1
UNITED STATES 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 March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the
transition period from ________________ to ___________________
Commission file number ________________
BIRMAN MANAGED CARE, INC.
(Name of small business issuer in its charter)
Delaware
(State or other jurisdiction of 62-1584092 (IRS Employer
incorporation or organization) Identification No.)
1025 Highway 111 South
Cookeville, Tennessee 38501
(Address of principal executive offices)
(931) 372-7800; (931) 372-7823 (Facsimile)
(Issuer's telephone number, including area code)
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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 2,696,566
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BIRMAN MANAGED CARE, INC.
FORM 10QSB
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 4. Submission of Matters to a Votive Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS
EX-27.1 Financial Data Schedule, Quarter Ended March 31, 2000
EX-27.2 Financial Data Schedule, Quarter Ended March 31, 1999, restated
3
Item 1. Financial Statements
Birman Managed Care, Inc. & Subsidiary
Condensed Consolidated Balance Sheets
(Unaudited) (Audited)
March 31, June 30,
2000 1999
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ -- $ 873,989
Accounts receivable, net of an allowance for doubtful of
$125,000 for March 31, 2000 and June 30, 1999 307,501 998,687
Prepaid expenses and other -- 9,673
Current portion of notes receivable 37,500 37,500
Deferred tax assets -- 47,625
----------- -----------
Total current assets 345,001 1,967,474
----------- -----------
Notes receivable 103,478 112,500
Property and equipment, net of accumulated depreciation 701,108 856,718
Other assets 8,324 70,376
----------- -----------
Total assets $ 1,157,911 $ 3,007,068
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 177,823 38,708
Accrued expenses 364,030 125,950
----------- -----------
Total current liabilities 541,853 164,658
----------- -----------
Deferred income taxes payable 19,118 19,118
----------- -----------
Total liabilities 560,971 183,776
----------- -----------
Stockholders' Equity:
Common stock, $.001 par value, 15,000,000 shares
authorized, 2,696,566 issued and outstanding 8,756 8,756
Additional paid-in capital 9,715,071 9,715,071
Retained deficit (9,126,887) (6,900,535)
----------- -----------
Total stockholders' equity 596,940 2,823,292
----------- -----------
Total liabilities and stockholders' equity $ 1,157,911 $ 3,007,068
=========== ===========
See accompanying notes to financial statements.
4
Birman Managed Care, Inc. & Subsidiary
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Consulting Revenues $ 596,068 $ 1,820,050 $ 2,233,539 $ 5,721,157
Cost of revenues 396,572 857,497 1,228,030 2,871,292
----------- ----------- ----------- -----------
Gross profit 199,496 962,553 1,005,509 2,849,865
General and administrative expenses 869,916 1,526,232 3,110,058 4,511,473
----------- ----------- ----------- -----------
Loss from continued operations (670,420) (563,679) (2,104,549) (1,661,608)
----------- ----------- ----------- -----------
Other income (expenses):
Interest and other income 764 10,004 13,150 56,842
Interest expense -- (6,408) (282) (14,809)
Other income 44,571 -- 104,953 --
----------- ----------- ----------- -----------
45,335 3,596 117,822 42,033
----------- ----------- ----------- -----------
Loss from continuing operations before
provision for income taxes and extraordinary gain (625,085) (560,083) (1,986,727) (1,619,575)
Provision for income taxes (120,508) (45,894) (120,508) (30,662)
----------- ----------- ----------- -----------
Loss from continuing operations before
extraordinary gain (745,593) (605,977) (2,107,235) (1,650,237)
Gain (loss) on disposal of health
maintenance organization, net of tax (119,117) -- (119,117) 75,000
----------- ----------- ----------- -----------
Net loss before extraordinary gain (864,710) (605,977) (2,226,352) (1,575,237)
Extraordinary gain on debt extinguishment,
net of income taxes of $- -- -- -- 221,005
----------- ----------- ----------- -----------
Net loss $ (864,710) $ (605,977) $(2,226,352) $(1,354,232)
=========== =========== =========== ===========
Loss per common share - basic:
Loss from continuing operations before
extraordinary gain $ (0.28) $ (0.22) $ (0.78) $ (0.61)
Gain on disposal of health plan (0.04) -- (0.04) 0.03
Extraordinary gain on extinguishment of debt -- -- -- 0.08
Net loss
----------- ----------- ----------- -----------
$ (0.32) $ (0.22) $ (0.83) $ (0.50)
=========== =========== =========== ===========
Loss per common share - assuming dilution:
Loss from continuing operations
before extraordinary gain $ (0.28) $ (0.22) $ (0.78) $ (0.61)
Gain on disposal of health plan (0.04) -- (0.04) 0.03
Extraordinary gain on extinguishment of debt -- -- -- 0.08
----------- ----------- ----------- -----------
Net loss $ (0.32) $ (0.22) $ (0.83) $ (0.50)
=========== =========== =========== ===========
Basic weighted average common stock shares
outstanding, adjusted for reverse stock split in 1999 2,696,566 2,696,529 2,696,566 2,696,529
=========== =========== =========== ===========
Weighted average diluted common stock
shares outstanding, adjusted for reverse
stock split in 1999 2,696,566 2,696,529 2,696,566 2,696,529
=========== =========== =========== ===========
See accompanying notes to financial statements.
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Birman Managed Care, Inc. & Subsidiary
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Additional Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Deficit Equity
--------- ------ --------- ---------- ----------
Balance as of June 30, 1999 2,696,566 $8,756 9,715,071 (6,900,535) 2,823,292
Net loss -- -- -- (2,226,352) (2,226,352)
--------- ------ --------- ---------- ----------
Balance as of March 31, 2000 2,696,566 $8,756 9,715,071 (9,126,887) 596,940
========= ====== ========= ========== ==========
See accompanying notes to financial statements.
