-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I2JqblYTKfhQA/f40nnhZ8+54ion5iqfB1OZb2ZdeYeVj0ss3BcUv0h6LHOIapHs G1+++a9IM508+Am/n/KVSQ== /in/edgar/work/20000814/0000950147-00-001229/0000950147-00-001229.txt : 20000921 0000950147-00-001229.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950147-00-001229 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVESIS INC CENTRAL INDEX KEY: 0000795574 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 860349350 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-15304 FILM NUMBER: 697057 BUSINESS ADDRESS: STREET 1: 3724 NORTH THIRD ST STREET 2: STE 300 CITY: PHOENIX STATE: AZ ZIP: 85012 BUSINESS PHONE: 6029567287 MAIL ADDRESS: STREET 1: 3724 NORTH THIRD STREET STREET 2: SUITE 300 CITY: PHOENIX STATE: AZ ZIP: 85012 FORMER COMPANY: FORMER CONFORMED NAME: NBS NATIONAL BENEFIT SERVICES INC DATE OF NAME CHANGE: 19910114 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL VISION SERVICES INC DATE OF NAME CHANGE: 19900117 10QSB 1 0001.txt QUARTERLY REPORT FOR THE QTR ENDED 6/30/00 Securities and Exchange Commission Washington D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to __________ Commission File Number 0-15304 AVESIS INCORPORATED --------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 86-0349350 - ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3724 North Third Street, Suite 300, Phoenix, Arizona 85012 --------------------------------------------------------- (Address of principal executive offices) (602) 241-3400 --------------------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of outstanding shares of the registrant's Common Stock on July 26, 2000 was 7,619,297. TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check One) [ ] Yes [X] No PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AVESIS INCORPORATED BALANCE SHEET JUNE 30, 2000 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,229,226 Receivables, net 436,643 Prepaid expenses and other 178,536 ------------ Total current assets 2,844,405 Property and equipment, net 478,019 Intangibles, net of amortization 530,883 Deposits and other assets 555,879 ------------ $ 4,409,186 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 581,172 Current installments of obligations under capital lease 10,288 Accrued expenses- Compensation 32,965 Other 53,859 Deferred income 26,425 ------------ Total current liabilities 704,709 Obligations under capital lease, excluding current installments 7,384 ------------ Total liabilities 712,093 ------------ Stockholders' equity: Preferred stock $.01 par value, authorized 12,000,000 shares: $3.75 Class A, senior nonvoting cumulative convertible preferred stock, Series A, $.01 par value; authorized 1,000,000 shares; 270,260 issued and outstanding (liquidation preference of $3.75 per share) 2,703 $10 Class A, nonvoting cumulative convertible preferred stock, Series 2, $.01 par value; authorized 1,000,000 shares; 5,000 shares issued and outstanding (liquidation preference of $10 per share) and $34,875 of dividends in arrears at $6.98 per share; dividends accrue at $.225 per share per calendar quarter 50 Common stock of $.01 par value, authorized 30,000,000 shares; 7,619,297 shares issued and outstanding 76,193 Additional paid-in capital 10,524,189 Accumulated deficit (6,906,323) ------------ Total stockholders' equity 3,697,093 ------------ $ 4,409,186 ============ The accompanying notes are an integral part of these statements. -2- AVESIS INCORPORATED STATEMENTS OF OPERATIONS FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
Quarters Ended June 30, Six Months Ended June 30, -------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Service revenues: Administration fees $ 1,790,120 $ 2,089,337 $ 3,297,140 $ 4,234,916 Provider fees 24,689 40,111 50,046 72,441 Buying group 378,174 428,251 812,623 871,192 Other 1,961 1,337 4,449 5,000 ----------- ----------- ----------- ----------- Total service revenues 2,194,944 2,559,036 4,164,258 5,183,549 Cost of services 1,525,398 1,681,779 2,727,052 3,437,976 ----------- ----------- ----------- ----------- Income from services 669,546 877,257 1,437,206 1,745,573 General and administrative expenses 354,787 286,690 698,373 563,924 Selling and marketing expenses 209,666 283,143 432,093 569,916 ----------- ----------- ----------- ----------- Income from operations 105,093 307,424 306,740 611,733 ----------- ----------- ----------- ----------- Non-operating income: Other income 485 586 1,816 47,619 Interest income 33,730 28,864 67,775 52,548 Interest expense (526) (957) (1,136) (1,884) Loss on asset disposal -- (18,466) -- (18,466) ----------- ----------- ----------- ----------- Net