<PAGE>
384795.001(B&F)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-QSB
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 1997
or
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the period from ___________________ to ________________
Commission file number 0-25344
________________________________________
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 25-1741216
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1315 Greg Street, Suite 103
Sparks, Nevada 89431
(Address of principal (Zip Code)
executive offices)
(702) 356-2315
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Act of 1934 during the past 12
months (or such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /X/ No /_/.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: Common Stock, par value $.01
per share, 15,015,316 shares outstanding as of May 9, 1997.
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 2,401,732 $ 2,882,035
Accounts receivable............................................ 3,301,814 2,339,093
Notes and interest receivable--related party................... 2,393,062 3,428,244
Other assets and prepaid expenses.............................. 185,767 301,738
------------- -------------
Total current assets....................................... 8,282,375 8,951,110
------------- -------------
Property and equipment, net.................................... -- 19,118
Intangible assets, net......................................... 6,342,686 5,780,397
Deferred costs and other assets................................ 849,299 800,450
------------- -------------
Total assets............................................... $ 15,474,360 $ 15,551,075
------------- -------------
------------- -------------
LIABILITIES
Current liabilities:
Accrued subcontract fees....................................... $ 513,897 $ 1,074,100
Accounts payable and accrued expenses.......................... 1,979 137,880
Short term debt................................................ 60,457 77,033
------------- -------------
Total current liabilities................................ 576,333 1,289,013
------------- -------------
Commitments and contingent liabilities -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none outstanding -- --
Common stock, $.01 par value, 40,000,000 shares authorized,
15,015,316 and 14,956,428 shares issued and outstanding...... 150,154 149,564
Paid-in capital................................................ 11,776,544 11,512,138
Retained earnings.............................................. 2,971,329 2,600,360
------------- -------------
Total stockholders' equity............................. 14,898,027 14,262,062
------------- -------------
Total liabilities and stockholders' equity............. $ 15,474,360 $ 15,551,075
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
INCOME STATEMENTS
For the Three Month Periods Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Revenues.......................................................... $ 2,382,790 $ 2,134,761
Subcontract expense............................................... 1,654,234 1,379,950
------------ ------------
Operating income............................................. 728,556 754,811
Selling, general and administrative expense....................... 265,735 104,332
Interest expense (income)......................................... (89,148) (51,914)
------------ ------------
Income before income taxes........................................ 551,969 702,393
------------ ------------
Provision for income taxes:
Current......................................................... 181,000 266,300
Deferred........................................................ -- 5,422
------------ ------------
181,000 271,722
------------ ------------
Net income................................................... $ 370,969 $ 430,671
------------ ------------
------------ ------------
Primary net income per share...................................... $ 0.02 $ 0.03
------------ ------------
------------ ------------
Weighted average number of shares outstanding used in primary
calculation..................................................... 15,554,891 15,443,306
------------ ------------
------------ ------------
Fully diluted net income per share................................ $ 0.02 $ 0.03
------------ ------------
------------ ------------
Weighted average number of shares outstanding used in fully
diluted calculation............................................. 15,554,891 15,611,862
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
STATEMENTS OF CASH FLOWS
For the Three Month Periods Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net income........................................................ $ 370,969 $430,671
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization expense............................. 112,893 59,223
Insurance in lieu of cash......................................... 66,743 --
Changes in assets and liabilities:
(Increase) decrease in receivables.............................. (962,721) (586,768)
(Increase) decrease in other assets............................. 127,228 (14,829)
Increase (decrease) in accounts payable and accrued expenses.... (696,104) 10,902
Increase in income taxes payable................................ -- 59,222
----------- -----------
Net cash used operations.......................................... (980,992) (41,579)
----------- -----------
Cash flow from investing activities:
Receivables acquired in acquisitions.............................. -- (271,664)
Origination of notes receivable................................... (69,205) --
Principal collections of notes receivable......................... 1,104,387 --
Deferred costs-contract acquisitions.............................. (59,728) 13,667
Purchase of property and equipment................................ 18,373 (5,797)
Client lists...................................................... (409,441) 56,749
Other assets...................................................... 10,879 --
----------- -----------
Net cash provided by (used in) investing activities............... 595,265 (207,045)
----------- -----------
Cash flow from financing activities:
Initial public offering costs..................................... -- (7,370)
Payments of short term debt....................................... (94,576) --
----------- -----------
Net cash used in financing activities........................... (94,576) (7,370)
----------- -----------
Net decrease in cash............................................ ($480,303) ($255,994)
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
STATEMENTS OF CASH FLOWS
For the Three Month Periods Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Net decrease in cash........................................ ($480,303) ($255,994)
Cash balance, beginning balance................................... 2,882,035 6,580,223
------------ ------------
Cash balance, ending balance...................................... $2,401,732 $6,324,229
------------ ------------
------------ ------------
Supplemental data:
Cash paid for income taxes...................................... $25,000 $212,500
------------ ------------
------------ ------------
Cash paid for interest.......................................... $1,500 $ --
------------ ------------
------------ ------------
Non-cash items:
Stock issued for contract acquisitions...................... $264,996 $2,150,000
------------ ------------
------------ ------------
Short term debt issued in lieu of insurance................. $78,000 $ --
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited statements of National Medical Financial
Services Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
information. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for
the three month period ended March 31, 1997 are not necessarily indicative of
the results of operations that may be expected for the year ending December
31, 1997.
