SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter ending February 28, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from - to - . ___
Commission File No. 33-1534-D
ASTHMA DISEASE MANAGEMENT, INC.
(Name of Small Business Issuer)
DELAWARE 22-3253496
(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
272 South White Horse Pike, Berlin, NJ 08009
(Address of principal executive offices) (Zip Code)
856-753-9595
(Issuer's Telephone Number, including Area Code)
Section registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
on Which Registered
None None
Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value per share
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 filings requirements for the past
90 days. YES [X] NO [ ]
On February 28, 2001, the Registrant had outstanding 93,503,508 shares of its
common stock and 10,000,000 shares of Class A common stock.
Part I Financial Information
ASTHMA DISEASE MANAGEMENT, INC.
UNAUDITED BALANCE SHEETS
2/28/2001 AND 2/29/2000
ASSETS Feb 28, 2001 February 29, 2000
CURRENT ASSETS
Cash $ (25,058) $ 86,954
Accounts receivable, net 59,653 142,931
Inventory 2,500 15,000
------- ----------
TOTAL CURRENT ASSETS 37,095 247,094
DEFERRED INCOME TAXES - -
PROPERTY AND EQUIPMENT, net 251,183 236,175
Office Equipment 123,076 119,232
Furniture & Fixtures 27,362 27,362
------ ----------
$ 401,621 $ 382,769
Less Accumulated Depreciation 382,769 371,949
------- ----------
Total Property & Equipment 18,852 10,820
Other Assets
Receivable from Litigation 500,000
Other Assets -0- 23,354
-------- ---------
Total Other Assets -0- $ 523,354
Total ASSETS $ 55,947 $781,268
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 212,352 $ 244,865
Payroll taxes payable 444,733 579,554
Accrued contractual settlements 180,509
Notes Payable 329,181 197,150
--------- ---------
TOTAL CURRENT LIABILITIES 1,166,775 1,021,569
COMMITMENTS and CONTINGENCIES
STOCKHOLDER'S EQUITY
Common Stock - Class A, par value $0.001;
10,000,000 shares authorized, issued 10,000 -
and outstanding at February 28, 2001
Common Stock, $0.001 par value;
140,000,000 shares authorized,
93,503,508 shares issued and
outstanding at February 28, 2001
and 93,503,508 at May 31, 2000. 93,504 22,590
Additional paid-in capital 9,066,398 7,796,262
Accumulated deficit (10,270,730) (8,048,147)
------------ ------------
(1,110,828) (229,285)
Less Treasury Stock, at cost (10,000)
Less subscription receivable -0- (1,006)
------------ ------------
$ -0- (240,301)
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 55,947 $ 781,268
=========== ===========
The accompanying notes are an integral part of these unaudited financial
statements.
ASTHMA DISEASE MANAGEMENT, INC.
UNAUDITED STATEMENTS OF OPERATIONS
YEAR ENDED 2/28/2001 and 2/29/2000
2001 2000
---- ----
Total Revenue $ 176,859 $ 192,518
Operating Expense
Cost of Sales 152,466 201,559
Selling and Promotional Expense 141,517 210,442
General and Administrative 459,598 385,761
----------- -----------
$ 753,581 797,762
Operating Loss $ (577,147) (605,244)
=========== ===========
Other Income 425 5,375
----------- -----------
Net Income (loss) (576,722) (599,869)
Net Income (Loss) Per Share (0.001) (0.001)
=========== ============
Weighted average common
shares outstanding 93,503,508 91,550,397
========== ============
The accompanying notes are an integral part of these unaudited financial
statements.
Income taxes - -
--------- ---------
NET INCOME $ (576,722) $ (599,869)
============== ============
NET INCOME PER SHARE -
Basic and Diluted $ (.001) $ (.001)
============== ============
The accompanying notes are an integral part of these unaudited financial
statements.
ASTHMA DISEASE MANAGEMENT, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
YEAR ENDED 2/28/2001 and 2/29/2000
2001 2000
---- ----
Cash flows from operating activities:
Net income $ (576,722) $ (599,869)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation - -
Decrease (Increase) in
accounts receivable, net 17,423 (59,648)
Decrease (Increase) in inventory - -
(Decrease) Increase in accounts
payable 72,248 121,957
(Decrease) Increase in payroll
taxes payable 101,193 119,940
Notes Payable-Current (8,043)
------ ------
NET CASH PROVIDED BY OPERATIONS (385,852) (425,663)
NET CASH PROVIDED BY INVESTING ACTIVITIES
Purchase of property and equipment - (3,800)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of convertible notes payable 275,398 -
Issuance of Class A common stock - -
Issuance of common stock - 668,474
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 312,182 477,207
======= =======
NET INCREASE (DECREASE) IN CASH (73,676) 239,011
------ --------
CASH AT END OF PERIOD $(25,057) $ 86,954
Adjusted Cash Bal. at the Beginning of 48,619 (152,057)
Period ======== ==========
Net Cash Increase/Decrease $(73,676) $239,011
======== ==========
The accompanying notes are an integral part of these unaudited financial
statements.
