inc., Alpha Associates,
Inc., Alpha Acquisitions, Inc., Brandon Diagnostic Center, Ltd., and
HealthCare Financial Partners Funding, Inc. (Exhibit 10.48 to the
Company's Form 10-QSB for September 30, 1997 is incorporated by
reference herein).
10.36 Merger Agreement dated February 23, 1998 by and between the Company, a
Florida Corporation, and American Enterprise Solutions, Inc., a Florida
Corporation. (Exhibit 10.49 to the Company's Form 8-K dated March 10,
1998 is incorporated by reference herein).
10.37 Stock Purchase Agreement dated March 17, 1998 by and between the
Company a Florida Corporation and American Enterprise Solutions, Inc.,
a Florida Corporation. (Exhibit 10.50 to the Company's Form 10-KSB
dated December 31, 1997, is incorporated by reference herein).
10.38 Professional Services Agreement dated October 13, 1997 by and between
the Company and Lisa Porter-Grenn, M.D. (Exhibit 10.51 to the Company's
Form 10-KSB dated December 31, 1997, is incorporated by reference
herein).
10.39 First Amendment to Merger Agreement by and between the Company and
American Enterprise Solutions, Inc. effective March 17, 1998. (Exhibit
10.53 to the company's Form 10-QSB dated March 31, 1998 is incorporated
by reference
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herein).
10.40 Second Amendment to Merger Agreement by and between the Company and
American Enterprise Solutions, Inc. effective April 29, 1998. (Exhibit
10.52 of the Company's Form 10-KSB dated December 31, 1997 is
incorporated herein).
10.41 Third Amendment to Merger Agreement by and between the Company and
American Enterprise Solution, Inc. effective July 24, 1998. (Exhibit
10.54 of the Company's Form 10-QSB dated June 30, 1998 is incorporated
herein).
10.42 Professional Services Agreement by and between the Company and NAVIX
MSO Punta Gorda, Inc. dated November 17, 1998. (Exhibit 10.47 of the
Company's Form 10KSB dated December 31, 1998 is incorporated herein.)
10.43 Professional Services Agreement by and between the Company and AES
Service Group, Inc. effective January 1, 1999. (Exhibit 10.48 of the
Company's Form 10-KSB dated December 31, 1998 is incorporated herein).
10.44 Originator Purchase and Contribution Agreement by and between AES
Funding Corp., and Originator Parties dated January 15, 1999
(Originators include among others: the Company and its diagnostic
centers) (Exhibit 10.49 of the Company's Form 10-QSB dated March 31,
1999 is incorporated herein).
10.45 Lease Agreement by and between the Company and Long Lake Professional
Center dated April 15, 1999. (Exhibit 10.50 of the Company's Form
10-QSB dated March 31, 1999 is incorporated herein).
10.46 Fourth Amendment to Merger Agreement by and between the Company and
American Enterprise.com. Corp. (formerly: American Enterprise
Solutions, Inc.) effective December 27, 1999. (Exhibit 10.51 of the
Company's Form 10-QSB dated September 30, 1999 is incorporated herein).
20.1 The Company Offer to Exchange dated July 6, 1995. (Exhibit 20.1 to the
Company's Form 10-QSB for the period ended June 30, 1995 is
incorporated by reference herein).
21 Subsidiaries of Registrant (Exhibit 21 of the Company's Form 10-KSB for
the period ended December 31, 1995 filed on April 1, 1996 is
incorporated by reference herein).
23.1 Consent of Independent Certified Public Accountants-Grant Thornton LLP
24 Powers of Attorney (included on signature page) (Exhibit 24 of the
Company's Form 10-KSB for the period ended December 31, 1995 filed on
April 1, 1996 is incorporated by reference herein).
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No Form 8-K was filed by the Company in the fourth quarter of 1999. In
March 2000 the Company filed Form 8-K describing the Company's name change to
American Enterprise.com, Corp.; indicating a four to one reverse split of all of
the common stock issued and outstanding; and indicating the change of the
Company's trading symbol on the capital OTC Bulletin Board to "AMER" from "AECC"
and formerly "NATD".