non-operating income 33,689 10,026 68,455 79,816 ----------- ----------- ----------- ----------- Income before income taxes and cumulative effect of change in accounting principle 138,782 317,450 375,195 691,549 Income taxes -- (38,000) 23,641 (38,000) ----------- ----------- ----------- ----------- Income before cumulative effect of change in accounting principle 138,782 355,450 351,554 729,549 Cumulative effect of change in accounting principle, net of income taxes of $51,000 -- 470,000 -- 470,000 ----------- ----------- ----------- ----------- Net income $ 138,782 $ 825,450 $ 351,554 $ 1,199,549 =========== =========== =========== =========== Preferred stock dividends 23,928 26,535 47,856 53,071 Net income available to common stockholders $ 114,854 $ 798,915 $ 303,698 $ 1,146,478 =========== =========== =========== =========== Basic earnings per share: Income before cumulative effect of change in accounting principle $ 0.02 $ 0.04 $ 0.04 $ 0.09 Cumulative effect of change in accounting principle -- 0.06 -- 0.06 ----------- ----------- ----------- ----------- Net income $ 0.02 $ 0.10 $ 0.04 $ 0.15 =========== =========== =========== =========== Diluted earnings per share: Income before cumulative effect of change in accounting principle $ 0.01 $ 0.03 $ 0.03 $ 0.07 Cumulative effect of change in accounting principle -- 0.05 -- 0.05 ----------- ----------- ----------- ----------- Net income $ 0.01 $ 0.08 $ 0.03 $ 0.12 =========== =========== =========== =========== Weighted average common and equivalent shares outstanding - Basic 7,617,484 7,356,297 7,448,275 7,356,297 =========== =========== =========== =========== Weighted average common and equivalent shares outstanding - Diluted 10,603,661 10,402,484 10,693,182 10,387,563 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. -3- AVESIS INCORPORATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
2000 1999 ----------- ----------- Cash flows from operating activities: Net income $ 351,554 $ 1,199,549 ----------- ----------- Adjustments to reconcile net income to net cash provided by in operating activities: Depreciation and amortization 98,729 67,500 Provision for losses of accounts receivable (3,901) (1,488) Loss on fixed asset disposal -- 18,245 Increase (decrease) in cash resulting from changes in: Accounts receivable (131,694) (26,540) Prepaid expenses and other (1,436) (21,357) Deposits and other assets (123,371) 26,062 Accounts payable (98,479) (732,938) Accrued expenses 27,086 46,396 Deferred income 12,361 (3,435) Accrued rent -- (33,344) ----------- ----------- Total adjustments (220,705) (660,899) ----------- ----------- Net cash provided by operating activities 130,849 538,650 ----------- ----------- Cash flows from investment activities: Purchases of property and equipment (46,684) (129,834 Proceeds from dispositions of property and equipment -- 9,745 Asset acquisition (286,842) -- ----------- ----------- Net cash used in investing activities (333,526) (120,089) ----------- ----------- Cash flows from financing activities: Principal payments under capital lease obligation (6,230) (5,482) Payment of dividend on preferred stock (45,606) (50,821) Payments for repurchase of common and preferred stock -- (16,255) ----------- ----------- Net cash used in financing activities (51,836) (72,558) ----------- ----------- Net (decrease) increase in cash and cash equivalents (254,513) 346,003 Cash and cash equivalents, beginning of period 2,483,739 2,181,385 ----------- ----------- Cash and cash equivalents, end of period 2,229,226 2,527,388 =========== =========== Non-cash investing activities: Net assets acquired, financed through the issuance of Common Stock $ 262,500 $ -- ========== ===========
The accompanying notes are an integral part of these statements. -4- AVESIS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2000 AND 1999 (Unaudited) NOTE 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Avesis Incorporated, and its wholly-owned subsidiaries, Avesis of Washington, D.C., Avesis Third Party Administrators, Inc., Avesis Reinsurance Incorporated and Avesis of New York, Inc. (collectively, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for a complete financial statement presentation. In the opinion of Management, such unaudited interim information reflects all adjustments, consisting only of a normal recurring nature, necessary to present the Company's financial position and the results of operations and cash flows for the periods presented. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-KSB, for the seven month transition period ended December 31, 1999. NOTE 2. EARNINGS PER SHARE A summary of the reconciliation from basic earnings per share to diluted earnings per share for the quarter and six month periods ended June 30, 2000 and 1999 follows:
Quarter ended Quarter ended June 30, 2000 June 30, 1999 ----------- ----------- Income before cumulative effect of change in accounting principle $ 138,782 $ 355,450 Less: preferred stock dividends 23,928 26,535 ----------- ----------- Income available to common stockholders $ 114,854 $ 328,915 =========== =========== Basic EPS - weighted average shares outstanding 7,617,484 7,356,297 =========== =========== Basic earnings per share before cumulative effect of change in accounting principle $ 0.02 $ 0.04 =========== =========== Basic EPS - weighted average shares outstanding 7,617,484 7,356,297 Effect of dilutive securities: Stock Purchase Options - common stock 269,264 15,071 Convertible preferred stock 2,716,913 3,031,116 ----------- ----------- Dilutive EPS - weighted average shares outstanding 10,603,661 10,402,484 Income before cumulative effect of change in accounting principle $ 138,782 $ 355,450 ----------- ----------- Diluted earnings per share before cumulative effect of change in accounting principle $ 0.01 $ 0.03 =========== ===========
-5-
Six months ended Six months ended June 30, 2000 June 30, 1999 ----------- ----------- Income before cumulative effect of change in accounting principle $ 351,554 $ 729,549 Less: preferred stock dividends 47,856 53,071 ----------- ----------- Income available to common stockholders $ 303,698 $ 676,478 =========== =========== Basic EPS - weighted average shares outstanding 7,448,275 7,356,297 =========== =========== Basic earnings per share before cumulative effect of change in accounting principle $ 0.04 $ 0.09 =========== =========== Basic EPS - weighted average shares outstanding 7,448,275 7,356,297 Effect of dilutive securities: Stock Purchase Options - common stock 520,323 4,694 Convertible preferred stock 2,724,584 3,026,573 ----------- ----------- Dilutive EPS - weighted average shares outstanding 10,693,182 10,387,564 Income before cumulative effect of change in accounting principle $ 351,554 $ 729,549 ----------- ----------- Diluted earnings per share before cumulative effect of change in accounting principle $ 0.03 $ 0.07 =========== ===========
NOTE 3. USE OF ESTIMATES Management of the Company has made certain estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses to prepare the financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. NOTE 4. ACCOUNTING FOR SOUTHERN STATES EYE CARE, LLC ASSET ACQUISITION On March 24, 2000, the Company purchased substantially all of the assets of Southern States Eye Care, LLC for an aggregate purchase price of $549,342, including transaction related costs of $36,842. The total purchase price for the acquisition comprised $250,000 cash and the issuance of 350,000 shares of common stock valued at $0.75 per share. The acquisition was accounted for under the purchase method. Results of operations are being recorded from the date of acquisition. The Company recorded preliminary purchase accounting adjustments based on the relative fair value of the assets acquired. Goodwill is being amortized over eight years on a straight-line basis. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 The statements contained in this discussion and analysis regarding management's anticipation of adequacy of cash reserves for operations, adequacy of reserves for claims, anticipated level of operating expenses related to new Members, viability of the Company, cash flows and marketability of the Company constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements. Management's anticipation is based upon assumptions regarding the market in which the Company operates, the level of competition, the level of demand for services, the stability of costs, the retention of Sponsors and Members enrolled in the Company's benefit programs, the relevance of the Company's historical performance and the stability of the regulatory environment. Any of these assumptions could prove inaccurate, and therefore there can be no assurance that the forward-looking information will prove to be accurate. Avesis Incorporated, a Delaware corporation (together with its subsidiaries, the "Company"), incorporated in June 1978, markets and administers vision, dental, chiropractic and hearing managed care and discount programs ("Programs") nationally. The Programs are designed to enable participants ("Members"), who are enrolled through various sponsoring organizations such as insurance carriers, HMOs, Blue Cross and Blue Shield organizations, corporations, unions