2. ACCOUNTS RECEIVABLE:
Accounts receivables consisted of the following at March 31, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
Accounts receivable--billed...................................... $ 2,701,601 $ 1,740,908
Accounts receivable--unbilled.................................... 592,886 592,886
Miscellaneous receivable......................................... 7,327 5,299
------------ ------------
Total............................................................ $ 3,301,814 $ 2,339,093
------------ ------------
------------ ------------
</TABLE>
3. NOTES RECEIVABLE:
On May 1, 1996, the Company entered into a transaction with First United
Equities Corporation ("First United"), a broker-dealer registered with the
Securities and Exchange Commission. First United is the principal market
maker in the Company's Common Stock. Pursuant to the transaction, the Company
loaned $5,200,000 through a series of advances evidenced by a promissory note
bearing interest at 10%. Such note was due and payable on demand with seven
days notice. The note was collateralized by the guarantees of the principals
of First United. On May 29, 1996, First United repaid $2,000,000 to the
Company. Effective October 1, 1996, the remaining balance on the note and
accrued interest was satisfied through the establishment of an unsecured note
due from Russell Data Services, Inc., a Nevada corporation ("Russell Data"),
which is owned by the Company's Chairman and principal stockholder (the
"Chairman"), in the amount of $3,344,174. The note bears interest at 10% and
establishes a payment schedule of $1,000,000 each at January 15, April 15 and
July 15, 1997 plus accrued interest thereon with the remaining balance and
interest thereon due on September 15, 1997. On February 10, 1997, the Company
received $1,104,786 in principal and accrued interest from Russell Data in
accordance with the payment schedule. The April 15 payment has not yet been
paid.
6
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
4. CONTRACT ACQUISITIONS:
On March 1, 1997, the Company acquired a contract to provide billing and
collection services to medical service providers in Rhode Island. The total
consideration paid was $164,998, consisting of $100,000 in cash and 14,444
shares of Common Stock, based on a value of $4.50 per share. In accordance
with the purchase agreement, the Company placed these shares into escrow.
Fewer shares will ultimately be released if certain revenue levels are not
maintained.
On March 1, 1997, the Company acquired a contract to provide billing and
collection services to medical service providers in the Cleveland, Ohio area.
The total consideration paid was $499,998, consisting of $300,000 in cash and
44,444 shares of Common Stock, based on a value of $4.50 per share. In
accordance with the purchase agreement, the Company placed these shares into
escrow. Fewer shares will ultimately be released if certain revenue levels
are not maintained.
5. INTANGIBLE ASSETS:
MARCH 31, DECEMBER 31,
1997 1996
---- ----
Client lists................................. $ 6,132,346 $ 5,457,911
Software license............................. 700,000 700,000
------------ -----------
6,832,346 6,157,911
Less accumulated amortization................ (489,660) (377,514)
------------ -----------
$ 6,342,686 $ 5,780,397
------------ -----------
------------ -----------
6. PENDING CONTRACT ACQUISITIONS:
The Company is negotiating to purchase billing contracts of medical
service providers in the Phoenix, Arizona area. As of March 31, 1997, the
Company made a $150,000 working capital loan to the acquisition candidate. In
addition, the Company has paid $490,000 in finders' fees to First United. It
is managements' belief that the acquisition will be consummated and the costs
will be capitalized as acquisition costs during 1997. If the contracts are
not acquired, the costs will be expensed in the appropriate period during
1997.
7. COMMON STOCK:
On February 4, 1997, the Board of Directors of the Company authorized a
two for one stock split and a corresponding increase in the number of
authorized shares of the Company to 40,000,000 shares pursuant to Section
78.207 of the Nevada General Corporation Law (the "Stock Split"). The
stockholders of record as of February 17, 1997 (the "Record Date") received
one additional share of the Company's common stock for each share of common
stock held of record as of the Record Date. The Stock Split was distributed
on February 24, 1997 and all stock related data in the financial statements
reflects the Stock Split for all periods presented.
7
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
8. PROSPECTIVE ACCOUNTING CHANGES:
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share." This
Statement establishes standards for computing and presenting earnings per
share ("EPS") and applies to entities with publicly held common stock or
potential common stock. This Statement is effective for financial statements
issued for periods ending after December 15, 1997, and earlier application is
not permitted. This Statement requires restatement of all prior-period EPS
data presented. The Company is currently evaluating the impact, if any, that
the adoption of SFAS No. 128 will have on its financial statements.
9. OTHER MATTERS:
Effective February 1, 1997, Alan H.L. Carr-Locke, the President, Chief
Executive Officer and Director of the Company, resigned from his offices and
employment by mutual consent with the Company. Mr. Carr-Locke's employment
contract with the Company was terminated. Stock options granted to the Mr.
Carr-Locke under the Stock Option Plan on December 20, 1995 will remain
exercisable until their respective expiration dates. The Company has retained
Medical Business Systems, Inc. ("MBS") as a marketing and acquisition
consultant for the time period from February 1, 1997 until May 31, 1998. The
agreement provides for a $14,227 monthly payment. Mr. Carr-Locke is an
officer of MBS. In addition, the Company is in the process of assigning its
non-cancelable operating leases for the Massachusetts office to a company
which owns and controls MBS.
Effective March 14, 1997, the Board of Directors appointed the Chairman
to serve as the President and Chief Executive Officer of the Company.
The contracts to provide billing, collection and accounts receivable
management services, as well as certain accounting services, to medical
service providers which are owned by, controlled by, or affiliated with the
Chairman are scheduled to expire in September 1997. The Company is in the
process of negotiating with these medical service providers terms under which
the Company will continue to provide services to these entities. There can be
no assurances that the Company will reach agreements with these entities or
that such agreements, if reached, will be on terms as favorable to the
Company as the existing contracts. Failure to successfully renegotiate these
contracts could have a material adverse effect on the Company's results of
operations.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
financial statements and notes thereto, and with the Company's audited
financial statements and notes thereto for the fiscal year ended December 31,
1996.