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Birman Managed Care, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
March 31
----------------------------
2000 1999
----------- -----------
Cash flows from operating activities:
Net loss $(2,226,352) $(1,354,232)
Adjustments to reconcile net loss to net cash used by operating
activities
Gain (loss) on disposal of health plans 192,000 (75,000)
Bad debt expense 105,000 --
Extraordinary gain on debt extinguishment -- (221,005)
Depreciation and amortization 160,315 197,303
Changes in assets and liabilities:
Accounts receivable 586,186 (151,834)
Income taxes receivable -- 1,151,900
Deferred income taxes 47,625 --
Prepaid expenses and other 9,673 (55,820)
Accounts payable 185,195 (67,629)
Income taxes payable -- 121,054
----------- -----------
Net cash used by operating activities (940,358) (455,263)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (4,705) (82,088)
Other assets 62,051 (66,498)
Collections of note receivable 9,022 22,963
Investment in discontinued operations -- 24,600
----------- -----------
Net cash provided (used) by investing activities 66,368 (101,023)
----------- -----------
Cash flows from financing activities:
Payments on debt -- (384,695)
----------- -----------
Net cash used by financing activities -- (384,695)
----------- -----------
Net decrease in cash and cash equivalents (873,990) (940,981)
Cash and cash equivalents, beginning of period 873,989 2,431,387
----------- -----------
Cash and cash equivalents, end of period $ -- $ 1,490,406
=========== ===========
See accompanying notes to financial statements.
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Birman Managed Care, Inc. & Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description
Birman Managed Care, Inc. (the "Company" or "BMC") is a Delaware
corporation originally incorporated in Tennessee in 1994 as BA Forum, Inc.,
which was changed to its current name in October 1995. The Company
reincorporated in Delaware in September 1996. The Company completed its
initial public offering of common shares in February 1997. The Company
provides consulting services in the healthcare field through its
wholly-owned subsidiary Birman Consulting Group, Inc. ("BCG"). Through BCG,
the Company assists hospitals and other health care providers in more
accurately documenting the services rendered, obtaining appropriate
reimbursement for services, and complying with applicable government rules,
regulations, and statutes.
The consolidated balance sheet as of March 31, 2000 and the related
consolidated statements of operations for the three months ended and nine
months ended March 31, 2000 and 1999 and consolidated statements of cash
flows for the nine months ended March 31, 2000 and 1999 are unaudited but,
in the opinion of management, reflect all adjustments necessary for a fair
presentation of results for those periods. The results of operations for an
interim period are not necessarily indicative of the results for the full
year. The consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto
contained in the Company's annual report on form 10-KSB for the year ended
June 30, 1999.
Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered losses
from its discontinued managed care operations and from restructuring the
nature of its consulting services. Unless the Company is able to reduce its
monthly operating losses dramatically, it will experience cash shortages
before the end of fiscal year 2000. The Company may seek additional capital
or explore other alternatives should its working capital prove inadequate.
There can be no assurance that the Company will be able to secure such
financing, if necessary, on favorable terms. If the Company is unable to
secure additional financing in the future, its results of operations for
future periods will be adversely affected and it may not be able to
continue as a going concern.
Principles of Consolidation
The accompanying financial statements include the accounts of Birman
Managed Care, Inc. and its wholly-owned subsidiary Birman Consulting Group,
Inc. All significant intercompany accounts and transactions have been
eliminated in the consolidated financial statements.
Unless otherwise noted all note disclosures herein represent activities and
balances of continuing operations.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments (demand
deposits, certificates of deposit, money market funds, and other short-term
investments) purchased with an initial maturity of three months or less.
Accounts Receivable
Accounts receivable represent amounts earned but not collected in
connection with consulting services performed by the Company and are
reflected at their net realizable value.
8
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for on
the straight-line method over the estimated useful lives of the assets.
Maintenance and repairs that neither materially add to the value of the
property nor appreciably prolong its life are charged to expense as
incurred. Betterment or renewals are capitalized when incurred. The
estimated useful lives for asset classifications are as follows:
Computer equipment 3 years
Office equipment 5 years
Furniture and fixtures 7 years
Leasehold improvements 10 years, or life of lease, if
shorter
Income Taxes
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." Under SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and the utilization of the net
operating loss carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to be applied to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. Income tax expense and benefits are allocated to
continuing operations and discontinued operations in accordance with
intra-period tax allocation provisions described in SFAS No. 109.
Earnings Per Share
Net earnings (loss) per common share have been computed in accordance with
SFAS No. 128, "Earnings per Share." Basic net earnings (loss) per common
share is computed by dividing net earnings (loss) by the weighted average
number of common shares outstanding during the year. Diluted net earnings
(loss) per common share is computed by dividing net earnings (loss) per
common share by the weighted average number of common shares outstanding
during the year which includes the dilutive effects of stock options and
warrants and, if certain conditions are present, contingently issuable
common stock. See note 8 for a reconciliation of basic and diluted earnings
(loss) per share.
Accounting 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.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash, accounts
receivable, notes receivable and current maturities of notes payable and
capital lease obligations, accounts payable, and accrued expenses
approximate fair value due to their short maturity.
2. CONCENTRATION OF CREDIT RISK
The Company deposits cash and cash equivalents at four financial
institutions. Each financial institution participates in the Federal
Deposit Insurance Corporation ("FDIC"). Each account is insured up to the
$100,000 FDIC insurance limit.
Financial instruments which potentially subject the company to
concentrations of credit risk principally consist of accounts receivable.
The Company's accounts receivable primarily result from its consulting
services with rural hospitals throughout the United States. The receivable
accounts are primarily billed monthly and are unsecured. Ongoing credit
evaluation and account monitoring procedures are utilized to minimize the
risk of loss.
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Notes to Condensed Consolidated Financial Statements, continued
(Unaudited)
3. COMMITMENTS AND CONTINGENCIES
Employment Contracts
The Company has entered into employment contracts with certain key
employees, which provide for minimum annual salary, adjusted for
cost-of-living changes, and incentives based on the Company's attainment of
specified levels of sales and earnings. At March 31, 2000 the total
commitment through June 30, 2002, excluding incentives, was approximately
$1,337,500.
Other Commitments
Effective September 1, 1996, the Company entered into a consulting
agreement with a director. Under the terms of the agreement, the Company
will pay a fee of $120,000 per annum, payable in equal monthly
installments. The contract is renewable annually for up to eight
consecutive years.