and various associations ("Sponsors"), to realize savings on purchases of services and products through networks of providers such as ophthalmologists, optometrists, opticians, dentists, chiropractors and hearing specialists ("Providers"). -6- The Company derives its administration fee revenue from plan Sponsors who customarily pay a set fee per Member per month. Administration fee revenue is recognized on the accrual basis during the month that the Member is entitled to use the benefit. Certain Sponsors pay for services rendered by the Company on a fee for service basis. Based upon the type of program (e.g., managed care, discount, third party administration) the Provider's claim for service provided to Members is paid either by the Company, Sponsor, Member or combination thereof. Buying Group revenues are recorded at the total amount billed to participating Providers and recognized in the month the product is shipped. Vision Provider fee revenue is based upon a percentage of materials sold by certain participating providers under certain plans. As previously reported on a Form 8-K filed on April 7, 2000, on March 24, 2000 the Company purchased substantially all of the assets of Southern States Eye Care, LLC ("SSEC"), including but not limited to the name "Southern States Eye Care", service marks, trade marks, trade names, current client contracts, provider contracts and managed care contracts. The aggregate purchase price for the acquisition was $250,000 and 350,000 shares of the Company's Common Stock. The Company used its existing cash to finance the purchase. The acquisition of SSEC broadens the Company's client base and increases the Company's vision provider network in Georgia, Alabama and North Carolina. The Company is using the acquired assets to continue SSEC's current lines of business, which the Company is operating out of its corporate headquarters in Phoenix, Arizona. RESULTS OF OPERATIONS: The following tables detail the Company's major revenue and expense categories for the quarters and six months ended June 30, 2000 and 1999:
Quarter Ended Quarter Ended June 30, 2000 June 30, 1999 Increase/(Decrease) --------------------------- --------------------------- -------------------- % of Total % of Total % Service Revenue Service Revenue Change --------------- --------------- ------ REVENUE: Total Service Revenue $2,194,944 100% $2,559,036 100% $(364,092) (14%) Vision & Hearing Program 1,610,948 73% 1,884,501 74% (273,553) (15%) Vision Provider Fee 24,689 1% 40,111 2% (15,422) (38%) Dental Program 179,065 8% 204,827 8% (25,762) (13%) Buying Group Program 378,174 17% 428,251 17% (50,077) (12%) EXPENSES: Cost of Services 1,525,398 69% 1,681,779 66% (156,381) (9%) General & Administrative 354,787 16% 286,690 11% 68,097 24% Selling & Marketing 209,666 10% 283,143 11% (73,477) (26%) Income from Operations 105,093 5% 307,424 12% (202,331) (66%) Net Income 138,782 6% 825,450 32% (686,668) (83%)
-7-
Six Months Ended Six Months Ended June 30, 2000 June 30, 1999 Increase/(Decrease) --------------------------- --------------------------- -------------------- % of Total % of Total % Service Revenue Service Revenue Change --------------- --------------- ------ REVENUE: Total Service Revenue $4,164,258 100% $5,183,549 100% $(1,019,291) (20%) Vision & Hearing Program 2,948,979 71% 3,794,705 73% (845,726) (22%) Vision Provider Fee 50,046 1% 72,441 1% (22,395) (31%) Dental Program 348,053 8% 440,190 8% (92,137) (21%) Buying Group Program 812,623 20% 871,192 17% (58,569) (7%) EXPENSES: Cost of Services 2,727,052 65% 3,437,976 66% (710,924) (21%) General & Administrative 698,373 17% 563.924 11% 134,449 24% Selling & Marketing 432,093 10% 569,916 11% (137,823) (24%) Income from Operations 306,740 7% 611,733 12% (304,993) (50%) Net Income 351,554 8% 1,199,549 23% (847,995) (71%)
Past and future revenues in all lines of business are directly related to the number of Cardholders enrolled in the Company's benefit programs. However, there may be significant pricing differences to Sponsors depending on whether the benefit offered is funded in part or whole by the plan Sponsor. Two major Sponsors accounted for 28% and 14% of total service revenues in the six months ended June 30, 2000, and two major Sponsors accounted for 48% and 14% of total service revenues in the six months ended June 30, 1999. The Company is substantially dependent on a limited number of Sponsors and may be materially adversely affected by termination of its agreements with those Sponsors. The decrease in total service revenues in the six months ended June 30, 2000 is principally due to a vision plan Sponsor that is