IMPORTANT FACTORS REGARDING FORWARD LOOKING STATEMENTS
Some of the information presented in this report constitutes forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Although the Company believes that its expectations are
based on reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual results of
operations or the result of the Company's marketing and acquisition
activities and will not differ materially from its expectations. Factors
which could cause actual results to differ from expectations include, among
others, uncertainty of whether the Company's marketing activities will result
in an expansion of its client base or lead to additional acquisitions of
contracts and entities, uncertainties related to state and federal
governmental regulation of the Company's business, uncertainties related to
the demand for the services provided by the Company, uncertainties related to
the renewal of the client contracts of medical service providers owned by,
controlled by or affiliated with the Company's Chairman, and the uncertainty
of whether the combination of operating cash flows, the proceeds of the
Company's initial public offering and repayment of the note receivable will
be sufficient to fund its growth and operations over the next twelve months.
Specific reference is made to risks and uncertainties described in the
Company's Registration Statement on Form S-3, Registration No. 333-11381 and
the Company's Registration Statement on Form SB-2, Registration No. 333-00804.
Results of Operations
Quarters Ended March 31, 1997 and March 31, 1996
Total revenues for the quarters ended March 31, 1997 and 1996 were
$2,382,790 and $2,134,761, respectively, an increase of approximately 11.6%.
Approximately 47.1% of the 1997 revenues, as compared to 53.1% of the 1996
revenues, were derived from the Company's contracts with medical service
providers owned by, controlled by, or affiliated with the Chairman. The
acquisitions made by the Company during the first, second and third quarters
of 1996 are the primary reasons for the increased revenues. Revenues earned
for the quarter ended March 31, 1997 consisted of $2,224,254, or 93.4% of
revenues, for billing and collection services, $138,938, or 5.8% of revenues,
for accounting services, and $19,598, or 0.8% of revenues, for late charges
and consulting services. Revenues earned for the quarter ended March 31, 1996
consisted of $1,828,020, or 85.6% of revenues, for billing and collection
services, and $138,022, or 6.5% of revenues, for accounting services, and
$168,719, or 7.9% of revenues, for late charges and consulting services. The
percentage of revenues attributable to billing and collection services as
compared to accounting services has increased as the Company has acquired
additional contracts which provide only for billing and collection services.
During the quarters ended March 31, 1997 and 1996, the Company incurred
subcontract expenses in the amount of $1,654,234 and $1,379,950,
respectively, for services rendered. Substantially all of these costs for
both periods incurred were to Russell Data. The Company reported operating
income of $728,556, income before taxes of $551,969, net income of
9
<PAGE>
$370,969, and primary earnings per share of $0.02 for the quarter ended March
31, 1997. The Company reported operating income of $754,811, income before
taxes of $702,393, net income of $430,671 and primary earnings per share of
$0.03 for the quarter ended March 31, 1996. The reasons for the decreases in
operating income, income before taxes and net income for the quarter ended
March 31,1997 as compared to the same period of 1996, were due to a reduction
in late fees and consulting income, which had no corresponding subcontract
expenses, and an increase in selling, general and administrative expenses,
particularly, amortization of client lists and insurance expense.
The Company incurred selling, general and administrative expenses of
$265,735 and $104,332 for the quarters ended March 31, 1997 an 1996,
respectively. The expenses for 1997 consisted primarily of amortization
related to acquisition costs of client contracts and salaries and related
benefits and insurance expense, while the expenses for 1996 consisted
primarily of amortization related to acquisition costs of client contracts
and salaries and related employee benefits and professional fees.
The Company's effective tax rate was 32.8% and 38.2% for the quarters
ended March 31, 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997 and 1996, the Company had cash and cash equivalents of
$2,401,732 and $6,324,229, respectively. The balance at March 31, 1996
primarily consisted of proceeds from the Company's initial public offering.
The Company realized net income from operations of $370,969 and $470,671
for the three months ended March 31, 1997 and 1996, respectively. During the
three month periods ended March 31, 1997 and 1996, the Company used cash in
operations of $980,992 and $41,579, respectively. The Company had net cash
provided from (used in) investing activities of $595,265 and ($207,045) for
the three months ended March 31, 1997 and 1996, respectively. The Company
used net cash in financing activities of $94,576 and $7,370 for the three
months ended March 31, 1997 and 1996, respectively.
On February 13, 1996, the Company acquired the accounts receivable and
client contracts from Doctors Medical Billing Services, A Limited Liability
Corporation. The client contracts related to this acquisition provide billing
and collection services to approximately 25 medical service providers in the
Las Vegas, Nevada area. The total consideration paid for this acquisition was
$1,800,000, consisting of $150,000 in cash and 388,236 shares of Common Stock
valued at $4.25 per share. In accordance with the purchase agreement, the
Company placed these shares into escrow. Fewer shares will ultimately be
released from escrow if certain revenue levels are not maintained.
On April 1, 1996, the Company acquired the accounts receivable and client
contracts from National Medical Services, Inc. The client contracts related
to this acquisition provide billing and collection services to approximately
19 medical service providers in the Las Vegas, Nevada area. The total
consideration paid for this acquisition was $550,000, consisting of $250,000
in cash and 60,000 shares of Common Stock valued at $5.00 per share. In
accordance with the purchase agreement, the Company placed these shares into
escrow. Fewer shares will ultimately be released if certain revenue levels
are not maintained.