Legal Proceedings
In April 1998, the Company supplied certain documents to the United States
Department of Justice ("DOJ") concerning its business pursuant to an
administrative subpoena (the "Subpoena"), served on February 24, 1998 under
the Health Insurance Portability and Accountability Act of 1996. Since
April 1998, the Company has not been requested to provide any further
documents or information to the DOJ related to the subpoena.
In August 1999, the Company was named as a defendant in a action for
declaratory relief by the City of Cookeville, Tennessee, d.b.a. Cookeville
Regional Medical Center. The suit alleges no actionable conduct by the
Company and the Company believes the suit is without merit.
The Company was named a defendant in a action for nonpayment of
compensation with a former employee due to a dispute regarding an agreed
upon salary reduction. Management anticipates a settlement of approximately
$37,000.
4. INCOME TAXES AND DEFERRED INCOME TAXES
Income tax expense consists of an increase in the valuation allowance
against deferred taxes related to the increase in the settlement liability
as a result of the final accounting of Care 3, Inc. A valuation allowance
was recorded against the deferred tax asset related to federal and state
net operating loss carryforwards created in the current year. Realization
of the deferred tax asset is dependent on generating sufficient taxable
income prior to expiration of the loss carryforwards. State net operating
loss carryforwards will begin expiring June 30, 2013.
5. STOCK OPTION PLANS
On October 31, 1995, the Company approved the 1995 Employee Stock Option
Plan ("Plan") The aggregate number of shares of common stock that may be
issued pursuant to the Plan will not exceed 486,260 shares. Pursuant to the
Plan, the Company has issued stock options to various key employees. All
stock options issued to employees have an exercise price not less than the
fair market value of the Company's common stock on the date of grant.
Options granted under the Plan have an expiration date of no later than ten
years following the date of grant and generally have vesting periods of
three or four years.
On September 9, 1996, the Company adopted the 1996 Non-Employee Directors
Non-Qualified Stock Option Plan (the "1996 Directors' Plan"). A total of
33,333 shares of common stock are reserved for issuance under the 1996
Directors' Plan. Under this plan, upon initial election to the Board of
Directors, all non-employee directors are awarded options to purchase 2,000
shares of common stock. Upon each subsequent election to the Board of
Directors, all non-employee directors receive option awards to purchase
1,000 shares of common stock. These options, which have an exercise price
equal to the fair market value of the shares of common stock as of the date
of grant, vest at the rate of 33.33% per year. All options awarded under
the 1996 Directors' Plan expire on the first to occur of (i) 10 years after
the date of grant or (ii) 90 days after the date the director is no longer
serving in such capacity for
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reasons other than death or disability.
Information relating to options at March 31, 2000 summarized by exercise
price is as follows:
Range of Weighted Average Vested Weighted Average
Exercise Options Remaining Options Exercise
Prices Outstanding Contractual Life Outstanding Price
----------------------------------------------------------------------------------------
$ 4.11 - 6.00 154,350 7.06 154,350 $ 4.27
12.00 - 15.00 61,000 8.60 47,444 13.62
$ 21.00 - 21.75 4,000 8.33 2,000 21.38
---------------------------------------------------------------
219,350 7.51 203,794 $ 7.19
===============================================================
In accordance with accounting for such options utilizing the intrinsic
value method, there is no related compensation expense recorded in the
Company's financial statements for the Nine months ended March 31, 2000 and
1999. As of March 31, 2000, none of these options have been exercised and
203,794 were exercisable.
6. SIGNIFICANT CUSTOMER
Approximately 14% in 1999 of the Company's revenue, was from
hospital-clients owned or managed by a national hospital management
company, which the Company had engagements with during the past five years.
In addition, approximately 11% of the Company's revenue for fiscal 2000 was
from hospital-clients owned by a large Texas based hospital system.
7. STOCK SPLIT
Subsequent to the end of fiscal 1999, the Company's Board of Directors
authorized and executed a reverse 1:3 common stock split. In accordance
with SFAS No. 128, the Company's outstanding common stock shares and
related disclosures, including those regarding options and warrants, have
been restated for periods ended March 31, 2000 and 1999 to account for the
stock split. The effect of the restatement is to decrease shares issued and
outstanding from 8,089,588 to 2,696,566 and to increase net loss per share
from $(0.16) per share to $(0.50) per share for the period ended March 31,
1999.
8. DISCONTINUED OPERATIONS:
On July 31, 1998, the Company's Board of Directors approved a plan to
discontinue the health plan operations of the Company. The Company
determined that it would provide no additional capital to Care3, Inc.
("Care3"), the health maintenance organization ("HMO") licensed in
Mississippi of which it owned 69% of the common stock and 100% of the
preferred stock. Factors which were taken into account in making this
decision include the estimated future capital requirements of Care3, the
operating results and claims experience of Care3, and the Company's current
cash reserves. The Company was advised that the other shareholders of
Care3, Inc. had elected to provide no additional capital to Care3. As a
consequence, Care3, Inc. was not able to maintain the required minimum net
equity of $750,000 as set by state regulations. On August 6, 1998, the
Board of Directors of Care3, Inc. consented to place the HMO under
administrative supervision of the Mississippi Insurance Commissioner ("the
Commissioner"). On August 7, 1998 (disposal date), Care3 was placed into
statutory rehabilitation in response to a petition by the Commissioner.
Neither Care3 nor the Company opposed the petition and both have and expect
to continue to cooperate fully with the Commissioner and the appointed
rehabilitator. As of April 1, 2000 the rehabilitator has presented its
final accounting to the court. The final accounting shows a $192,000
deficit. Management expects the rehabilitator to demand payment of the
deficit and as a result has recorded a liability to the extent of the
entire deficit. The deficit has been presented net of deferred tax benefits
of approximately $74,000.
9. EXTRAORDINARY GAIN:
For the quarter and nine months ended March 31, 1999, the Company reported
an extraordinary gain of $221,005. There were no applicable income tax
effects related to the extraordinary gain. Such gain related to the
Company's extinguishment of debt and accrued interest to former
shareholders of Canton Management, Inc. (now "Care3, Inc.").