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SIGNATURES
IN ACCORDANCE WITH 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: April 14, 2000 AMERICAN ENTERPRISE.COM, CORP.
By: /s/ Chuck Broes
----------------------------------------------
Chuck Broes
Chief Executive Officer
By: /s/ Anthony Maniscalco
----------------------------------------------
Anthony Maniscalco
Senior Executive Vice President of AESI
By: /s/ Curtis L. Alliston
----------------------------------------------
Curtis L. Alliston
President
By: /s/ Dennis C. Hult
----------------------------------------------
Dennis C. Hult
Controller
62
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Exhibit
Number DESCRIPTION
- ------ -----------
3.i.1 Articles of Incorporation of the Company (Exhibit 3.1 to the Company's
Form SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
reference herein).
3.i.2 Articles of Amendment of Articles of Incorporation of the Company
(Exhibit [3.i.2] to the Company's Form 8-K dated March 24, 2000 is
incorporated by reference herein).
3.i.3 Re-stated Articles of Amendment of Articles of Incorporation of the
Company (Exhibit [3.i.3] to the Company's Form 8-K dated March 24, 2000
is incorporated by reference herein).
3.2 By-laws of the Company (Exhibit 3.2 to the Company's Form SB-1
Registration Statement (Reg. No. 33-80612) is incorporated by reference
herein).
4.1 1995 Employee Stock Option Plan. (Exhibit 4.1 of Company's Form S-8
Registration No.33-80293 is incorporated by reference herein).
4.2 1995 Non-Employee Director Stock Option Plan. (Exhibit 4.2 of Company's
Form S-8 Registration No. 80293 is incorporated by reference herein).
4.3 Warrants Agreement (Exhibit 4.4 to Amendment No. 3 to the Company's
Form SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
reference herein).
10.3 Lease Agreement dated April 1, 1995 by and between National
Diagnostics/Orange Park, Inc. and Sundance Partners. (Exhibit 10.3 of
Company's Form 10-QSB for the period ended March 31, 1995 is
incorporated by reference herein).
10.4 Employment Agreement by and between the Company and Curtis L. Alliston
dated November 10, 1995. (Exhibit 10.1 of Company's Form 10-QSB for the
period ended September 30, 1995 is incorporated by reference herein).
10.5 Employment Agreement by and between the Company and Jugal K. Taneja
dated November 10, 1995. (Exhibit 10.2 of Company's Form 10-QSB for the
period ended September 30, 1995 is incorporated by reference herein).
10.6 Lease Agreement dated July 12, 1995 between National Diagnostics/Orange
Park, Inc. and Siemens Medical Systems, Inc. effective September 14,
1995. (Exhibit 10.3 of Company's Form 10-QSB for the period ended
September 30, 1995 is incorporated by reference herein).
10.7 Purchase Agreement dated February 19, 1996 between the Company,
National Diagnostics/Orange Park, Sundance Partners, and partners
(Exhibit 10.9 of the Company's Form 10-KSB for the period ended
December 31, 1995 filed on April 1, 1996 is incorporated by reference
herein).
10.8 Agreement of Partnership of Sundance Partners (a Florida partnership)
dated March 1, 1995. (Exhibit 10.10 of the Company's Form 10-KSB for
the period ended December 31, 1995 filed on April 1, 1996 is
incorporated by reference herein).
10.9 Lease Agreement dated September 3, 1991 and modification thereto dated
August 8, 1992 by and between Brandon Diagnostic Center, Ltd. and Bay
Land Investment, Inc. relating to a portion of the Company's Brandon,
Florida facility. (Exhibit 10.2 to the Company's Form SB-1 Registration
Statement (Reg. No. 33-80612) is incorporated by reference herein).
10.10 Lease Agreement dated February 1, 1992 and modification thereto dated
August 8, 1992 by and between Brandon
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Diagnostic Center, Ltd. and Bay Land Investment, Inc. relating to a
portion of the Company's Brandon, Florida facility. (Exhibit 10.3 to
the Company's Form SB-1 Registration Statement Reg. No. 33-80612) is
incorporated by reference herein).