10
<PAGE>
On August 1, 1996, the Company acquired from Rapier Investments, Ltd.
seven additional contracts to provide billing, collection and accounts
receivable management services to medical service providers in Massachusetts
and New Hampshire. The total consideration paid was $945,000, consisting of
$750,000 in cash and 42,740 shares of Common Stock, based on a value of $4.56
per share. In accordance with the purchase agreement, the Company placed
these shares into escrow. Fewer shares will ultimately be released if certain
revenue levels are not maintained.
On March 1, 1997, the Company acquired a contract to provide billing and
collection services to medical service providers in Rhode Island. The total
consideration paid was $164,998, consisting of $100,000 in cash and 14,444
shares of Common Stock, based on a value of $4.50 per share. In accordance
with the purchase agreement, the Company placed these shares into escrow.
Fewer shares will ultimately be released if certain revenue levels are not
maintained.
On March 1, 1997, the Company acquired a contract to provide billing and
collection services to medical service providers in the Cleveland, Ohio area.
The total consideration paid was $499,998, consisting of $300,000 in cash and
44,444 shares of Common Stock, based on a value of $4.50 per share. In
accordance with the purchase agreement, the Company placed these shares into
escrow. Fewer shares will ultimately be released if certain revenue levels
are not maintained.
On May 1, 1996, the Company entered into a transaction with First United,
a broker-dealer registered with the Securities and Exchange Commission. First
United is the principal market maker in the Company's common stock. Pursuant
to the transaction, the Company loaned $5,200,000 in a series of advances
evidenced by a promissory note bearing interest at 10%. Such note was due and
payable on demand with seven days notice. The note was collateralized by the
guarantees of the principals of First United. On May 29, 1996, First United
repaid $2,000,000 to the Company. Effective October 1, 1996, the remaining
balance on the note and accrued interest was satisfied through the
establishment of an unsecured note due from Russell Data in the amount of
$3,344,174. The note bears interest at 10% and establishes a payment schedule
which will result in the balance being paid in full by September 15, 1997. On
February 10, 1996, the Company received $1,104,786 of principal and accrued
interest from Russell Data representing the first in the series of scheduled
payments. The April 15 payment has not yet been made.
As of March 31, 1997, certain medical service providers which are owned
by, controlled by, or affiliated with the Chairman, owed the Company
approximately $1.2 million in fees for services. Since December 31, 1996, an
additional $1,113,000 has been billed to these entities, and the Company has
received approximately $486,000 related to the amounts. As of March 31, 1997,
approximately $1,042,000 has been prepaid to Russell Data.
The contracts to provide billing, collection and accounts receivable
management services, as well as certain accounting services, to medical
service providers which are owned by, controlled by, or affiliated with the
Chairman are scheduled to expire in September 1997. The Company is in the
process of negotiating with these medical service providers terms under which
the Company will continue to provide to these entities. There can be no
assurances that the Company will reach agreements with these entities or that
such agreements, if reached, will be on terms as favorable to the Company as
the existing contracts. Failure to successfully renegotiate these contracts
could have a material adverse effect on the Company's results of operations.
The Company's principal sources of liquidity are anticipated to be cash
flows from operations, repayment of notes and the remaining proceeds from its
initial public offering. The Company expects to fund future acquisitions of
contracts and future acquisitions of businesses by a combination of funds
available through the cash from operations, proceeds from the initial public
11
<PAGE>
offering, repayment of the note receivable and issuance of Common Stock and
promissory notes. A similar funding strategy is anticipated to be used in its
future business growth. The Company anticipates that cash flow from
operations, the proceeds of the initial public offering and repayment of the
note receivable will be adequate to fund its operations for the next twelve
months, although there can be no assurance to that effect.
Prospective Accounting Changes:
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share." This
Statement establishes standards for computing and presenting earnings per
share ("EPS") and applies to entities with publicly held common stock or
potential common stock. This Statement is effective for financial statements
issued for periods ending after December 15, 1997, earlier application is not
permitted. This Statement requires restatement of all prior-period EPS data
presented. The Company is currently evaluating the impact, if any, that the
adoption of SFAS No. 128 will have on its financial statements.
12
<PAGE>
PART II--OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
(No response required)
ITEM 2: CHANGES IN SECURITIES
On February 4, 1997, the Board of Directors of the Company authorized a
two for one stock split and a corresponding increase in the number of
authorized shares of the Company to 40,000,000 shares pursuant to Section
78.207 of the Nevada General Corporation Law (the "Stock Split"). The
stockholders of record as of February 17, 1997 (the "Record Date") received
one additional share of the Company's common stock for each share of common
stock held of record as of the Record Date.
On March 1, 1997, in connection with the acquisitions of two client
contracts, the Company issued 58,888 shares of Common Stock to the former
owners of the client contracts at a price of $4.50 per share. These issuances
were pursuant to exemptions from registration under Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
(No response required)
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(No response required)
ITEM 5: OTHER INFORMATION
Effective February 1, 1997, Alan H.L. Carr-Locke, the President, Chief
Executive Officer and Director of the Company, resigned from his offices and
employment by mutual consent with the Company. Mr. Carr-Locke's employment
contract with the Company was terminated. Stock options granted to the Mr.
Carr-Locke under the Stock Option Plan on December 20, 1995 will remain
exercisable until their respective expiration dates. The Company has retained
Medical Business Systems, Inc. ("MBS") as a marketing and acquisition
consultant for the time period from February 1, 1997 until May 31, 1998. The
agreement provides for a $14,227 monthly payment. Mr. Carr-Locke is an
officer of MBS. In addition, the Company is in the process of assigning its
non-cancelable operating leases for the Massachusetts office to a company
which owns and controls MBS.
Effective March 14, 1997, the Board of Directors appointed the Chairman
to serve as the President and Chief Executive Officer of the Company.
