-----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, OYN+6+gexKEEv7rArN/3siXaZs0yDTUt5Rhx7Ugp/TxDuqcZXOd1eSRmF6khbhpp kdD02IbY7ygM0wdTGzUXow== 0000950147-96-000476.txt : 19961017 0000950147-96-000476.hdr.sgml : 19961017 ACCESSION NUMBER: 0000950147-96-000476 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961016 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVESIS INC CENTRAL INDEX KEY: 0000795574 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 860349350 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-15304 FILM NUMBER: 96644340 BUSINESS ADDRESS: STREET 1: 1001 WEST CLARENDON SUITE 2300 STREET 2: STE 300 CITY: PHOENIX STATE: AZ ZIP: 85013 BUSINESS PHONE: 6029567287 MAIL ADDRESS: STREET 1: 1001 W CLARENDON STREET 2: NO 2300 CITY: PHOENIX STATE: AZ ZIP: 85013 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 FORM 10QSB 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 August 31, 1996 ----------------------------------- | | 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 --------------------------------- incorporation or organization) (IRS Employer Identification No.) 100 West Clarendon Avenue, Suite 2300 Phoenix, Arizona 85013 - ------------------------------------------------------------------------------- (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 October 10, 1996 was 4,100,420. TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check One) | | Yes | | No 1 of 9 PART I FINANCIAL INFORMATION Item 1 Financial Statements
AVESIS INCORPORATED BALANCE SHEET AUGUST 31, 1996 ASSETS ------ Current assets: Cash and cash equivalents $ 510,492 Receivables, net 241,190 Prepaid expenses and other 101,964 ------------- Total current assets 853,646 Property and equipment, net 618,171 Deferred debenture issuance costs, net 2,398 Deposits 183,815 ------------- Total Assets $ 1,658,030 ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 218,412 Accrued expenses- Compensation 63,090 Other 102,984 Deferred income 22,330 ------------- Total current liabilities 406,816 Convertible subordinated debentures 189,000 Less unamortized debenture discount (2,541) Accrued rent 107,316 Notes payable to stockholders 160,000 ------------- Total liabilities 860,591 ------------- Stockholders' equity: Preferred stock $.01 par value, authorized 12,000,000 shares: $100 Class A, nonvoting cumulative convertible preferred stock, Series 1, $.01 par value; authorized 1,000,000 shares; none issued and outstanding (liquidation preference of $100 per share) - - - - - $10 Class A, nonvoting cumulative convertible preferred stock, Series 2, $.01 par value; authorized 1,000,000 shares; 388,180 shares issued and outstanding (liquidation preference of $10 per share) 3,882 Class A, voting cumulative convertible preferred stock, Series 3, $.01 par value; authorized 100,000 shares; none issued and outstanding (liquidation preference of $100 per share) - - - - - Common stock of $.01 par value, authorized 20,000,000 shares; 4,100,420 shares issued and outstanding 41,004 Additional paid-in capital 9,949,158 Accumulated deficit (9,196,605) ------------- Net stockholders' equity 797,439 ------------- $ 1,658,030 =============
The accompanying notes are an integral part of these statements. - 2 - AVESIS INCORPORATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 1996 AND 1995 (Unaudited) Quarters Ended August 31 August 31 ------------------------------ 1996 1995 ----------- ----------- Service revenues: Administration fees $ 912,084 $ 1,113,741 Buying group sales 388,629 362,154 Provider fees 34,051 57,720 Other 14,277 28,346 ----------- ----------- Total service revenues 1,349,041 1,561,961 Cost of services 888,809 963,396 ----------- ----------- Income from services 460,232 598,565 General and administrative expenses 254,965 294,335 Selling and marketing expenses 166,384 232,417 ----------- ----------- Income from operations 38,883 71,813 Non-operating income (expense): Other income -0- 15,417 Interest income 6,238 6,662 Interest expense (7,385) (8,238) ----------- ----------- Net non-operating income (expense) (1,147) 13,841 ----------- ----------- Net income $ 37,736 $ 85,654 =========== =========== Net income per common share $ (.01) $ (.01) =========== =========== The accompanying notes are an integral part of these statements. - 3 - AVESIS INCORPORATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED AUGUST 31, 1996 AND 1995 (Unaudited)
Quarters Ended 1996 1995 -------------- ------------ Cash flows from operating activities: Net income $ 37,736 $ 85,654 -------------- ------------ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 41,634 28,351 Gain on sale of property and equipment -0- (8,250) Gain on retirement of debentures -0- (7,067) Provision for losses on accounts receivable (154) (625) Changes in assets and liabilities: Decrease (increase) in receivables 74,371 (341,658) Decrease (increase) in prepaid expenses 11,112 (58,531) Decrease in other assets -0- 150 Decrease in accounts payable (2,496) (30,949) Decrease in accrued expenses (20,291) (5,837) Decrease in deferred income (9,035) (10,194) Increase in accrued rent 4,114 4,370 ------------- ------------ Total adjustments 99,255 (430,240) ------------- ------------ Net cash provided by (used in) operating activities 136,991 (344,586) ------------- ------------ Cash flows from investing activities: Purchases of property and equipment (62,582) (19,228) Proceeds from dispositions of property and equipment -0- 8,250 -------------- ------------ Net cash used in investing activities (62,582) (10,978) ------------- ------------ Cash flows from financing activities: Repurchase of debentures -0- (59,743) -------------- ------------ Net cash used in financing activities -0- (59,743) ------------- ------------ Net increase (decrease) in cash and cash equivalents 74,409 (415,307) Cash and cash equivalents at beginning of period 436,083 815,567 ------------- ------------ Cash and cash equivalents at end of period $ 510,492 $ 400,260 ============= ============= Supplemental information: - ------------------------- Interest paid during the period: Debentures -0- -0- Notes payable to stockholders -0- -0-
The accompanying notes are an integral part of these statements. - 4 - AVESIS INCORPORATED NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996 AND 1995 (Unaudited) 1. The condensed financial statements included herein have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared at the fiscal year end have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of Management, the adjustments included in the accompanying interim financial statements are all of a normal recurring nature and present fairly the Company's financial position and the results of operations and cash flows for the periods indicated. The results of operations for the period ended August 31, 1996, are not necessarily indicative of the results to be expected for the complete fiscal year. 2. Income per common share is computed by dividing net income, after giving appropriate effect to undeclared preferred stock dividends payable and accrued during the period ($87,342 for each of the quarters ended August 31, 1996 and 1995) by the weighted average number of common shares outstanding during the period. For the quarter ended August 31, 1996, earnings per share is calculated as follows. Note that the inclusion of common stock equivalents (Series 2 Preferred stock, options and warrants) and potentially dilutive convertible debt has an immaterial dilutive effect.
Primary Fully Diluted ------- ------------- Net income $37,736 $37,736 Add: interest expense on convertible debentures that are not CSEs based on the interest rate test 4,489 Subtract: preferred stock dividends 87,342 87,342 Net income applicable to common shares ($49,606) ($45,117) Shares: Weighted average common shares outstanding 4,100,420 4,100,420 Add common stock equivalents: Convertible preferred stock 970,450 970,450 Incremental shares from outstanding options and warrants 1,039,834 1,039,834 Add convertible debentures (potentially dilutive securities which are not CSEs) 51,800 Adjusted shares outstanding 6,110,704 6,162,504 Earnings per share (.01) (.01)
- 5 - Item 2 Management's Discussion and Analysis or Plan of Operations For the Three Months Ended August 31, 1996 Results of Operations: - ---------------------- Service revenues totaled $1,349,041 for the quarter ended August 31, 1996, compared to $1,561,961 for the same period in fiscal 1995, representing a decrease of $212,920 (14%). The Company's vision and hearing programs accounted for $535,342 (40%) and $656,123 (42%) of total service revenues during the quarters ended August 31, 1996 and 1995, respectively. There were approximately 356,000 vision and 82,000 hearing cardholders as of August 31, 1996, compared to approximately 383,000 vision and 85,000 hearing cardholders as of August 31, 1995. The decrease in vision and hearing revenue during the current quarter was the result of one sponsor reducing the number of cardholders covered under the Company's benefit plan. This sponsor, whose cardholders are covered under the Company's vision, hearing and dental plans, reduced its total number of cardholders by approximately 27,000. The reduction from this sponsor has been marginally offset by the addition of a new account that enrolled approximately 30,000 and 52,000 uninsured cardholders under the Company's hearing and dental plans, respectively. The other changes in the amounts of vision and hearing cardholders were due to sponsors' employee fluctuations in their normal course of business. Vision provider fee revenue declined by $23,669 (41%) during the quarter ended August 31, 1996, as compared to the same period in fiscal 1995 due in part to a modification of the Company's agreements with its providers. Under the modified agreement, for new sponsors, the providers are not required to pay a fee based on gross sales to that sponsor's members. The Company's dental program accounted for $409,891 (30%) and $465,403 (30%) of total service revenues during the quarters ended August 31, 1996 and 1995, respectively. There were approximately 112,000 and 81,000 dental cardholders as of August 31, 1996 and 1995, respectively. The change in this line of business during the current quarter was primarily due to the loss of approximately 27,000 uninsured cardholders and the addition of the new account of approximately 52,000 uninsured cardholders under the Company's dental plan, as discussed above. The other changes in the amounts of dental cardholders were due to sponsors' employee fluctuations in