10.11 Lease Agreement dated January 15, 1993 by and between Brandon
Diagnostic Center, Ltd. and Bay Land Investment, Inc. relating to a
portion of the Company's Brandon, Florida facility. (Exhibit 10.4 to
the Company's Form SB-1 Registration Statement (Reg. no. 33-80612) is
incorporated by reference herein).
10.12 Lease Agreement dated May 4, 1994 by and between Alpha Associates, Inc.
and Sun Point Associates, Inc. and Sun Point Associates relating to the
Company's Ruskin, Florida facility. (Exhibit 10.5 to the Company's for
SB-1 Registration Statement (Reg. No. 33-80612) is incorporated by
reference herein).
10.13 Equipment Lease Agreement dated September 11, 1991 by and between
Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
supplements thereto relating to the Company's magnetic resonance
imaging equipment. (Exhibit 10.6 to the Company's Form SB-1
Registration Statement (Reg. No. 33-80612) is incorporated by reference
herein).
10.14 Equipment Lease Agreement dated September 11, 1991 by and between
Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
supplement thereto relating to the Company's computer tomography
equipment. (Exhibit 10.7 to the Company's Form SB-1 Registration
Statement (Reg. No. 33-80612) is incorporated by reference herein).
10.15 Equipment Lease Agreement dated November 18, 1991 by and between
Brandon Diagnostic Center, Ltd. and Siemens Credit Corporation and
supplements thereto relating to the Company's nuclear medicine
equipment. (Exhibit 10.9 to the Company's Form SB-1 Registration
Statement (Reg. No. 33-80612) is incorporated by reference herein).
10.16 Lease Agreement dated September 1, 1994 by and between Highland
Properties of Gulf Coast, Ltd. and Brandon Diagnostic Center, Ltd.
relating to the Company's Brandon, Florida facility. (Exhibit 10.21 to
Amendment No. 3 to the Company's Form SB-1 Registration Statement (Reg.
No. 33-80612 is incorporated by reference herein).
10.17 Asset Purchase Agreement effective November 1, 1993 by and between
Alpha Acquisitions Corp. and Equipment Company of Brandon, Inc.
pertaining to the acquisition by Alpha Acquisitions Corp. of the 40%
limited partnership interest in Brandon Diagnostic Center, Ltd.
(Exhibit 10.22 to Amendment No. 3 to the Company's Form SB-1
Registration Statement (Reg. No. 33-80612) is incorporated by reference
herein).
10.18 Unit Purchase Option dated September 27, 1994 relating to 50,000 Units
(Exhibit 4.5 to Amendment No. 2 to the Company's Form SB-1 Registration
Statement (Reg. No. 33-80612) is incorporated by reference herein).
10.19 Equipment Lease Agreement dated July 19, 1994 by and between Medical
Consultants of Middleburg, Inc. and Copelco Capital Corporation
relating to Orange Park's ultrasound equipment. (Exhibit 10.17 to the
Company's Form 10-KSB for December 31, 1994 is incorporated by
reference herein).
10.20 Master Lease Agreement dated June 27, 1994 by and between Alpha
Associates, Inc. d/b/a Brandon Diagnostic Center and Copelco Leasing
Corporation and schedules thereto relating to SunPoint's diagnostic
imaging equipment. (Exhibit 10.18 to the Company's Form 10-KSB for
December 31, 1994 is incorporated by reference herein).
10.21 Equipment Lease Agreement dated August 1, 1994 by and between Brandon
Diagnostic Center, Ltd. and Siemens Credit Corporation relating to
SunPoint's diagnostic imaging equipment. (Exhibit 10.19 to the
Company's Form 10-KSB for December 31, 1994 is incorporated by
reference herein).
10.22 Asset Purchase Agreement, dated February 6, 1995 and effective as of
January 31, 1995, as amended, by and among Middleburg Medical Imaging
Consultants, Inc. (renamed National Diagnostics/Orange Park, Inc.),
Medical
64
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Consultants of Middleburg, Inc. and Medical Imaging Consultants, Inc.
(Exhibit 10.20 to the Company's Form 10-KSB for December 31, 1994 is
incorporated by reference herein).