13
<PAGE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1 Acquisition Consulting Contract dated December 1,
1996 between the Company and the Bradford
Group, Inc.*
11.1 Statement Regarding Computation of Per Share Earnings
(Three Months).*
27.1 Financial Data Schedule.*
* Filed herewith.
b. Forms 8-K
1. No reports on Form 8-K were filed during the quarter
for which this report is filed.
14
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
________________________________________________
(Registrant)
By: /s/ Robert W. Horner, Jr.
_________________________________________
Robert W. Horner, Jr., Vice President,
Chief Financial Officer, Secretary
and Treasurer
Signing on behalf of the Registrant
and as Principal Accounting Officer
Date: May 14, 1997
<PAGE>
INDEPENDENT CONTRACTOR AGREEMENT
--------------------------------
THIS INDEPENDENT CONTRACTOR AGREEMENT ("Agreement") is made and entered into
as of the 1st day of December, 1996, by and between National Medical
----------
Financial Services Corporation, a Nevada Corporation (hereinafter "Company") and
Bradford Group, Inc., a Nevada Corporation, located at 11017 Mason Ridge Drive,
Raleigh, North Carolina, 27614, (hereinafter "Contractor").
WITNESSETH:
ARTICLE I. DEFINITIONS
Capitalized terms used in the Agreement shall have their defined meaning
throughout the Agreement. The following terms shall have the meanings set forth
below, unless the context clearly requires otherwise.
1.1 Agreement means this Independent Contractor Agreement, as from
time to time amended in accordance herewith.
1.2 Commencement Date means December 1 ,1996.
--------------------
1.3 Company means National Medical Financial Services Corporation.
1.4 Confidential Information means information that is proprietary to
the Company or proprietary to others and entrusted to the
Company, whether or not trade secrets, Confidential Information
includes, but is not limited to, information relating to business
plans and to business as conducted or anticipated to be
conducted, and to past or current or anticipated products,
services to procedures. Confidential Information also includes,
without limitation, names, addresses, lists, rates, and
information concerning Company research, development, purchasing,
accounting, marketing, selling and acquisition of billing service
companies and billing services. All information that Contractor
or Company has a reasonable basis to consider confidential is
Confidential Information, whether or not originated by
Contractor, and without regard to the manner in which Contractor
obtains access to this and any other proprietary information.
Notwithstanding the above, the Bradford Group, Inc. may use its
proprietary valuation and due diligence systems to serve other
<PAGE>
clients and is not considered Company Confidential Information under
the terms of this Agreement.
1.5 Contractor means The Bradford Group, Inc.
1.6 Territory means U.S.A.
1.7 Target means billing and financial services companies in the
medical and healthcare fields.
ARTICLE II. RETENTION, DUTIES AND TERM
2.1 Retention. Upon the terms and conditions set forth in this
Agreement, the Company hereby retains Contractor and Contractor
accepts such retention as an independent contractor. Except as
expressly provided elsewhere in this Agreement, expiration of its
initial term or as extended, or termination of this Agreement by
either party, or by mutual agreement of the parties, shall also
terminate Contractor's retention by the Company. Contractor
hereby acknowledges that it has the capability to provide the
services required under the terms and conditions of this
Agreement.
2.2 Services and Duties.
(a) During the term of this Agreement, Contractor agrees to
devote its professional and best efforts and attention to
the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to
Contractor hereunder, to use Contractor's best efforts to
perform faithfully and efficiently such responsibilities, to
abide by the policies and procedures of the Company and
accept no other gainful retention with a competitor of the
Company without the consent of the Company.
(b) During the term of this Agreement, it shall not be a
violation of this Agreement for Contractor to accept
2
<PAGE>
work for other medical billing service companies not in
competition with Company, and, so long as such activities do not
interfere with the performance of Contractor's responsibilities
as an independent contractor of the Company and do not result in
or from Confidential Information in accordance with this
Agreement.
(c) Contractor shall develop leads, qualify leads, negotiate and
close acquisitions of Targets specifically approved by
Company.
(d) Contractor shall be responsible for managing the acquisition
process of Targets, including but not limited to, due
diligence, overseeing the preparation of legal
documentation, preparation of schedules, and closing.
(e) Contractor shall operate within the written acquisition
guidelines developed by the Company, and provided to
Contractor, with exception or deviation, being pre-approved
by the Company's CEO. Acquisition guidelines may be amended
from time to time by the Company.
(f) Contractor shall represent Company in a highly professional
manner.
(g) Contractor shall, during 1997, acquire $10,000,000 in net
revenues through the acquisition of billing companies and
other related medical financial management businesses and
through the execution of service agreements (including but
not limited to transcription and billings). The 1998
acquisition goal will be set during the first six month
period of 1997. Contractor may, with prior Company
approval, broker Company rejected acquisition candidates to
other noncompetitors of the Company.
3
<PAGE>
(h) Contractor will keep and maintain appropriate records
related to all services rendered by it under this Agreement
and will meet every two weeks or as required, with the
Company's Chairman. Contractor will maintain and provide
Company a status report of qualified leads, practices under
letter of intent, and schedule of closings.
2.3 Company's duties.
(a) Company shall support Contractor by providing written
acquisition financial guidelines.
(b) Company shall provide the capital necessary to complete
qualified acquisitions.
(c) Contractor may use the Company name and logo while representing
the Company.
(d) The Company shall be responsible for providing appropriate
legal services necessary to support Contractor in closing
acquisitions.
(e) The Company shall provide direct supervision of the
Contractor through its Chairman.
2.4 Certain Proprietary Information. If Contractor possesses any
proprietary information of another person or entity as a result
of prior retention or relationship, Company shall not interfere
with legal obligations that Contractor has with that person or
entity with respect to such proprietary information.