not renewing the benefit for their Members upon their annual renewal but instead is providing a lesser benefit internally. As of June 30, 2000, the Company had approximately 79,000 Members from this Sponsor, as compared to approximately 192,000 Members as of December 31, 1999 and approximately 229,000 Members as of June 30, 1999. The Company expects to lose a significant portion of the remaining 79,000 Members from this Sponsor as they renew their benefits during the upcoming year. The Company's vision and hearing revenue received from this Sponsor decreased by approximately $1,300,000 during the six months ended June 30, 2000 as compared to the six months ended June 30, 1999. The Company had approximately 1,770,000 vision and 12,300 hearing Members as of June 30, 2000, compared to approximately 699,000 vision and 7,500 hearing Members as of June 30, 1999. The vision Member count for June 30, 2000 includes approximately 1,174,000 Members received through the transaction with SSEC. The vision and hearing revenue derived from the Sponsors from the SSEC transaction accounted for 15% of the Company's total service revenues for the quarter ended June 30, 2000, and 9% of the Company's total service revenues for the six months ended June 30, 2000. The revenue and profit expected to be derived per Member under SSEC's vision benefit program, in general, is less than the revenue and profit derived from the Sponsor that decreased its Membership, as described above, due to the provision of a different level of benefit. The decrease in vision and hearing revenue during the current quarter and six months was largely the result of the vision plan Sponsor mentioned above. Other changes in the number of vision and hearing cardholders occurred due to Sponsors' employee or Member fluctuations in the normal course of business. The vision provider fee revenue decreased in the quarter and six month period ended June 30, 2000 due to reduced claims experience in the benefit programs under which Providers pay a marketing fee. -8- The Company had approximately 73,000 dental Members as of June 30, 2000 and 153,000 dental Members as of June 30, 1999. The decline of the Company's dental program revenue and membership resulted from two Sponsors' discontinuation of a benefit program that resulted in a loss of approximately 55,000 Members who participated in the Company's dental program. There also have been reductions in Members from various Sponsors in the normal course of business. To minimize the Company's risk related to its dependence on a limited number of Sponsors, the Company has developed the Avesis Advantage Vision Program and the Avesis Advantage Dental Program. These insured products allow the Company to market and contract directly with employers, unions and other groups either through the Company's internal sales staff or the broker community. The Company derived its first revenues from its Avesis Advantage Vision Program in December 1999, and had approximately 1,100 Members as of June 30, 2000. The Company expects to derive its first revenues from the Avesis Advantage Dental Program in the fourth quarter of calendar 2000. The Company makes available to its vision Providers a buying group program that enables the Provider to order eyeglass frames from the manufacturers at discounts from wholesale costs. These discounted prices are generally lower than a Provider could negotiate individually, due to the large volume of purchases of the buying group. Costs of Services primarily relate to servicing Members, Providers, and Sponsors under the Company's vision, hearing and dental benefit programs as well as the cost of frames that are sold through the Company's buying group program as discussed above. The increase in Cost of Services as a percentage of total service revenues in the current quarter as compared to the same period in the prior year resulted from an increase in claims experience as a percentage of revenue from the newly acquired accounts from SSEC, as mentioned above. General and Administrative expenses increased as a percentage of total service revenue during the quarter and six months ended June 30, 2000 compared to the corresponding periods in the prior year due to increases in depreciation and amortization related to the Company's new computer systems, amortization of goodwill created by the SSEC transaction, increases in payroll related to administrative functions and increases in the payments under the Company's Management Agreement and Investment Advisor Agreement, both with affiliated entities. Selling and marketing expenses include marketing fees, broker commissions, inside sales