10.23 Employment Contract, dated February 6, 1995 and effective as of January
31, 1995, by and between Ronald D. Baugh and Middleburg Medical Imaging
Consultants, Inc. (Exhibit 10.21 to the Company's Form 10-KSB for
December 31, 1994 is incorporated by reference herein).
10.24 Professional Services Agreement, dated November 30, 1994, by and
between the Company and Drs. Hurt, Isaacs, Johnston and Cranford, P.A.
(Exhibit 10.23 to the Company's Form 10-KSB for December 31, 1994 is
incorporated by reference herein).
10.25 Services Agreement, dated November 17, 1994, by and between Diagnostic
Cardiology Associates, P.A. and the Company. (Exhibit 10.24 to the
Company's Form 10-KSB for December 31, 1994 is incorporated by
reference herein).
10.26 Lease Agreement dated August 15, 1995 between National
Diagnostics/Riverside, Inc. ("Riverside") and Sundance Partners II
relating to the Company's Riverside fixed site facility. (Exhibit 10.33
to the Company's 10-QSB for June 30, 1996 is incorporated by reference
herein).
10.27 Equipment Lease Agreement dated July 15, 1996 between National
Diagnostics/Riverside, Inc. and Siemens Credit Corporation relating to
Riverside's computer tomography equipment. (Exhibit 10.34 to the
Company's 10-QSB for September 30, 1996 is incorporated by reference
herein).
10.28 Equipment Lease Agreement dated August 12, 1996 between National
Diagnostics/Riverside, Inc. and Siemens Credit Corporation relating to
the Riverside's ultrasound equipment. (Exhibit 10.35 to the Company's
10-QSB for September 30, 1996 is incorporated by reference herein).
10.29 Promissory Note and Business Loan Agreement dated September 9, 1996
between Brandon Diagnostic Center, Ltd. and South Hillsborough
Community Bank related to equipment refinancing. (Exhibit 10.36 to the
Company's 10-QSB for September 30, 1996 is incorporated by reference
herein).
10.30 Equipment Lease Agreement dated September 11, 1996 between National
Diagnostics/Riverside, Inc. ("Riverside") and Siemens Credit
Corporation relating to Riverside's Sireskop C. (Exhibit 10.37 to the
Company's 10-QSB for September 30, 1996 is incorporated by reference
herein).
10.31 Promissory Note and Business Loan Agreement dated December 23, 1996
between Brandon Diagnostic Center, Ltd. and South Hillsborough
Community Bank related to the purchase of Stereotactic Mammography
equipment. (Exhibit 10.37 to the Company's Form 10-KSB for December 31,
1996 is incorporated by reference herein).
10.32 Equipment Lease Agreement dated January 22, 1997 between Brandon
Diagnostic Center, Ltd. ("Brandon") and Siemens Credit Corporation
relating to Brandon's Sireskop CX. (Exhibit 10.38 to the Company's Form
10-KSB for December 31, 1996 is incorporated by reference herein).
10.33 Professional Services Agreement dated May 15, 1997 by and between the
Company and University of Florida, for and on behalf of the Board of
Regents of the State of Florida, for the Benefit of the Department of
Radiology/UFHSCJ, College of Medicine, University of Florida. (Exhibit
10.44 to the Company's Form 10-QSB for June 30, 1997 is incorporated by
reference herein.)
10.34 Professional Services Agreement dated August 1, 1997 by and between the
Company and Nancy C. Lawhon, M.D., P.C. (Exhibit 10.47 to the Company's
Form 10-QSB for June 30, 1997 is incorporated by reference herein).
65
<PAGE>
10.35 Loan and Security Agreement, dated October 3, 1997 by and between the
Company, SunPoint Diagnostic Center, Inc., National Diagnostics/Orange
Park, Inc., National Diagnostics/Riverside, Inc., Alpha Associates,
Inc., Alpha Acquisitions, Inc., Brandon Diagnostic Center, Ltd., and
HealthCare Financial Partners Funding, Inc. (Exhibit 10.48 to the
Company's Form 10-QSB for September 30, 1997 is incorporated by
reference herein).
10.36 Merger Agreement dated February 23, 1998 by and between the Company, a
Florida Corporation, and American Enterprise Solutions, Inc., a Florida
Corporation. (Exhibit 10.49 to the Company's Form 8-K dated March 10,
1998 is incorporated by reference herein).