2.5 Term. The term of this Agreement shall begin on the Commencement
Date and shall end three (3) years from the Commencement Date
year, unless sooner terminated as set forth in Article IV hereof.
2.6 Ownership and Return of Confidential Information. Contractor
agrees that all Company Confidential Information in Contractor's
possession, including without
4
<PAGE>
limitation, all documents, financial reports, records, leads, manuals,
memoranda, computer print-outs, lists, and all other property relating
in any way to the business of the Company is the exclusive property of
the Company, even if Contractor authored, created or assisted in
authoring or creating, such property. Notwithstanding the above, the
Bradford Group, Inc. may use its proprietary valuation and due
diligence systems to serve other clients and is not considered Company
Confidential Information under the terms of this Agreement.
Contractor shall return to the Company all such Confidential
Information immediately upon expiration or termination of
retention or at such earlier time as the Company may request.
ARTICLE III. COMPENSATION, BENEFITS AND EXPENSES
3.1 Compensation. During the term of Contractor's retention by
Company, Contractor shall be entitled to compensation in
consideration of its services hereunder, based upon the following
commission formula:
4% times the annual revenue as used by Company and
Contractor in the acquisition of the acquired business.
Said commission is calculated as part of the consideration
for the acquired business. Such Commission is earned by and
shall be distributed to the Contractor at the closing of the
acquisition.
Company will advance to Contractor an amount of $11,000 per
month payable on the first of each month. This advance will
be reconciled against all commissions as they are earned.
3.2 Health Insurance, Professional Liability, Unemployment, and
Workers or Workmen's Compensation Insurance. The Company shall
not provide health insurance, professional liability,
unemployment, workers compensation
5
<PAGE>
insurance for employees of Contractor, and it will be Contractor's
responsibility to provide those coverages, and provide to Company
evidence of same.
3.3 Travel and Other Expenses. Contractor will be responsible to
bear for all travel and other related expenses in performing its
duties under this Agreement.
3.4 Indemnity by Contractor. The Contractor shall hold harmless and
indemnify the Company, its successors and assigns, from and
against any liabilities, costs, damage, expenses and reasonable
attorney's fees imposed against Company resulting from or
attributable to any and all acts and omissions of the Contractor,
under this Agreement, or any prior liabilities, acts or omissions
of the Contractor in the conduct of its business for Company.
The provisions of this Section 3.4 shall survive the expiration
or termination of this Agreement and the Contractor's retention
hereunder.
3.5 Indemnity by Company. The Company shall hold harmless and
indemnify the Contractor, its successors and assigns, from and
against any liabilities, costs, damage, expenses and reasonable
attorney's fees imposed against Contractor resulting from or
attributable to any and all acts and omissions of the Company,
under this Agreement. The provisions of this Section 3.5 shall
survive the expiration or termination of this Agreement and the
Company's retention hereunder.
3.6 Contractor's Employee Deductions. Contractor will pay to the
proper government agencies employer contributions for old-age
benefits and unemployment insurance, as well as all other
federal, state, or municipal mandated withholding. Contractor
will keep accurate records of accounts relative to the above
deductions and payments, and it will make the same, together with
any and all supporting data, copies of returns, and other related
data, available to representatives of Company at times during
usual business hours. It is understood that Contractor will
carry Workers' Compensation and Occupational
6
<PAGE>
Disease Insurance, upon all its employees engaged in the
performance of services under this Agreement, and it will
otherwise fully comply with all applicable employment laws.
ARTICLE IV. EARLY TERMINATION
Subject to the respective continuing obligations of the parties elsewhere
provided in this Agreement, this Article IV sets forth the terms for early
termination of Contractor's retention under this Agreement.
4.0 Either party may terminate this Agreement "for cause" upon sixty
(60) days prior written notice. "For Cause" shall be defined as
one party failing to remedy any breach of this Agreement, alleged
by the other in writing, within thirty (30) days of such notice
of breach.
4.1 Termination without Cause. Either party may terminate this
Agreement without cause with ninety (90) days prior written
notice.
4.2 Compensation upon Termination. If Contractor's retention under
this Agreement is terminated by the Company for Cause, the
Company shall, upon the Date of Termination, pay any amounts
earned by Contractor in accordance with the provisions of
paragraph 3.1 of this Agreement through the Date of Termination.
If Contractor's retention under this agreement is terminated by
the Company without Cause, the Company shall, upon the Date of
Termination, pay any amounts earned by Contractor in accordance
with the provisions of paragraph 3.1 of this Agreement through
the Date of Termination, plus $11,000 per month for three months.
4.3 Termination by Contractor. In the event any payment owed to
Contractor under Article III is not made when due and such
default is not cured within thirty (30) days after Contractor
gives the Company written notice of such default, the Contractor
may, within ten (10) days thereafter, give written Notice of
termination of this Agreement to the Company.
7
<PAGE>
ARTICLE V. CONFIDENTIAL INFORMATION
5.1 Prohibitions Against Use. Contractor agrees that, during the
term of its retention by the Company and for a period of two (2)
years following the expiration or termination of Contractor's
retention under this Agreement, Contractor will not use or
disclose, other than in connection with Contractor's retention
with the Company, any Company Confidential Information to any
person not employed by the Company or not authorized by the
Company to receive such Confidential Information-nation, without
the prior written consent of the company. Contractor will use
reasonable and prudent cm to safeguard and protect and prevent
the unauthorized use and disclosure of Company Confidential
Information. Contractor agrees to require each and every sales
person employed by Contractor for the Company to execute a
confidentiality document conforming to the restrictions of this
Section 5.1.
