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 SEPTEMBER 23, 1995 ------------------------------------------------ OR [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________________ to _____________________ Commission file number 0-08547 ---------------------- AMSERV HEALTHCARE INC. - -------------------------------------------------------------------------------- (Exact name of Issuer as specified in its charter) DELAWARE 94-1627467 - -------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3252 Holiday Court, #204, La Jolla, CA 92037 - -------------------------------- -------------------------------------- (Address of principal executive offices) (Zip code) (Issuer's telephone number, including area code) (619) 597-1000 -------------------------------------- Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for 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 _____ ----- As of November 2, 1995, there were outstanding 3,163,203 shares of the Issuer's common stock, par value $.01 per share. Transitional Small Business Disclosure Format (check one): Yes _____ No X ----- AMSERV HEALTHCARE INC. I N D E X _____________________ Page PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS A. CONDENSED CONSOLIDATED BALANCE SHEETS, SEPTEMBER 23, 1995 AND JUNE 24, 1995 3 B. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 23, 1995 AND SEPTEMBER 30, 1994 4 C. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 23, 1995 AND SEPTEMBER 30, 1994 5 D. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6 - 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9 SIGNATURES 10 EXHIBIT INDEX E-1 2 PART I - FINANCIAL INFORMATION AMSERV HEALTHCARE INC. CONSOLIDATED BALANCE SHEETS September 23, June 24, 1995 1995 --------- --------- ASSETS (unaudited) Current Assets Cash and cash equivalents........................................... $ 1,794,211 $ 1,226,448 Short-term investments, net......................................... 646,588 1,392,021 Accounts receivable, net of allowance for doubtful accounts of $103,264...................................... 1,156,908 973,731 Other current assets................................................ 256,926 187,463 ----------- ----------- Total current assets............................................ 3,854,633 3,779,663 Equipment, furniture and fixtures net of accumulated depreciation of $221,050 and $196,069, respectively..... 412,375 387,821 Intangible assets, net............................................... 2,137,036 2,203,113 Other assets......................................................... 307,709 313,888 ----------- ----------- $ 6,711,753 $ 6,684,485 =========== =========== LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable.................................................... $ 70,873 $ 105,663 Accrued payroll and related taxes................................... 653,712 561,143 Net liabilities of discontinued operations (Note 4)................. 281,334 391,770 Other current liabilities........................................... 208,000 254,778 ----------- ----------- Total current liabilities....................................... 1,213,919 1,313,354 ----------- ----------- Long-Term Liabilities Other long-term liabilities......................................... 31,708 30,859 ----------- ----------- Total long-term liabilities..................................... 31,708 30,859 ----------- ----------- Redeemable Preferred Stock Redeemable preferred stock, $.01 par value; authorized 3,000,000 shares: Class A; issued and outstanding 341,435 shares (Note 5)......... - 3,414 Class B; issued and outstanding 260,141 shares (Note 5)......... 2,601 - Additional paid-in capital (Note 5)................................. 680,269 679,456 ----------- ----------- Total redeemable preferred stock................................ 682,870 682,870 Common Shareholders' Equity Common stock, $.01 par value; authorized 15,000,000 shares; 3,306,471 shares and 3,295,356 shares outstanding, respectively.......................................... 33,067 32,953 Treasury stock, at cost, 143,268 shares............................. (296,053) (296,053) Additional paid-in capital.......................................... 6,806,601 6,787,963 Note receivable from officer........................................ (198,440) (198,440) Unrealized loss on short-term investments........................... (2,340) (14,564) Accumulated deficit................................................. (1,559,579) (1,654,457) ----------- ----------- Total common shareholders' equity............................... 4,783,256 4,657,402 ----------- ----------- $ 6,711,753 $ 6,684,485 =========== =========== See accompanying notes to consolidated financial statements. 3 AMSERV HEALTHCARE INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended Three months ended September 23, September 30, 1995 1994 ----------- ----------- Operating Revenues................................ $ 2,893,058 $ 2,636,920 ------------- ------------ Operating Expenses Selling, general and administrative.............. 2,700,032 2,433,291 Depreciation and amortization.................... 