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations:
The following table represents results from operations and sets forth percentage
of revenue represented by certain items reflected in the Company's consolidated
statements of operations for the periods indicated.
Three Months Ended Nine months ended
March 31, March 31,
-------------------------- ----------------------------
2000 1999 2000 1999
--------- ----------- ----------- -----------
Consulting Revenues $ 596,068 $ 1,820,050 $ 2,233,539 $ 5,721,157
Cost of revenues 396,572 857,497 1,228,030 2,871,292
--------- ----------- ----------- -----------
Gross profit 199,496 962,553 1,005,509 2,849,865
General and administrative expenses 869,916 1,526,232 3,110,058 4,511,473
--------- ----------- ----------- -----------
Loss from continued operations (670,420) (563,679) (2,104,549) (1,661,608)
--------- ----------- ----------- -----------
Other income (expenses):
Interest and other income 764 10,004 13,150 56,842
Interest expense -- (6,408) (282) (14,809)
Other income 44,571 -- 104,953 --
--------- ----------- ----------- -----------
45,335 3,596 117,822 42,033
--------- ----------- ----------- -----------
Loss from continuing operations before
provision for income taxes and extraordinary gain (625,085) (560,083) (1,986,727) (1,619,575)
Provision for income taxes (120,508) (45,894) (120,508) (30,662)
--------- ----------- ----------- -----------
Loss from continuing operations before
extraordinary gain (745,593) (605,977) (2,107,235) (1,650,237)
Gain (loss) on disposal of health
maintenance organization, net of tax (119,117) -- (119,117) 75,000
--------- ----------- ----------- -----------
Net loss before extraordinary gain (864,710) (605,977) (2,226,352) (1,575,237)
Extraordinary gain on debt extinguishment,
net of income taxes of $- -- -- -- 221,005
--------- ----------- ----------- -----------
Net loss $(864,710) $ (605,977) $(2,226,352) $(1,354,232)
========= =========== =========== ===========
FORWARD LOOKING STATEMENTS:
Certain statements contained in this section of the report, including those
under "Outlook" and "Financial Conditions" are "forward-looking." While the
Company believes that these statements are accurate, the Company's business is
dependent upon general economic conditions specific to its industry, and future
trends and results cannot be predicted with certainty.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion of the results of operations and financial condition of
the Company should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto. Historical results and percentage
relationships among accounts are not necessarily an indication of trends in
operating results for any future period. The consolidated financial statements
present the continuing operations of Birman Managed Care, Inc. and its wholly
owned subsidiary. All significant inter-company balances and transactions have
been eliminated in consolidation.
12
NINE MONTHS ENDED MARCH 31, 2000 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1999:
REVENUE:
GENERAL
Revenues for the quarter and nine months ended March 31, 2000 continued its
downward trend as management continues to implement new pricing and marketing
strategies for its QMP product.
QUALITY MANAGEMENT PROGRAM (QMP)
The Quality Management Program (QMP) experienced a 61% decrease in revenue. The
revenue decrease was from lost business not replaced with new accounts. The
Company experienced resistance from potential clients to the level of fees
charged by the Company and the need to adapt the Company's marketing strategy to
that environment.
As long as the Company's compensation was based entirely upon results, the
Company's fees had not been a material impediment to closing new consulting
agreements. With the practical need to convert to fixed fee arrangements, the
cost of the Company's services became an issue as many hospitals viewed the
Company as competitive with lower cost "coding companies." The need to
distinguish the Company's physician-to-physician services from those non-medical
clerically-oriented companies required substantially more effort and time. The
Company also was required to re-orient its marketing personnel to stress the
regulatory compliance value of the QMP, a feature not generally found with
lower-cost services.
Outlook: The Company believes that the hostile government regulatory climate
which has impeded the Company's efforts to obtain new hospital client
engagements has subsided somewhat but has been replaced by substantial pressure
on the Company's fees. The Company believes it cannot charge rates for its
services any lower than now charged but remains at a competitive disadvantage
against less-sophisticated "coding companies" which cannot offer the regulatory
compliance services or physician-to-physician credibility provided by the
Company's staff. The Company firmly believes that its services result in greater
net benefit to a hospital than those provided by the coding companies, but this
analysis is often lacking among hospital administrators who focus primarily on
cost as opposed to net result. With hospitals whose administrators focus on cost
and principal criterion for analyzing consultants, the Company generally does
not obtain an engagement. With hospitals whose administrators focus on the net
benefit to the hospital, the Company generally obtains the engagement. The
Company will continue to differentiate itself from these non-medical clerical
services against which the Company is forced by the market to compete. Although
this continues adversely to affect the Company's revenues, the Company believes
that for the long term, its substantial investment in physicians and in
regulatory research, updating and communication will provide a substantial
competitive advantage. In addition, the Company continues to develop new
consulting products geared to the different aspects of the health care industry.
The Company believes that it will be successful at closing additional new
contracts during fourth Quarter of fiscal 2000 due to the development of a more
tactically refined sales process and through the addition of complimentary
software products.
COST OF REVENUE AND GROSS PROFIT:
The cost of revenue includes all costs directly associated with the operations
of the QMP business, including compensation of physicians, nurses, and allied
health specialists, consulting staff travel and lodging, and other direct costs.
To return to the margins of previous periods, David N. Birman will return to the
field and provide services to the Company's clients.
Outlook: Cost of revenue as a percentage of total revenue will be more stable as
minimal impact should be seen from the shift to fixed fee contracts. Cost of
revenue for the Company's new products remains undetermined as the Company has
not begun delivering sufficient of those services to determine accurately the
ultimate cost of those services or the prices for which those services can be
provided.
13
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses decreased by approximately $700,000
and $1,400,000 to approximately $870,000 and $3,100,000 for the quarter and nine
months ended March 31, 2000, respectively. This was due to a decrease in salary
and benefit expenses attributable to the elimination of several positions and
pay reductions implemented at the beginning of the first quarter of the fiscal
year. The Company also implemented another round of substantial overhead and
cost reduction measures at the beginning of the third quarter that will
contribute to the continued decrease in selling, general, and administrative
expenses.