10.37 Stock Purchase Agreement dated March 17, 1998 by and between the
Company a Florida Corporation and American Enterprise Solutions, Inc.,
a Florida Corporation. (Exhibit 10.50 to the Company's Form 10-KSB
dated December 31, 1997, is incorporated by reference herein).
10.38 Professional Services Agreement dated October 13, 1997 by and between
the Company and Lisa Porter-Grenn, M.D. (Exhibit 10.51 to the Company's
Form 10-KSB dated December 31, 1997, is incorporated by reference
herein).
10.39 First Amendment to Merger Agreement by and between the Company and
American Enterprise Solutions, Inc. effective March 17, 1998. (Exhibit
10.53 to the company's Form 10-QSB dated March 31, 1998 is incorporated
by reference herein).
10.40 Second Amendment to Merger Agreement by and between the Company and
American Enterprise Solutions, Inc. effective April 29, 1998. (Exhibit
10.52 of the Company's Form 10-KSB dated December 31, 1997 is
incorporated herein).
10.41 Third Amendment to Merger Agreement by and between the Company and
American Enterprise Solution, Inc. effective July 24, 1998. (Exhibit
10.54 of the Company's Form 10-QSB dated June 30, 1998 is incorporated
herein).
10.43 Professional Services Agreement by and between the Company and NAVIX
MSO Punta Gorda, Inc. dated November 17, 1998. (Exhibit 10.47 of the
Company's Form 10KSB dated December 31, 1998 is incorporated herein.)
10.43 Professional Services Agreement by and between the Company and AES
Service Group, Inc. effective January 1, 1999. (Exhibit 10.48 of the
Company's Form 10-KSB dated December 31, 1998 is incorporated herein).
10.44 Originator Purchase and Contribution Agreement by and between AES
Funding Corp., and Originator Parties dated January 15, 1999
(Originators include among others: the Company and its diagnostic
centers) (Exhibit 10.49 of the Company's Form 10-QSB dated March 31,
1999 is incorporated herein).
10.45 Lease Agreement by and between the Company and Long Lake Professional
Center dated April 15, 1999. (Exhibit 10.50 of the Company's Form
10-QSB dated March 31, 1999 is incorporated herein).
10.46 Fourth Amendment to Merger Agreement by and between the Company and
American Enterprise.com. Corp. (formerly: American Enterprise
Solutions, Inc.) effective December 27, 1999. (Exhibit 10.51 of the
Company's Form 10-QSB dated September 30, 1999 is incorporated herein).
20.1 The Company Offer to Exchange dated July 6, 1995. (Exhibit 20.1 to the
Company's Form 10-QSB for the period ended June 30, 1995 is
incorporated by reference herein).
21 Subsidiaries of Registrant (Exhibit 21 of the Company's Form 10-KSB for
the period ended December 31, 1995 filed on April 1, 1996 is
incorporated by reference herein).
23.1 Consent of Independent Certified Public Accountants-Grant Thornton LLP
66
<PAGE>
24 Powers of Attorney (included on signature page) (Exhibit 24 of the
Company's Form 10-KSB for the period ended December 31, 1995 filed on
April 1, 1996 is incorporated by reference herein).
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No Form 8-K was filed by the Company in the fourth quarter of 1999. In
March 2000 the Company filed Form 8-K describing the Company's name change to
American Enterprise.com, Corp.; indicating a four to one reverse split of all of
the common stock issued and outstanding; and indicating the change of the
Company's trading symbol on the capital OTC Bulletin Board to "AMER" from "AECC"
and formerly "NATD".
67
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report, dated April 11, 2000, accompanying the consolidated
financial statements included in the Annual Report of American Enterprise.com,
Corp. and Subsidiaries, on Form 10-KSB for the year ended December 31, 1999. We
hereby consent to the incorporation by reference of said report in the
Registration Statement of National Diagnostics, Inc. and Subsidiaries on Form
S-8 (File No. 33-80293, effective December 11, 1995).
GRANT THORNTON LLP
Tampa, Florida
April 11, 2000
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