91,059 110,230 ------------- ------------ Total Operating Expenses....................... 2,791,091 2,543,521 ------------- ------------ Operating Income from Continuing Operations....... 101,967 93,399 Interest Expense.................................. - (18,476) Interest Income................................... 52,911 13,490 ------------- ------------ Income from Continuing Operations Before Provision for Income Taxes................ 154,878 88,413 Income Tax Provision.............................. 60,000 25,000 ------------- ------------ Net Income from Continuing Operations............. $ 94,878 $ 63,413 ============= ============ Net Income Per Common Share from Continuing Operations....................... $ 0.03 $ 0.02 ============= ============ Shares Used in Computing Per Share Amounts........ 3,268,642 2,945,664 ========== ========== See accompanying notes to consolidated financial statements. 4 AMSERV HEALTHCARE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended -------------------------------------- September 23, September 30, 1995 1994 -------------- -------------- OPERATING ACTIVITIES: Net income............................................ $ 94,878 $ 63,413 Noncash items included in net income: Depreciation and amortization........................ 91,059 110,230 Changes in assets and liabilities: Accounts receivable.................................. (183,177) (37,004) Income taxes......................................... 27,333 26,639 Other assets......................................... (63,284) (41,349) Accounts payable..................................... (34,790) (52,979) Other liabilities.................................... 19,306 (41,237) ---------- -------- Net cash provided by (used in) operating activities... (48,675) 27,713 INVESTING ACTIVITIES: Payment of costs related to discontinued operations.. (110,436) (77,941) Proceeds from sale of short-term investments......... 757,657 100,325 Purchase of equipment, furniture and fixtures........ (49,535) (14,563) Cash received on notes receivable.................... - 16,956 ---------- -------- Net cash provided by investing activities............. 597,686 24,777 FINANCING ACTIVITIES: Repayment on note payable............................ - (43,767) Exercise of employee stock options................... 18,752 - ---------- -------- Net cash provided by (used in) financing activities... 18,752 (43,767) ---------- -------- Net increase in cash and cash equivalents............. 567,763 8,723 Cash and cash equivalents at beginning of year........ 1,226,448 643,987 ---------- -------- Cash and cash equivalents at end of year.............. $ 1,794,211 $ 652,710 ========== ======== NONCASH FINANCING AND INVESTING ACTIVITIES: Income tax paid....................................... 30,115 - Interest paid......................................... - 976 See accompanying notes to consolidated financial statements. 5 AMSERV HEALTHCARE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. ADJUSTMENTS In the opinion of management of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary (which are of a normal recurring nature) to present fairly the Company's financial position as of September 23, 1995, and the results of operations and cash flows for the three month periods ended September 23, 1995 and September 30, 1994. Information included in the condensed consolidated balance sheet as of June 24, 1995 has been derived from the Company's Form 10-K for the year ended June 24, 1995 ("1995 Form 10-K"). The unaudited condensed financial statements contained herein should be read in conjunction with the consolidated financial statements and notes contained in the Company's 1995 Form 10-K. 2. FISCAL YEAR During fiscal 1995 the Company commenced utilizing a 52/53-week fiscal year ending on the last Saturday in June. Monthly periods are accounted for in a four-week, four-week, five-week sequence, with each quarter consisting of 13 weeks. All references to years relate to fiscal years rather than calendar years. 3. EARNINGS PER SHARE Earnings per share for the three month periods ended September 23, 1995 and September 30, 1994 are based on the weighted average number of common and common stock equivalent shares outstanding. Certain stock options were not included in the computation of earnings per share because their effect would be antidilutive. Earnings per share assuming full dilution are the same as primary earnings per share. 4. DISCONTINUED OPERATIONS On November 9, 1994, the Company sold substantially all of the fixed and intangible assets of its temporary nursing services business for $814,000 in cash. The related net liabilities for this discontinued operation are included in the balance sheet under the caption "Net liabilities of discontinued operations". The balance remaining unpaid at September 23, 1995, relates to various state and local tax and payroll issues that have not been finalized. 