their normal course of business. On December 30, 1992, the Company completed the sale of its pharmacy line of business to Med Net, Inc. (formerly Medi-Mail, Inc.), for 298,333 unregistered and 35,000 registered shares of Med Net Common Stock. The Company contracted to provide certain administrative services with respect to the pharmacy line of business until December 31, 1993. However, due to delays encountered by Med Net during the conversion of the claims processing, the Company entered into a month to month agreement to continue to provide administrative services to Med Net. Med Net terminated the agreement in August 1995. Pharmaceutical revenues constituted $902 (0%) and $78,281 (5%) of total service revenues during the quarters ended August 31, 1996 and 1995, respectively. The Company makes available to its providers a buying group program that enables the provider to purchase 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. Buying group revenues were $388,629 (29%) and $362,154 (23%) for the quarters ended August 31, 1996 and 1995, respectively. 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 depending on whether the benefit is insured in part or whole by the plan sponsor. The Company's cardholder base principally is derived from a limited number of sponsors. Other income in the first quarter of 1995 was attributed to the sale of furniture which was not repeated in 1996. The cost of services decreased by $74,587 (8%) from $963,396 during the quarter ended August 31, 1995 to $888,809 during the quarter ended August 31, 1996. These costs primarily relate to servicing cardholders, 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 decrease in cost of services during the current quarter was due to the associated decrease in revenue during the quarter. The cost of services did not decrease as greatly as revenue due to the loss of efficiencies of scale related to the volume of claims paid. -6- General and administrative expenses were $254,965 during the quarter ended August 31, 1996, which represents a decrease of $39,370 (13%) compared to the same period in fiscal 1995. The decrease in general and administrative expenses in the quarter ended August 31, 1996 as compared to the same period in fiscal 1995 is primarily due to legal expenses related to an ongoing lawsuit during the first quarter of fiscal 1995 that was settled prior to the current quarter, and a decrease in personnel involved in the accounting and finance functions. Selling and marketing expenses were $166,384 during the quarter ended August 31, 1996, representing a decrease of $66,033 (28%) from the same period in the prior year. 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 other overhead expenses relating to the Company's sales and marketing functions. The decrease in expenses during the current period was primarily due to a decrease in personnel involved in the Company's sales and marketing activities and reduced broker commissions related to the reduction in revenue. A significant amount of the Company's marketing activities are performed by National Health Enterprises. Liquidity and Capital Resources - ------------------------------- The Company had cash and cash equivalents of $510,492 at August 31, 1996, compared to $436,083 at May 31, 1996. The increase of $74,409 was due primarily to the Company's ability to reduce expenses and increase timely collections of accounts receivable during the quarter. As of August 31, 1996, the Company had aggregate outstanding long-term liabilities of $453,775, consisting of $189,000 of Convertible Subordinated Debentures, less $2,541 of unamortized discount, $160,000 of subordinated notes payable to stockholders, and $107,316 in accrued rent. Current cash on hand is expected to allow the Company to sustain operations for at least the next twelve months. -7- PART II OTHER INFORMATION Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from the Company's report on Form 10-KSB for the year ended May 31, 1996. Item 3. Defaults Upon Senior Securities (b) The Company determined not to pay the quarterly dividend otherwise scheduled for payment in October 1996, on shares of its Series 2 Preferred Stock. The dividend is cumulative. The arrearage is $1,368,864 as of August 31, 1996. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are being filed with this report: 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended August 31, 1996. -8- 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: 10/15/96 /s/ Neal A. Kempler --------------------- ------------------------------- Neal A. Kempler, Vice President and Secretary - 9 - 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: 10/15/96 /s/ Neal A. Kempler --------------------- ------------------------------- Neal A. Kempler, Vice President and Secretary - 10 - EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial infomation extracted from the Company's Form 10-QSB for the quarter ended August 31, 1996, and is qualified in its entirety by reference to such Form 10-QSB. 1 U.S. Dollars 3-MOS MAY-31-1997 JUN-01-1996 AUG-31-1996 1 510,492 0 261,036 (19,846) 0 853,646 1,659,702 (1,041,531) 1,658,030 406,816 0 0 3,882 41,002 0 1,658,030 0 1,349,041 0 888,809 421,349 0 7,385 37,736 0 37,736 0 0 0 37,736 0.00 0.00
-----END PRIVACY-ENHANCED MESSAGE-----