Outlook: The Company is aggressively reviewing all general and administrative
expense items. The Birmans are considering substantial reductions in their
compensation package. Management anticipates further reductions in selling,
general, and administrative expense through decreases in officers compensation,
legal and professional fees, equipment leases, and costs related with
maintaining a public presence.
NET LOSS:
For the quarter and nine months ended March 31, 2000, the Company reported a net
loss of $864,710 and $2,226,352 respectively, as compared to a net loss of
$605,977 and $1,354,232 for the quarter and nine months ended March 31, 1999,
respectively.
The net loss for quarter and nine months ended March 31, 2000 was primarily from
the continued decline in revenues without reductions in overall operating
expenses.
Outlook: The Company anticipates substantially lower net operating losses in the
fourth quarter of fiscal 2000 as (i) revenue is realized from the additional
contracts from the investment made in retaining and refocusing marketing
personnel for QMP and (ii) selling, general and administrative costs decreases
due to steps taken by the Company in the first nine months of this fiscal year
to reduce overhead. The Company has regularly anticipated a reduction in its
operating losses but has, to date, failed to achieve those results for a variety
of reasons which the Company believes have been beyond its control. There is no
assurance that the Company will reduce its net operating losses in the near
future. Should these operating losses continue and the Company is unable to
raise additional capital, the Company will have insufficient working capital to
continue its operations in succeeding periods.
LIQUIDITY AND CAPITAL RESOURCES:
For the period ended March 31, 2000, the Company funded its continuing
operations and business development activities primarily through collection of
past accounts receivables and cash on deposit and cash equivalents.
Outlook: In order for the Company's resources to be sufficient to meet the
Company's anticipated working capital needs for the next three months, the
Company must successfully attract hospital consulting contracts generating
approximately $145,000 per month of additional consulting revenue and must also
further reduce its operating costs by 50%. The Company, however, may attempt to
raise capital through the issuance of long-term or short-term debt or the
issuance of securities in private or public transactions to fund future
expansion of its business either before or after the end of the twelve month
period. There can be no assurance that acceptable financing for future
transactions can be obtained. Should management fail to achieve the above
objectives, the Company will not be able to meets its future working capital
needs.
14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
The Company currently is not a party to any material legal proceedings except as
follows:
In August of 1999, the Company was named a defendant in an action for
declaratory relief filed by the City of Cookeville, Tennessee, dba Cookeville
Regional Medical Center seeking a declaration that the Company is liable for all
costs, including outside legal costs, incurred by the plaintiff in responding to
requests for information served by the United States Department of Justice. The
suit alleges no actionable conduct on the part of the Company, but simply
alleges that the Company in some unidentified manner is responsible for the
charges and costs incurred by the hospital in providing documents to the federal
government. The Company filed a motion to dismiss the suit, which is pending. In
the meantime, the Company continues to offer to assist Cookeville Regional
Medical Center and any of its other hospital clients in defending any bills
submitted by the hospital consistent with recommendations made by the Company.
The Company believes the suit is without merit.
On April 7, 2000, Harrison Memorial Hospital, Inc. ("Harrison") filed suit
against the Company in the Harrison County Circuit Court of Kentucky. The
complaint alleges that the Company made certain coding errors which errors
overstated Harrison's medicare reimbursement by $540,000 and subjected it to
governmental investigation and liability. The Plaintiff seeks approximately
$60,000 for attorneys' fees, approximately $45,000 for accounting fees, and such
other sums as the Court deems equitable. The Company expresses no opinion as to
the merits of this suit and has not yet decided on the action it will take with
respect to its defense.
ITEM 2. CHANGES IN SECURITIES
During the First Quarter of Fiscal 2000, the Company's Board of Directors as
approved by the shareholders authorized and executed a reverse 1:3 common stock
split. The reverse split did not affect the rights of the common shareholders,
as no additional stock was issued. The effect on per share profitability is
detailed in note 12.
ITEM 4. SUBMISSION OF MATTERS TO A VOTIVE SECURITY HOLDERS
On December 9, 1999 the Company held its annual meeting at which the
shareholders of the Company elected five (5) directors and ratified the acts of
the Company's officers and directors for the fiscal year ended June 30, 1999.
The Company nominated David N. Birman, M.D., Sue D. Birman, Richard A. Andrews,
Richard M. Ross, and Darrel C. Silvey for positions on the Board of Directors.
Each of the nominees received 2,459,210 votes for their election while 236,756
votes were withheld. 2,454,047 votes were cast in favor of ratification, 24,709
against and 217,810 abstained or were withheld.
ITEM 5. OTHER INFORMATION
Discussion of certain matters contained in this Form 10-QSB may constitute
forward-looking statements within the meaning of the Securities Reform Act of
1996, and as such, may involve risks and uncertainties. These forward-looking
statements relate to, among other things, expectations of the business
environment in which the Company operates, projections of future performance,
perceive opportunities in the market and statements regarding the Company's
mission and vision. Such forward-looking statements are labeled "Outlook." The
Company's actual results, performance and achievements may differ materially
from the results, performance or achievements expressed or implied in such
forward-looking statements. In addition to other information contained in this
Form 10-QSB, the following is a summary of some of the important factors that
could affect the Company's future results of operations and/or its stock price,
and should be considered carefully in evaluating the Company.
TRENDS OR UNCERTAINTIES WHICH MAY IMPACT REVENUES FROM CONTINUING OPERATIONS
Through most of fiscal 1997 the Company experienced rapid growth in its QMP
business. Under contracts then in effect, the Company would typically be
compensated by a hospital client only in the event it generated increased
revenue for that hospital. This "the risk is on us" policy made it simpler to
obtain new hospital clients. In January 1997, the Federal Government issued a
"fraud alert" announcing that it would examine with heightened scrutiny any
contract with a health care provider which provided a financial incentive to
obtain more funds from the Medicare program. This announcement, along with
highly-publicized initiatives of the federal government to examine, challenge
and prosecute hospitals, physicians, medical executives, medical laboratories
and others caused hospitals throughout the United States to reduce or cease
outside contracting for consulting services such as the Company provides.