6 5. REDEEMABLE PREFERRED STOCK On April 7, 1995, the Company issued 426,794 shares of its voting Class A Redeemable Preferred Stock, which had a redemption value of $2.00 per share, in exchange for the Company's promissory note payable to North Central Personnel, Inc. and related accrued interest which totalled $853,588 on the date of the exchange. The preferred shares pay no dividends and may be redeemed at the option of the holder, in specified installments for cash. On May 29, 1995, 85,359 shares were redeemed for $170,718. Subsequently, on July 6, 1995, the remaining 341,435 Class A Redeemable Preferred Shares were exchanged for 260,141 Class B Redeemable Preferred Shares, with a redemption price of $2.625 per share. These remaining 260,141 shares, with an aggregate redemption value of $682,870 at September 23, 1995 and June 24, 1995, may be redeemed in installments of approximately 65,000 shares on November 29, 1995, May 29, 1996, November 29, 1996 and May 29, 1997. All outstanding Class B shares become redeemable in the event of default or change of control. 7 AMSERV HEALTHCARE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents and short-term investments decreased $178,000, from $2,619,000 to $2,441,000 during the first three months of fiscal 1996. This decrease is the result of an increase in accounts receivable and payments made during the period for corporate income taxes and liabilities associated with the Company's discontinued operations. The Company's balance sheet maintains a current ratio of 3.2 to 1 at September 23, 1995. Management believes that its working capital position will enable the Company to continue its expansion in home care and other health care services and meet its anticipated cash requirements. OPERATING RESULTS Operating revenues for the three month period ended September 23, 1995 increased $256,000 or 10% over the same period a year ago. Higher operating revenues are the result of an overall increase in the demand for home care services. Selling, general and administrative expenses for the three months ended September 23, 1995 increased $267,000 or 11% compared to the same period of the prior fiscal year. This increase is primarily the result of the direct variable costs associated with the increase in operating revenues and the fixed costs incurred in connection with the start-up office in Union City, New Jersey, which began operations in October 1994. Depreciation and amortization decreased $19,000 or 17%, from $110,000 to $91,000 during the three month period ended September 23, 1995 over the same period of fiscal 1995. This overall decrease is the result of a reduction of amortization expense in connection with the intangible assets acquired in the purchase of the New Jersey subsidiary, part of which became fully amortized, offset by an increase in depreciation expense due to the purchase of equipment, furniture and fixtures. Interest income increased to $53,000 during the three month period ended September 23, 1995 compared to $13,000 during the same period of a year ago. This increase of $40,000 is due to one-time interest and dividends received during the period related to the sale of various short-term investments. Net income increased 50% from $63,000 in the first quarter of fiscal 1995 to $95,000 for the first quarter of fiscal 1996. 8 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: The exhibits listed on the accompanying Exhibit Index are filed as part of this Quarterly Report. (b) Reports on Form 8-K: There were no reports on Form 8-K filed during the quarter ended September 23, 1995. 9 SIGNATURES ---------- In accordance with the requirements of the Securities Exchange Act of 1934, the Issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMSERV HEALTHCARE INC. - ---------------------- Issuer /s/Eugene J. Mora - ----------------- Eugene J. Mora November 2, 1995 Chairman and President /s/Lori Anderson - ---------------- Lori Anderson November 2, 1995 Treasurer 10 EXHIBIT INDEX Page 2.1 Asset Purchase Agreement dated March 22, 1991, by and between Always Care of New Jersey, Inc., and AMSERV NURSES OF NEW JERSEY, INC. incorporated herein by reference from the Company's Form 8-K dated March 22, 1991. - 2.2 Asset Purchase Agreement dated March 31, 1992, by and between MERX, Inc., AMSERV, Inc.,and AMSERV MEDICAL PRODUCTS, INC. incorporated herein by reference from the Company's Form 8-K dated March 31, 1992. - 2.3 Asset Purchase Agreement dated July 21, 1992, by and between John Parker and AMSERV NURSES OF WASHINGTON, INC. incorporated herein by reference from the Company's Form 8-K dated July 21, 1992. - 2.4 Asset Purchase Agreement dated June 10, 1994, by and between North Central Personnel, Inc. and AMSERV HEALTHCARE OF OHIO INC. incorporated herein by reference from the Company's Form 8-K dated June 10, 1994. - 2.5 Amendment No. 2 to Asset Purchase Agreement dated April 7, 1995, by and between North Central Personnel, Inc., Diane Gurik and AMSERV HEALTHCARE OF OHIO INC. incorporated herein by reference from the Company's Form 10-Q dated May 10, 1995. - 3.1 Certificate of Incorporation of the Company, as amended, incorporated herein by reference from the Company's Form 10-K dated October 2, 1995. - 3.2 By-laws of the Company, as amended, incorporated herein by reference from the Company's Form 10-K dated October 2, 1995. - 4.1 Form of Common Stock Certificate incorporated herein by reference from the Company's Registration