ARTICLE VI. NON-COMPETITION
6.1 Acknowledgments. The Contractor agrees and acknowledges that:
(1) it shall be in a position of confidence and trust with the
Company and it shall have access to Company Confidential
Information; (it) the nature and periods of restrictions imposed
by the covenants set forth in this Article VI are fair,
reasonable and necessary to protect and preserve for the Company
the benefits of this Agreement and that such restrictions shall
not prevent Contractor from earning income in its profession;
(iii) the Company would sustain irreparable loss and damage if
the Contractor were to breach any of such covenants; (iv) the
Company has advised the Contractor that the Company intends to
acquire financial services businesses actively in the Territory;
(v) the Territory is reasonably sized inasmuch as the business of
the Company is conducted over a wide geographical area and is
based on servicing practices in the entire Territory to be
successful. The Contractor represents and
8
<PAGE>
warrants that the Contractor has not, prior to the date hereof,
disclosed to any person or used or otherwise exploited for the
Contractor's own benefit or for the benefit of any other person
any Company Confidential Information. Contractor agrees to
require each and every employee of contractor representing the
Company to execute a document reciting the provisions of this
Section 6. 1.
6.2 Non-Competition by Contractor. Contractor agrees that, during
the term of its retention by the Company and for a period of two
(2) years following the expiration or termination of Contractor's
retention with the Company for any reason, Contractor will not
directly or indirectly, alone or as a partner, officer, director,
shareholder or employee, as well as Contractor of any other firm;
engage in any business activity which is directly or indirectly
in competition with any financial services offered by the Company
during the term of the Agreement or as of the date of such
expiration or termination of retention or with any part of the
Company's contemplated business with respect to which Contractor
has Confidential Information as governed by Article V, within the
Territory.
6.3 Solicitation of Prospective Acquisition Candidates. For a period
of two (2) years after the expiration or termination of
Contractor's retention with the Company for any reason
whatsoever, Contractor will not solicit any entity or the owner
of any entity which was (during Contractor's retention) a
prospective acquisition candidate of the Company or a client of
Customer.
6.4 Covenant Not to Recruit. Contractor recognizes that the Company
work force represents a substantial financial and educational
investment and constitutes an important and vital aspect of its
business on a worldwide basis. Contractor agrees that, during
the term of its retention by the Company and for a period of two
(2) years following the expiration or termination of Contractor's
retention with the Company for any reason whatsoever, it shall
not solicit, or assist anyone else in the solicitation of,
9
<PAGE>
any of the Company's then current employees to terminate their
employment with the Company and to become employed or retained
any business enterprise with which the Contractor may then be
associated, affiliated or connected.
6.5 Consent to Injunction. The Contractor acknowledges that its
breach of any provision set forth in this Article VI would result
in irreparable injury to the Company and that the Company's
remedies at law for such a breach would be inadequate and
extremely difficult to calculate or determine. Accordingly, the
Contractor agrees and consents that upon such a breach or
threatened breach by the Contractor of any provision set forth
herein, the Company shall, in addition to all other remedies
available at law and in equity, be entitled to a temporary
restraining order and to both preliminary and permanent
injunctions to prevent or halt such a breach or threatened
breach.
6.6 Severability; Reformation. If any of the provisions, or portions
thereof, of this Agreement are held to be unenforceable or
invalid by any arbitrator or court of competent jurisdiction, the
validity and enforceability of the remaining provisions, or
portions thereof, will not be affected and shall continue in
force. If any arbitrator or court of competent jurisdiction
determines that the scope, duration or geographical limit of any
of the restrictions contained in this Agreement is unenforceable,
it is the intention of the parties that the restrictions shall
not thereby be terminated but rather shall be amended and revised
to the extent required to render them valid and enforceable.
6.7 Separate Agreement. Contractor agrees that its agreements
contained herein shall be construed as agreements independent of
any other agreements with the Company and are independently
supported by good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and further
10
<PAGE>
agrees that this Agreement shall be interpreted, construed and
enforced separate and apart from any other agreements between or
among the parties hereto. Contractor rather agrees that any
claim or cause of action of Contractor against the Company or any
other party hereto arising out of any other agreement or arising
out of any set of facts outside the scope of this Agreement shall
not constitute a defense to the enforcement by the Company or its
assigns of the agreements of Contractor contained herein.
6.8 Injunctive Relief. The parties hereto recognize and hereby
acknowledge that it is impossible to measure in money the damages
which would result to the Company or its successors or assigns by
reason of a failure by Contractor to perform any of the
obligations imposed upon him under Article V and Article VI of
this Agreement. Therefore, the Company or its successors or
assigns shall be entitled to injunctive and other equitable
relief to enforce the terms of Article V and Article VI of this
Agreement, without the necessity of showing irreparable harm and
without the necessity of posting bond or security. If the
Company or its successors or assigns should institute an action
or proceeding to enforce the provisions of Article V or Article
VI hereof, Contractor hereby waives the claim or defense; that
any such party has an adequate remedy at law, and Contractor
shall not urge in any action or proceeding the claim or defense
that such a remedy at law exists. At the discretion of the court
or arbitrator before which an injunctive proceeding is brought,
the running of the covenants herein may be tolled and extended
for a period of time equal to the time period Contractor shall be
in violation of any such covenant.
6.9 Remedies Cumulative and Concurrent. The rights and remedies of
the Company as provided in the Article VI shall be cumulative and
concurrent and may be pursued separately, successively or
together against the Contractor at the sole discretion of the
Company, and may be exercised as often as occasion therefor shall
arise. The failure
11
<PAGE>
to exercise any right or remedy shall in no event be construed
as a waiver or release thereof.