Although the Company's Quality Management Program has always concentrated
heavily on regulatory compliance, many hospital
15
clients were primarily attracted by its generally positive financial results. As
hospitals' awareness of enforcement against regulatory violations increased, the
Company highlighted the regulatory compliance aspects of its QMP and changed its
predominant billing arrangements from "results oriented" to fixed fee billings
with most of its hospitals in fiscal 1998. The combination of eliminating
"results oriented" billing and the near standstill in hospitals' willingness to
enter into new contracts caused a decrease in revenue per discharge and a
significant decrease in the rate of adding new hospital clients. As a
consequence, the Company only started twelve new hospital accounts during First
Quarter of Fiscal 1999. The Company started four new hospital accounts during
the first quarter and four during the second quarter. Three new hospital
accounts were started during the third quarter. For the nine months ended March
31, 2000, the Company experienced a net decline in hospital accounts. Federal
regulators make widely disseminated pronouncements threatening severe sanctions,
both civil and criminal, against health care providers. Federal enforcement
officials have also engaged in practices the Company believes constitutes
retroactive application of regulatory interpretations which differ significantly
from interpretations widely accepted and applied in the industry for many years.
The Company's agreements with its hospital clients generally obligate the
Company defend its recommendations for a period of up to two years after the end
of each contract. The Company may be called upon to do this on an increasing
basis. The ultimate impact this will have on the Company's operations cannot be
determined with any certainty.
Outlook: The Company has encountered extremely strong resistance to obtaining
new clients for its services. Most of this pressure could be attributed to the
January 1997 federal "fraud alert" aimed at discouraging hospitals from entering
into any contracts in which compensation was based directly or indirectly on
obtaining more money from the federal Medicare program. The federal government
announced that any such contracts, while not illegal per se, would received
"heightened scrutiny." The federal government enforced this policy by
challenging many years of bills previously submitted by hospitals which the
hospitals believed complied in all material respects with applicable
regulations. Nonetheless, through the device of alleging federal "False Claims
Act" violations and threatening severe civil and criminal sanctions, federal
regulators have obtained substantial money from hospitals and their officers and
physicians throughout the country. Often, these settlements were compelled by
high cost of defense and the severity of the sanctions threatened. This created
a climate hostile to expanding the Company's client base because the Company's
services, which focus in part on accurately capturing the true level of services
rendered by a hospital, have frequently resulted in revenue gains for hospitals.
This fact placed the Company in a category of service providers who were
generally suspect under the federal government's enforcement initiative. The
Company believed and continues to believe that its services have been in
compliance with all applicable statutes and regulations. The Company believes
that most hospitals have now reviewed their practices sufficiently to gain
confidence in their record keeping and billing, thus reducing the resistance the
Company must overcome from this regulatory and enforcement pressure. This
federal regulatory pressure against obtaining new engagements for the Company
has been replaced by tremendous cost-cutting pressure on hospital
administrators. The Company's fees for its services are substantially greater,
often double or more, of those of other companies and consultants perceived by
hospital administrators to be its competitors. The Company has encountered
strong resistance to the level of its fees, but believes it cannot lower its
charges any more than it has already done. This places the Company at a severe
disadvantage with hospital considering retaining consultants. On the other hand,
the pressure on hospitals to reduce costs is accompanied by an equally great
pressure to increase revenues. Based on its ten-year history, the Company must
be considered a high-cost provider of services, but with an even higher net
return for the hospitals served. With hospitals solicited by the Company whose
administrators base their decisions on the net results achieved by the Company's
services (that is, the benefit netted against the cost), the Company typically
obtains an engagement. With other hospitals whose administrators focus more on
cost alone, the Company typically does not obtain the engagement. The Company
has suffered continuing substantial operating losses through third quarter 2000.
Management has elected to attempt to generate sufficient new revenue from new
hospital engagements to achieve break-even financial results, and reduce
officers' compensation. In addition to attempting to obtain more hospital
clients, the Company has explored a number of arrangements with major hospital
equipment manufacturers and software suppliers to apply its
"physician-to-physician" core competency in other areas. To date, no agreements
have been reached for providing services in these areas. The Company believes
its sales efforts will continue to add new hospital clients to its prospective
client list. The Company expects to add a net of approximately four to six new
hospital clients in fourth quarter 2000. There is no assurance it will be able
to do so as financial pressures mount on U.S. hospitals.
16
POTENTIAL FLUCTUATION IN OPERATIONS AND OPERATING RESULTS
The Company's operating results could vary from period to period as a result of
seasonality in discharges of Medicare patients by Quality Management Program
hospital-clients, fluctuations in severity of illness, changes in the Medicare
prospective payment system, the expiration of contracts to provide Quality
Management Program services coupled with a failure to replace such contracts
with comparable engagements, under performing contract engagements, and changes
in governmental regulations.
Outlook: The Company expects operating losses to continue through the fourth
quarter of fiscal 2000. Management has elected to pursue a policy of increasing
revenues to reach profitability and to implement more extensive cost reductions.
The principal obstacle to achieving revenue targets is overcoming the practical
difficulties of obtaining final contract approval before commencing a new
hospital engagement. The difficulty is obtaining the agreement of both the
administration and medical staff of a prospective hospital. In simple terms, it
takes a long time to meet with enough staff physicians, educate them on the key
aspects of the Quality Management Program, and wait for meetings (typically held
only once a month) of the medical staff in order to complete the contracting
process. The Company has reduced its sales force to one full time salesman and
its chairman, Dr. Birman, is involved almost exclusively in attempting to obtain
new hospital client engagements. Experience has shown, however, that a larger
sales force does not translate into more hospital engagements. The Company has
been able to maintain a relatively steady gross profit margin of around fifty
percent of fees billed and it has been able to make substantial reductions in
corporate and support staff overhead. Despite these reductions, the Company
continues to experience operating losses because Management believes it cannot
reduce support staff costs and overhead sufficiently to operate within the gross
profit generated by operations in the field by the current number of hospitals
it now serves. Management is attempting to obtain sufficient new engagements to
cover its operating overhead. There is no assurance this strategy will succeed.