Statement on Form 10, Exhibit 3, filed October 3, 1977. - 4.2 Certificate of Designation of Class A Preferred Stock, incorporated herein by reference from the Company's Form 10-Q dated May 10, 1995. - E-1 4.3 Certificate of Designation of Class B Preferred Stock, incorporated herein by reference from the Company's Form 8-K dated July 6, 1995. - 4.4 Exchange Agreement dated July 6, 1995, between the Company and North Central Personnel, Inc. incorporated herein by reference from the Company's Form 8-K dated July 6, 1995. - 10.1 Company's 1982 Stock Option Plan incorporated herein by reference from the Company's Registration Statement on Form S-8 dated August 12, 1988. - 10.2 Employment Agreement dated February 27, 1987, and amended August 8, 1989, by and between AMSERV HEALTHCARE INC. and Eugene J. Mora, President, incorporated herein by reference from the Company's Form 10-K dated October 2, 1995. - 10.3 Non-Competition Agreement dated March 22, 1991, by and between Kenneth Freeman and AMSERV NURSES OF NEW JERSEY, INC. incorporated herein by reference from the Company's Form 8-K dated March 22, 1991. - 10.4 Consulting Agreement dated August 23, 1990, and amended August 15, 1991, by and between AMSERV HEALTHCARE INC. and Eugene J. Mora, President, incorporated herein by reference from the Company's Form 10-K dated October 2, 1995. - 10.5 Non-Competition Agreement dated March 31, 1992, by and between MERX, Inc., AMSERV, Inc. and AMSERV MEDICAL PRODUCTS, INC. incorporated herein by reference from the Company's Form 8-K dated March 31, 1992. - 10.6 Company's 1991 Stock Option Plan incorporated herein by reference from the Company's Registration Statement on Form S-8 dated April 16, 1992, as amended. - 10.7 Non-Competition Agreement dated July 21, 1992, by and between John Parker and AMSERV NURSES OF WASHINGTON, INC. incorporated herein by reference from the Company's Form 8-K dated July 21, 1992. - 10.8 Non-Competition Agreement dated June 10, 1994, by and between Diane Gurik and AMSERV HEALTHCARE OF OHIO INC. incorporated herein by reference from the Company's Form 8-K dated June 10, 1994. - E-2 10.9 Promissory note dated June 10, 1994, by and between North Central Personnel, Inc. and AMSERV HEALTHCARE OF OHIO INC. incorporated herein by reference from the Company's Form 8-K/A dated August 22, 1994. - 10.10 Employment Agreement dated March 21, 1995, by and between AMSERV HEALTHCARE INC. and Leslie Hodge, Vice President - Administration and Secretary, incorporated herein by reference from the Company's Form 10-K dated October 2, 1995. - 10.11 Employment Agreement dated March 21, 1995, by and between AMSERV HEALTHCARE INC. and Lori Anderson, Controller and Treasurer, incorporated herein by reference from the Company's Form 10-K dated October 2, 1995. - 10.12 Promissory note dated April 20, 1995, by and between Eugene J. Mora and AMSERV HEALTHCARE INC. incorporated herein by reference from Amendment No. 8 to Mr. Mora's Schedule 13D, dated April 7, 1995. - 10.13 Stock Pledge Agreement dated April 20, 1995, by and between Eugene J. Mora and AMSERV HEALTHCARE INC., incorporated herein by reference from Amendment No. 8 to Mr. Mora's Schedule 13D dated April 7, 1995. - 10.14 Voting Agreement and Proxy dated April 7, 1995, by and between North Central Personnel, Inc. and AMSERV HEALTHCARE INC., incorporated herein by reference from Amendment No. 8 to Eugene J. Mora's Schedule 13D dated April 7, 1995. - 10.15 Rescission Agreement dated May 12, 1995, by and between North Central Personnel, Inc. and AMSERV HEALTHCARE INC., incorporated herein by reference from Amendment No. 8 to Eugene J. Mora's Schedule 13D dated April 7, 1995. - 10.16 Stock Purchase Agreement dated April 7, 1995, by and between AMSERV HEALTHCARE INC. and North Central Personnel, Inc. incorporated herein by reference from the Company's Form 10-Q dated May 10, 1995. - 10.17 Standstill Agreement dated May 12, 1995, by and among Stockbridge Investment Partners, Inc., and AMSERV HEALTHCARE INC., and each of their affiliates, associates, groups, directors, officers, representatives or agents, incorporated herein by reference from Amendment No. 4 to Stockbridge Investment Partners, Inc.'s Schedule 13D dated May 15, 1995. - E-3 10.18 Stipulation and Order of Settlement, Release of Claims and Final Judgment dated May 12, 1995, by and between Stockbridge Investment Partners, Inc., and AMSERV HEALTHCARE INC. and its directors, incorporated herein by reference from the Company's Form 10-K dated October 2, 1995. - 10.19 Renewed Standstill Agreement dated June 9, 1995, by and among Stockbridge Investment Partners, Inc., and AMSERV HEALTHCARE INC., and each of their affiliates, associates, groups, directors, officers, representatives or agents, incorporated herein by reference from Amendment No. 5 to Stockbridge Investment Partners, Inc.'s Schedule 13D dated June 13, 1995. - 10.20 Agreement by and between Stockbridge Investment Partners, Inc. and AMSERV HEALTHCARE INC. dated October 18, 1995, incorporated herein by reference from Amendment No. 8 to Stockbridge Investment Partners, Inc.'s Schedule 13D dated October 18, 1995. - 27.1 Financial Data Schedule E-5