ASTHMA DISEASE MANAGEMENT, INC.
UNAUDITED STATEMENTS OF STOCKHOLDER'S EQUITY
YEAR ENDED 2/28/2001 and 2/29/2000
Common Additional
Stock Common Paid-In Accumulated
Class A Stock Capital Deficit Total
------- ------ ---------- ----------- -----
BALANCE at
May 31, 1999 $ none $22,590 $7,116,782 $(7,330,044) $(190,672)
Comprehensive
Loss none - - (566,595) (566,595)
Issuance of
common stock - - 479,906 479,906
------- ------- ---------- ------------ ---------
BALANCE at
Feb 28, 2000 $ none $22,590 $7,596,688 $(7,896,639) $(277,361)
======= ======= ========== ============ ==========
BALANCE at
May 31, 2000 $ - $93,504 $9,066,398 $(9,694,008) $(534,106)
Comprehensive
Loss - - - (576,722) (576,722)
Issuance of
Class A
common stock 10,000 -0-
Issuance of
common stock - - - - -
------- ------- ---------- ------------ ------
BALANCE at
2/28/2001 $10,000 $93,504 $9,066,398 $(10,270,730) (1,110,828)
======= ======= ========== ============= ===========
The accompanying notes are an integral part of these unaudited financial
statements.
ASTHMA DISEASE MANAGEMENT, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
February 28, 2001
Note 1 - Basis of Presentation
The accompanying financial statements of the Corporation are unaudited. In
the opinion of management, all adjustments (which include only normal
recurring accruals) necessary for a fair presentation of such financial
statements have been included. Interim results are not necessarily indicative
of results of a full year.
The financial statements and notes are presented in accordance with the rules
and regulations of the Securities and Exchange Commission and do not contain
certain information included in the Corporation's annual report. Therefore
the interim statements should be read in conjunction with the financial
statements and notes thereto contained in the Corporation's annual report or
10K.
Note 2 - Summary of Significant Accounting Policies
The Corporation, Asthma Disease Management, Inc., (ADMI), is a corporation
formed under the laws of the State of Delaware with its office and clinical
laboratory in Berlin, New Jersey. ADMI offers a broad range of testing
services used by Primary Care Physicians in the diagnosis, monitoring and
treatment of asthma and allergy diseases throughout the United States.
Prior to December 3, 1998, the Corporation conducted its business under the
names of IRT Holding Corporation, IRT Laboratory, Inc. and IRT Diagnostic,Inc.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash: Holdings of highly liquid investments with maturities of three months
or less when purchased are considered to be cash equivalents.
Fair Value of Financial Instruments: The carrying amounts reported in the
balance sheet for cash, accounts receivable, accounts payable, payroll taxes
payable and convertible notes payable are considered to be representative of
their respective fair values due to their short-term nature.
Inventories: Inventories, consisting primarily of purchased laboratory
supplies, are stated at the lower of cost or market using the first-in, first
out method.
Property and Equipment: Property and equipment are carried at cost.
Depreciation is provided principally on the straight-line method over the
estimated useful lives of the assets. Betterment's and large renewals which
extend the life of the asset are capitalized whereas maintenance and repairs
and small renewals are expended as incurred.
Revenue Recognition: Revenues are recognized on the accrual basis at the time
test results are reported, which approximates when services are provided.
Services are provided to certain patients covered by various third-party
payor programs including the Medicare and Medicaid programs. Billings for
services under third-party payor programs are included in revenues net of
allowances for contractual discounts and allowances for differences between
the amounts billed and estimated program payment amounts. Adjustments to the
estimated payment amounts based on final settlement with the programs are
recorded upon settlement as an adjustment to revenue. In 2001 and 2000,
approximately 10% of the Corporation's revenues were derived from tests
performed for beneficiaries of Medicare and Medicaid programs.
Income Taxes: Income taxes are accounted for utilizing the asset and
liability method. Under this method, deferred income taxes are determined
based on the difference between the financial statement and tax basis of
assets and liabilities using presently enacted tax rates and regulations.
Future tax benefits, such as net operating loss carry forward, are recognized
to the extent that realization of such benefits are more likely than not.
Concentration of Credit Risk: Substantially all of the Corporation's accounts
receivable are with companies and physicians in the health care industry and
with individuals for whom tests were performed. However, concentrations of
credit risk are limited due to the number of the Corporation's clients as
well as their dispersion across many different geographical regions.