If the Company does not substantially increase its revenues, Management's
current plan does not allow the Company to operate at a profit.
RISK OF MEDICARE AUDITS ON QUALITY MANAGEMENT PROGRAM BUSINESS
Hospitals and physicians providing services under Medicare are subject to
regulatory responsibilities imposed by the Health Care Financing Administration
("HCFA"). Peer Review Organizations ("PROs") engaged by HCFA in each state
routinely review and audit reimbursement requests, including patient admissions,
quality of care, and appropriateness of diagnostic-related group("DRG")
selections, among other things. The depth of review varies from hospital to
hospital. There is always a risk that PRO attention may focus with increased
scrutiny on reimbursement requests submitted by hospital-clients of the Company
that achieve increased reimbursements as a result of the Quality Management
Program. In addition, HCFA investigates allegations of fraud and abuse of
Medicare and Medicaid and has instituted a multi-state program called "Operation
Restore Trust" to punish persons engaged in fraud and abuse of Medicare and
Medicaid, recover funds, identify areas of vulnerability, and prevent fraud.
Among the areas of investigatory interest to HCFA are billing code fraud,
billing schemes, contingent fees, and kickbacks involving providers.
Historically, the Quality Management Program has not been the cause of a focused
review or audit by a PRO or a formal investigation by HCFA. However, there can
be no assurance that focused reviews, audits, or investigations will not occur
in the future. A denial of reimbursement requests submitted by a hospital-client
could result in one or more hospital-clients seeking to withdraw from their
contracts, and could result in a formal investigation by HCFA. Such events could
have a material adverse effect on the Company.
Outlook: The Company received demands for indemnification against
federally-imposed fines and expenses from six of its current and past hospital
clients during the latter half of fiscal 1999. Through the third quarter of
fiscal 2000, the Company has had no further communication from its current or
past clients with regards to any medicare audits. No such claim has resulted in
litigation except the claim asserted by Cookeville Regional Medical Center,
discussed below. The Company has assisted each such hospital in the defense of
the bills challenged by federal regulators. The Company is aware of no hospital
which has been sanctioned as a result of the Company's services. The Company
believes it has successfully defended its work, and thus the hospitals, in these
matters. The Company may receive other claims for indemnification for billings
submitted by a hospital through the PRO and to the HCFA if such billings result
in denials or formal investigations. It is the Company's position that such a
claim has no basis in law as the Company makes no billing decisions for any
hospital. The Company prepares no bills, handles no billing, and has no
authority - legal or otherwise - for billings for a hospital. All billings
submitted by a hospital are those of the hospital, not the Company. In the case
of each claim, the Company notified its insurance carrier of the claim and, in
addition, offered to assist each hospital in the defense of any diagnosis made
by a hospital in its billing consistent with a recommendation made by the
Company. One hospital, Cookeville Regional Medical Center, filed suit in
Tennessee state court seeking a declaration that the Company is liable for all
costs of responding to federal demands for more information regarding billing.
The suit does not allege any misconduct on the part of the Company and the
Company believes the suit is without
17
merit. See, "Legal Proceedings."
HEIGHTENED FEDERAL SCRUTINY OF MEDICARE PROVIDERS
The Health Insurance Portability and Accountability Act of 1996, effective
January 1, 1997, established funding for a Medicare Integrity Program to combat
Medicare fraud. Effective April 2000, HCFA has adopted its final regulations as
to enforcement and related compliance penalties. The maximum civil penalty for
filing a false claim has increased from $2,000 to $10,000 per claim. Federal
enforcement agencies are now expected to have funding sufficient to undertake
anti-fraud enforcement investigations and prosecutions of what were previously
viewed as minor offenses resolved in a regulatory or civil forum. The Office of
Inspector General of the Department of Health and Human Services released a
special fraud alert, 97-01, which notifies field agents to give special
attention to consulting relationships under which consultants are paid a
commission for increasing the Medicare reimbursements of a Medicare provider. A
majority of the Company's contracts to date have largely set the Company's
contract revenues based on increasing Medicare reimbursements to Medicare
providers. Furthermore, the Balanced Budget Act of 1997 provides additional
civil and criminal penalties for provider activities that are in violation of
the federal fraud and abuse laws. Decisions regarding coding and billing
practices generally employed throughout the health care industry require the
exercise of judgment in ambiguous or previously unresolved situations. As a
consequence, there can be no assurance that practices heretofore deemed proper
will not be attacked by Federal regulators as a result of heightened Federal
scrutiny of those practices.
18
PRINCIPAL CLIENTS
The Company has provided Quality Management Program services to several
hospitals affiliated with a common management company or hospital system. The
Company is continuing its efforts to expand its Quality Management Program
client base to reduce its dependence on hospitals which are affiliated with one
common management company or hospital system.
GOVERNMENT REGULATION
The Quality Management Program hospital-clients are subject to substantial
regulation at both the federal and state levels. The Company is subject to a
number of laws governing issues as diverse as relationships between health care
providers and their referral sources, prohibitions against providers referring
patients to an entity with which the provider has a financial relationship,
licensure and other regulatory approvals, the corporate practice of medicine,
and regulation of unprofessional conduct by providers, including fee-splitting
arrangements. Although the Company believes that its current operations comply,
and its proposed operations will comply, with relevant federal and state laws,
many aspects of the relationships between the Company and its hospital-clients
have not been the subject of judicial or administrative interpretation. An
adverse review or determination by any court or applicable administrative agency
or changes in the regulatory requirements could have a material adverse effect
on the operations and financial condition of the Company.
The Company has engaged special health care regulatory counsel since its
inception to review the Company's procedures and activities to assure compliance
with those laws. The Company's Board of Directors has adopted its resolution
setting compliance with those laws as the Company's main governing business
principle. Given the widespread federal enforcement activities in this industry,
there can be no assurance that the Company and/or its current and former
officers will not be made the subject of an investigation by federal enforcement
personnel. In the event of any such investigation or other regulatory or
enforcement action, the Company may experience a material adverse decline in its
principal business. While the Company believes any such action would be wholly
unwarranted, the mere fact of such action would cause the Company to incur
substantial professional fees for its defense and would damage its reputation
and business activities within its market.