and marketing salaries and related expenses, travel related to the Company's sales activities and an allocation of related overhead expenses. Selling and marketing expenses declined slightly as a percentage of total service revenue during the quarter and six months ended June 30, 2000 as compared to the corresponding periods in the prior year due to the absence of sales commissions on the newly acquired SSEC accounts. A significant amount of the Company's marketing activities has been outsourced to a management consultant, National Health Enterprises (an affiliate). -9- LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents of $2,229,226 as of June 30, 2000, compared to $2,483,739 as of December 31, 1999. The decrease of $254,513 is primarily due to the Company's cash payment of $250,000 for the acquisition of the assets of Southern States Eye Care, LLC on March 25, 2000. Current cash on hand and cash provided from operations is expected to allow the Company to sustain operations for the foreseeable future. On July 18, 2000, the Company's Board of Directors approved a resolution authorizing the Company to pursue the establishment of a new venture in HIV and infectious disease treatment. The Company's Board further authorized a maximum of $500,000 to be allocated to the initial start-up and operational expenses of the venture, subject to certain oversight and approval by the Board. The Company has allocated approximately $200,000 for the build-out of the facility and the purchase of medical and office equipment, and approximately $150,000 to fund negative cash flow prior to the opening of the first center and during the first few months of its operation. The Company expects its first facility to be operational in the fourth quarter of calendar 2000. The Company is party to a revolving credit facility for an amount not to exceed $100,000. The credit facility allows the Company to better manage its cash liquidity. To date, the Company has never drawn funds on the credit facility. As of June 30, 2000, the Company had $581,172 of Accounts Payable, compared to $679,649 as of December 31, 1999. Included in Accounts Payable are reserves for claims of $332,819 as of June 30, 2000, and $489,814 as of December 31, 1999. The reserves are for incurred but not reported claim reimbursements to Providers who participate in certain managed care programs. The Company believes this reserve is adequate based upon historical results. YEAR 2000 COMPLIANCE The Company so far has experienced no disruptions in the operation of its internal information systems during the transition to the year 2000. The Company is not aware that any of its vendors or clients experienced any disruptions during their transition to the year 2000 or that there has been any year 2000 issues with its services provided. The Company will continue to monitor the transition to year 2000 and will act promptly to resolve any problems that occur. If the Company or any third parties with which it has business relationships experience problems related to the year 2000 transition that have not yet been discovered, it could have a material adverse impact on the Company. -10- PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES (c) Conversion of Series A Preferred Stock to Common Stock Each share of the Company's Series A Preferred Stock is currently convertible at any time at the option of the holders of the Series A Preferred Stock into 10 shares of Common Stock of the Company. The conversion ratio is subject to adjustment for stock splits and combinations, stock dividends, reclassifications, exchanges or substitutions relating to the Company's Common Stock, and any reorganization, merger, consolidation or sale of assets of the Company. The following table provides information concerning the conversion of Series A Preferred Stock during the quarter ended June 30, 2000, which has been previously disclosed on the Company's Form 10-QSB for the quarter ended March 31, 2000. Number of Shares of Number of Shares Series A Preferred Stock of Common Date Converted to Common Stock Stock Issued ---- ------------------------- ------------ April 11, 2000 1,500 15,000 ITEM 3. DEFAULTS UPON SENIOR SECURITIES (b) The Certificate of Designation for the Company's Class A, Senior Nonvoting Cumulative Convertible Preferred Stock, Series A, places restrictions upon the payment of dividends on the Company's Series 2 Preferred Stock and Common Stock. Accordingly, the Company may not pay the quarterly dividend otherwise scheduled for payment during July 2000 on shares of its Series 2 Preferred Stock. Such dividend is cumulative, and the total dividend arrearage is $34,875, or $6.98 per share, as of June 30, 2000 for all 5,000 shares outstanding. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) An annual meeting of stockholders of the Company was held on July 21, 2000. (b) The following nominees were elected for one-year terms as directors of the Company: William R. Cohen William L. Richter Gerald L. Cohen Brent D. Layton Kenneth L. Blum, Sr. Kenneth L. Blum, Jr. Alan S. Cohn -11- (c) On the record date of June 5, 2000, 7,619,297 common shares were outstanding. The results of voting for Proposals 1, 2 and 3 were as follows: 1. Election of directors For Withheld Non-Votes --------------------- --------- -------- --------- William R. Cohen 6,544,990 15,500 1,058,807 Kenneth L. Blum Sr. 6,528,235 32,255 1,058,807 Gerald L. Cohen 6,526,485 34,005 1,058,807 Brent D. Layton 6,545,490 15,000 1,058,807 William L. Richter 6,545,490 15,000 1,058,807 Alan S. Cohn 6,545,490 15,000 1,058,807 Kenneth L. Blum, Jr. 6,545,490 15,000 1,058,807 For Against Abstain --- ------- ------- 2. Approve an Amendment to the Company's 6,542,195 16,900 1,395 Certificate of Incorporation to increase the number of authorized shares of Common Stock from 20,000,000 to 30,000,000 3. Approve amendments to the Company's 6,532,940 25,750 1,800 1993 Stock Option Plan, including an increase in the number of shares available under the Plan from 600,000 to 900,000 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index following the Signatures page, which is incorporated herein by reference. (b) As previously disclosed in the Company's Form 10-QSB for the quarter ended March 31, 2000, a report on Form 8-K was filed on April 7, 2000 to report the acquisition of substantially all of the assets of Southern States Eye Care, LLC. -12- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AVESIS INCORPORATED ---------------------------------------- (Registrant) Date: 8/14/2000 /s/ Neal A. Kempler ---------------------------------------- Neal A. Kempler, Vice President and Secretary Date: 8/14/2000 /s/ Joel H. Alperstein ---------------------------------------- Joel H. Alperstein, Chief Financial Officer and Treasurer -13- Avesis Incorporated Exhibit Index Form 10-QSB for the Six Months Ended June 30, 2000 Exhibit No. Description Incorporated by Reference from the: - ----------- ----------- ----------------------------------- 3.1 Amended and Restated Company's Registration Statement on Certificate of Incorporation Form S-1 (File No. 33-17217) filed of the Company, as amended January 12, 1988, and declared effective January 12, 1988. 3.2 Certificate of Amendment of Filed herewith the Certificate of Incorporation of the Company 11 Statement re: Computation of Earnings per Share Computation, see per Share Earnings Note 2 to the Notes to Condensed Consolidated Financial Statements 27 Financial Data Schedule Filed herewith EX-3.2 2 0002.txt CERTIFICATE OF AMENDMENT CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF AVESIS INCORPORATED Avesis Incorporated, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify that: 1. Resolutions setting forth a proposed amendment of the Certificate of Incorporation of the corporation, declaring such amendment to be advisable and submitting such amendment for the consideration of the stockholders of the corporation were duly adopted by the Board of Directors of the corporation. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the first paragraph of Article 4 of the First Amended and Restated Certificate of Incorporation of the corporation, as amended to date, is hereby amended to read in its entirety as follows: "Article 4. The Corporation shall have authority to issue Thirty Million (30,000,000) shares of common stock, par value $.01 per share, and Twelve Million (12,000,000) shares of preferred stock, par value $.01 per share." 2. Thereafter, pursuant to a resolution of the Board of Directors, the stockholders of the corporation approved the amendment. 3. The amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the corporation has caused this Certificate to be signed by Joel H. Alperstein, its Treasurer, this 7th day of August, 2000. AVESIS INCORPORATED By: /s/ Joel H. Alperstein ------------------------------------ Joel H. Alperstein, Treasurer EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS IN THE COMPANY'S FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 2,229,226 0 461,003 (24,360) 0 2,844,405 1,287,961 (809,942) 4,409,186 704,709 0 0 2,753 76,193 0 4,409,186 0 4,164,258 2,727,052 1,130,466 69,591 0 (1,136) 375,195 23,641 351,554 0 0 0 351,554 0.04 0.03
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