Net Income Per Share: Net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common shares outstanding
during the period. Diluted net income (loss) per share is computed by
dividing net income (loss) by the sum of weighted average number of common
shares outstanding during the period plus common stock equivalents. Common
stock equivalents are shares assumed to be issued if the Corporation's
outstanding stock option was exercised. However, the effect of the exercise
of the Corporation's stock option was not included in the computation of
diluted net income/loss per share as it would have been anti-dilutive for all
periods presented.
Comprehensive Income. Comprehensive income consists only of net income and is
presented in the statements of stockholder's equity.
Reclassifications. Certain reclassifications have been made to prior year
amounts to conform to the classifications used in the current year
presentation.
Note 3 - Accounts Receivable, Net
February 28
2001 2000
---- ----
Gross accounts receivable $ 77,240 $144,346
Less: Allowance for doubtful accounts (17,587) (34,000)
-------- --------
$ 59,653 $110,346
Bad debt expense was $15,572 and $0 in 2001 and 2000 respectively.
Note 4 - Property and Equipment
February 28
2001 2000
---- ----
Laboratory equipment $ 236,175 $ 236,175
Office equipment 123,076 119,232
Furniture and fixtures 27,362 27,362
Vehicles 15,008 -
-------- -------
401,621 382,769
Accumulated depreciation (382,769) (371,949)
--------- ---------
Property and equipment, net $ 18,852 $ 10,820
The Corporation rents its office and clinical laboratory in Berlin, New
Jersey, on a month-to-month basis at a cost of $3,450 per month.
Note 5 - A valuation allowance is provided to reduce the deferred tax assets
to a level which, more likely than not, will be realized. The netting of
deferred assets and liabilities reflects management's estimate of the amount
which will be realized from future taxable income which can be predicted with
reasonable certainty.
The Corporation has net operating losses carry forward of $10,230,730 for
Federal and state tax purposes that begin to expire in 2003.
Payroll Taxes Payable
February 28
2001 2000
---- ----
Federal payroll taxes payable-prior year $185,807 $368,893
State payroll taxes payable-prior year 117,735 90,721
Federal payroll taxes payable-current year 123,582 59,091
State payroll taxes payable-current year 18,147 29,105
Federal payroll taxes payable former subsidiary 40,000 -
------- -------
485,321 547,810
Current year payments made 40,587 -
------- -------
$444,734 $547,810
The Corporation is significantly in the arrears in making Federal and state
payroll tax payments.
Note 6 - Accrued Contractual Settlements
February 28,
2001 2000
---- ----
Termination of employment contracts $ 150,000 $ -
Medicaid overpayments due to
New Jersey DMAHS Per note 26,509 -
Legal costs incurred with Medicaid suit 4,000 -
------ --------
$ 180,509 $ -
The Corporation has entered into a Stipulation of Dismissal with the New Jersey
Division of Medical Assistance and Health Services (Medicaid) to repay $26,509
in alleged over billing of laboratory tests in 1995. The legal costs incurred in
defense of these allegations were $4,000.
Note 7 - Convertible Notes Payable
February 28,
2001 2000
---- ----
One-year,15%,convertible notes issued
May 2000 through February 2001 $312,182 $202,494
======== ========
The Corporation issued new notes of $261,682 during the six month period ended
February 28, 2001. Interest cost on these notes for the six month period was
$5,716.
Note 8 - Shares Outstanding
Article IV of the Corporation's 1985 Certificate of Incorporation provides that
the Corporation has the authority to issue 50,000,000 shares, consisting of up
to 40,000,000 shares of common stock and 10,000,000 shares of Class A common
stock. Common Stock shares have a par value of one mill ($0.001) and Class A
common stock has par value of one mill ($0.001).
On February 5, 1999, an amendment to the Corporation's Certificate of
Incorporation was filed with the State of Delaware, following the increase of
the common stock, from 40,000,000 shares to 100,000,000; then on February 7,
2000, an amendment was filed with the State of Delaware, increasing the common
stock from 100,000,000 to 150,000,000 shares.
Note 9 - Related Party Transaction
On June 15, 1999, the Corporation granted a stock option to a member of the
Board of Directors to purchase ten million shares of common stock at a price of
$0.001 per share. This option can be exercised at any time and expires on June
15, 2009.
Note 10 - Commitments and Contingencies
The Corporation believes that it is in compliance in all material respects with
all statues, regulations and other requirements applicable to its clinical
laboratory operations. The clinical laboratory testing industry is, however,
subject to extensive regulation, and many of these statues and regulations have
not been interpreted by the courts. There can be no assurance therefore that
applicable statues and regulations might not be interpreted or applied by a
prosecutorial, regulatory or judicial authority in a manner that would adversely
affect the Corporation. Potential sanctions for violations of these statues and
regulations include significant fines and the loss of
various licenses, certificates and authorizations.