6.10 Contractor agrees to require each and every salesperson employed
by Contractor representing the Company to execute a document
reciting the requirements of this Article VI which shall be in
favor of Company and made a condition of every sales persons
employment by Contractor in Company's business.
ARTICLE VII. GENERAL PROVISIONS
7.1 Assignment. Other than to a parent or controlled entity, the
Agreement is not assignable by the Contractor or by the Company.
7.2 Offsets. Any amount payable to contractor pursuant to this
Agreement may be reduced for purposes of offsetting, either
directly or indirectly, any indebtedness or liability of
Contractor to the Company supported by a judgment of a court
of competent jurisdiction.
7.3 Captions. The various headings or captions in this Agreement
are for convenience only and shall not affect the meaning or
interpretation of this Agreement.
7.4 Governing Law; Arbitration. The validity and construction of
this Agreement shall be governed by the laws of the State of
Delaware. The parties (meaning Contractor on one hand and the
Company on the other hand) agree that all disputes concerning
this Agreement shall be submitted to binding arbitration in
accordance with the commercial arbitration rules of the American
Arbitration Association and the provisions contained herein. The
arbitration shall be conducted in Wilmington, Delaware, by one
arbitrator. The party initiating arbitration shall give the
other party notice of the matter in dispute. If the parties fail
to agree upon an arbitrator within ten days after notice of
initiation of the arbitration is given, then the American
Arbitration Association shall
12
<PAGE>
select the arbitrator. All determinations and the final decision
of the arbitrator shall be made in writing. The fees and expenses
of the arbitrator shall be awarded by the arbitrator in his
discretion as part of the award. The arbitrator's award shall
be binding on the parties hereto and may be entered in any court
of competent jurisdiction. The parties reserve the fight to seek
a judicial temporary restraining order, preliminary injunction,
or other similar short term equitable relief prior to the
appointment of the arbitrator. The arbitrator will have the
fight to make a final determination of the parties' rights
including, without limitation, whether to make permanent, modify
or dissolve the judicial order.
7.5 Construction. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of the
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
7.6 Waivers. No failure on the plan of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise of any fight or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or
remedy granted hereby or by any related document or by law.
7.7 Modification. This Agreement may not be modified or amended
except by written instrument signed by the parties hereto.
7.8 Notices. All notices, demands and other communications hereunder
shall be written and shall be deemed to have been duly given if
delivered in person or mailed by certified mail, postage prepaid,
to the address set forth below:
13
<PAGE>
To the Company: National Medical Financial Services
Corporation
Attn: Douglas R. Colkitt, M.D.
2171 Sandy Drive
State College, PA 16803
With a copy to: Marcy L. Colkitt, Esq.
P.O. Box 607
Indiana, PA 15701-0607
To the Contractor: Bradford Group, Inc.
11017 Mason Ridge Drive
Raleigh, NC 27614
Attn: Bradford C. Wright, President
or to such other address as either party may designate by notice
to the other. Notices delivered in person shall be deemed
delivered on the date of delivery and notices mailed, as
aforesaid, shall be deemed delivered forty-eight (48) hours after
the date mailed. Rejection or other refusal to accept or
inability to deliver because of a changed address of which no
notice was given shall be deemed to be a receipt of the notice,
request or other communication. Any notice, request or other
communication required or permitted to be given by any party may
be given by such party's legal counsel.
7.9 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties hereto in
reference to all the matters herein agreed upon.
14
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
CONTRACTOR: COMPANY:
Bradford Group, Inc. National Medical Financial
Services Corporation
By: /s/ Bradford C. Wright By: /s/ Douglas R. Colkitt, M.D.
---------------------- ----------------------------
Bradford C. Wright Douglas R. Colkitt, M.D.
President Chairman
15
<PAGE>
Exhibit 11.1
COMPUTATION OF PER SHARE EARNINGS
For the Three Month Periods Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
PRIMARY NET INCOME PER SHARE
Average shares outstanding........................................ 14,976,712 14,670,236
Net effect of dilutive stock options and warrants based on the
treasury stock method using average market price................ 578,179 773,070
------------ ------------
Total............................................................. 15,554,891 15,443,306
------------ ------------
------------ ------------
Net income........................................................ $ 370,969 $ 430,671
------------ ------------
------------ ------------
Primary net income per share...................................... $ 0.02 $ 0.03
------------ ------------
------------ ------------
FULLY DILUTED NET INCOME PER SHARE
Average shares outstanding........................................ 14,976,712 14,670,236
Net effect of dilutive stock options and warrants based on the
treasury stock method using ending market price................. 578,179 941,626
------------ ------------
Total............................................................. 15,554,891 15,611,862
------------ ------------
------------ ------------
Net income........................................................ $ 370,969 $ 430,671
------------ ------------
------------ ------------
Fully diluted net income per share................................ $ 0.02 $ 0.03
------------ ------------
------------ ------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,401,732
<SECURITIES> 0
<RECEIVABLES> 5,694,876
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,282,375
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,474,360
<CURRENT-LIABILITIES> 576,333
<BONDS> 0
0
0
<COMMON> 150,154
<OTHER-SE> 14,747,873
<TOTAL-LIABILITY-AND-EQUITY> 15,474,360
<SALES> 2,382,790
<TOTAL-REVENUES> 2,382,790
<CGS> 0
<TOTAL-COSTS> 1,654,234
<OTHER-EXPENSES> 265,735
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (89,148)
<INCOME-PRETAX> 551,969
<INCOME-TAX> 181,000
<INCOME-CONTINUING> 370,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 370,969
<EPS-PRIMARY> $0.02
<EPS-DILUTED> $0.02
</TABLE>