End of Financial Statements
Item 1. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion should be read in conjunction with, and is qualified in
its entirety by, Asthma Disease Management, Inc. (the "Company") Financial
Statements and Notes thereto appearing elsewhere herein. Historical results are
not necessarily indicative of trends in operating results for any future period.
ANALYSIS OF FINANCIAL CONDITION
Quarter ended February 28. In thousands (except for per share data)
Operations Statement Data 2001 2000
---- ----
Revenues $ 177 $ 50
Net loss (577) (566)
Net loss per share of common stock (.001) (.007)
Cash dividend per share 0 0
Balance Sheet Data
Total assets $ 56 $ 147
Current liabilities 1,166 681
Long term debt 0 0
Stockholders' equity (deficit) $(1,111) $(534)
RESULTS OF OPERATIONS
Revenues and Expenses
Revenue for the quarter ended February 28, 2001 was $176,859, a decrease of
$15,659(or 8%) over revenue of $192,518 for the quarter ended February 29, 2000.
Revenues in each quarter consist of funds generated from laboratory testing and
immunotherapy support services for physicians and are net of contractual
allowances.
Cost of revenues for the quarter ended February 28, 2001 was, $152,466 a
decrease of $49,093 (or 24%) over the comparable figure of $201,559 for the
fiscal quarter ended February 29, 2000. Costs of revenues include materials,
salaries and other conversion costs. The increase in cost of revenues is due to
a change in laboratory testing equipment and reagents. After months of
comparative studies the Company decided to opt for a slightly more costly test
in exchange for greater reliability and accuracy.
Selling, general and administrative expenses for the quarter ended February 28,
2001 were $601,115 an increase of $4,912(or 1%) over expenses of $596,203 for
the year ended February 29, 2000. The increase in expenses reflects the legal
fees in pursuit of litigation described in footnote #9 of the financial
statements.
Liquidity and Capital Resources;
At February 28, 2001, the Company had cash of $(25,058). To fund working capital
deficits, the Company in previous periods had issued stock and convertible
notes. For the year ended May 31, 2000, the Company raised cash of $1,395,295
from the issuance of 22,868,794 shares of stock. See "Legal Proceedings."
Item 2. Quantitative and Qualitative Disclosures About Market Risk
None.
Part II. Other Information
Item 1., Part II. Legal Proceedings
On May 5, 2000, the Securities and Exchange Commission commenced a formal
investigation into the activities of the Company, certain former officers and
directors of the Company, and others, concerning, among other things,
possible unlawful issuance's of the Company's common stock. Thereafter, the
SEC temporarily suspended the over-the-counter trading of the common stock of
the Company. The temporary suspension was effective on May 8, 2000 and
terminated on May 19, 2000. The suspension occurred according to the SEC,
because questions were raised about the accuracy and adequacy of the publicly
disseminated information concerning, among other things, the status and
extent of the Company's business operations. The temporary suspension ended
on May 19, 2000, but the SEC is continuing its investigation of certain of
its former officers and directors and others.
On August 29, 2000, the Company filed a complaint in the Delaware Chancery
Court against certain former officers, directors and employees, alleging,
among other things, that such former officers, directors of the Company and
employees engaged in unlawful issuance's of stock and other breaches of
fiduciary duties. The action alleges, among other things, that the defendants
caused the Company to unlawfully issue up to 53 million unauthorized shares
of common stock.
The action seeks declaratory relief, injunctive relief and damages. The
defendants in such action have filed answers to the complaint. The Company
believes that a settlement of all the issues in the complaint might be
reached with the defendants named in the complaint.
The Company is a defendant in two employment contract suits pending in the
Superior Court of New Jersey, Camden County. The plaintiffs are claiming
damages of approximately $291,000. The case has been postponed and no new
trial date has been set. The Company believes that a settlement of all the
issues in the suits might be reached with the plaintiffs.
Item 2, Part II. Exhibits and Reports on Form 8K
A. Exhibits: none.
B. Reports on Form 8K.
On January 15, 2001, the Company filed a Current Report on Form 8-K
announcing the resignation of Dr. Richard Anderson as Chairman of the Board.
C. Other business.
On April 30, 2001, the Board of Directors elected, as Chairman of the Board,
Secretary/Treasurer of the Company, James O'Connor. Mr. O'Connor replaces
Scott Foster as Secretary/Treasurer.
The Company has engaged, StockTrans, as its transfer agent.
Signatures:
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May ____, 2001 ASTHMA DISEASE MANAGEMENT, INC.
By: /s/ James O'Connor
-------------------------------
James O'Connor, Chairman of the Board of Directors,
and Secretary/Treasurer.