DEPENDENCE UPON REIMBURSEMENT BY THIRD-PARTY PAYORS
Clients for the Company's Quality Management Program derive substantial revenue
from third party payors. The health care industry is undergoing cost-containment
pressures as third-party payors seek to impose lower reimbursement and
utilization rates and to negotiate reduced rate payments with medical service
providers. The Company believes that this trend will continue. Reductions in
payments to hospitals or other changes in reimbursements for health care
services could have a direct or indirect material adverse effect on the Company,
including increasing demand for the Company's services.
SUBSTANTIAL COMPETITION
The Company's Quality Management Program competes for hospitals as clients in a
highly competitive environment. Many of these competitors have substantially
greater financial, marketing, and management resources than the Company.
Although the Company believes the acceptance of its Quality Management Program
and related professional services and its familiarity with and reputation in
medium size hospitals will enable it to compete successfully. There can be no
assurance that the Company will be able to compete effectively against existing
competitors or that additional competitors will not enter the markets the
Company plans to serve.
LIABILITY AND INSURANCE
The physicians and allied health specialists employed by the Company in its
Quality Management Program do not treat patients, make any treatment or
diagnostic decisions, or provide any medical services. Although the Company
believes that the Quality Management Program activities of its physicians do not
constitute the practice of medicine or establish physician-patient relationships
for which the Company could incur liability, the Company may be exposed to the
risk that professional liability claims could be brought against the Company by
third parties.
DEPENDENCE ON KEY EXECUTIVE
The Company depends to a significant extent on the efforts and skills of its
Chairman and Chief Executive Officer, David N. Birman, M.D. The Company has
entered into an employment agreement with Dr. Birman. The loss, incapacity, or
unavailability of Dr. Birman could adversely affect the Company's operations.
The Company maintains a $1,000,000 key man insurance policy on his life.
FUTURE CAPITAL NEEDS
The Company is concentrating its efforts on achieving break-even financial
performance. These efforts consist primarily of attempting to obtain new
hospital-client engagements and reducing
19
costs. The Company is not pursuing any expansion or diversification initiatives
which would involve the expenditure of any material amounts of its capital. The
Company consumed a substantial portion of its cash reserves in fiscal 1998 -
1999. Its future capital needs will be primarily dependent upon its ability to
attract new hospital client engagements and to achieve additional cost
reductions. To date, the Company has financed its growth primarily through
operating income, the proceeds of private offerings of shares of Common Stock,
and the proceeds of the Company's initial public offering of Common Stock on
February 12, 1997.
Outlook: The Company has experienced continued substantial operating losses
monthly. Management believes that it can achieve nearly break-even operating
results by the end of the fourth quarter of fiscal 2000. Unless the Company is
able to reduce its monthly operating losses dramatically and attract new
hospital contracts, it will experience cash shortages before the end of fiscal
year 2000. The Company is seeking additional capital to fund its anticipated
working capital deficiency. There can be no assurance that the Company will be
able to secure such financing, if necessary, on favorable terms. If the Company
is unable to obtain new hospital contracts, reduce its operating expenses, and
secure additional financing in the future, its ability to continue as a going
concern in will be in doubt.
20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
A. EXHIBITS
*3.1 Certificate of Incorporation of Birman Managed Care, Inc.
*3.2 By-laws of Birman Managed Care, Inc.
*3.3 Certificate of Merger dated September 9, 1996 by and between
Birman Managed Care, Inc. - Delaware and Birman Managed Care,
Inc.
*4.1 Reference is made to Exhibits 3.1 through 3.3.
*10.1 Employment Agreement by and between Birman Managed Care, Inc.
and David N. Birman, M.D. entered into on March 1, 1996.
*10.2 Employment Agreement by and between Birman Managed Care, Inc.
and Sue D. Birman entered into on March 1, 1996.
*10.3 Employment Agreement by and between Birman Managed Care, Inc.
and Robert D. Arkin entered into on March 1, 1996; Amendment
No. 1 by and between Birman Managed Care, Inc. and Robert D.
Arkin entered into on March 1, 1996.
*10.4 Employment Agreement by and between Birman Managed Care, Inc.
BMC Health Plans, Inc. and Vincent W. Wong entered into on
March 1, 1996.
*10.5 Employment Agreement by and between Birman Managed Care, Inc.
and Douglas A. Lessard entered into on March 1, 1996;
Amendment No. 1 by and between Birman Managed Care, Inc. and
Douglas A. Lessard entered into on March 1, 1996; Amendment
No. 2 by and between Birman Managed Care, Inc. and Douglas A.
Lessard entered into on September 1, 1996.
*10.6 Employment Agreement by and between Birman Managed Care, Inc.
and Mark C. Wade entered into on July 1, 1995; Amendment No. 1
by and between Birman Managed Care, Inc., BMC Health Plans,
Inc. and Mark C. Wade entered into on October 30, 1995;
Amendment No. 2 by and between Birman Managed Care, Inc. and
Mark C. Wade entered into on September 1, 1996.
*10.9 Consulting Agreement by and between Richard M. Ross, RRCG,
L.L.C., and Birman Managed Care, Inc. entered into as of
September 1, 1996.
*10.10 1995 Stock Option Plan for Birman Managed Care, Inc. dated
October 31, 1995
*10.11 1996 Non-Employee Directors' Non-Qualified Stock Option Plan
of Birman Managed Care, Inc.
*10.12 Stock Purchase Agreement by and between Birman Managed Care,
Inc., Canton Management Group, Inc. and Wesley Prater, M.D.,
Larry Cooper, M.D., Kelvin Ramsey, M.D., L.C. Tennin, M.D.,
Louis Saddler, M.D., James Goodman, Ph.D., Vic Caracci,
Michael T. Caracci, Robert T. Teague, M.S.W., Vincent Caracci,
Charlie Hills, Harold Wheeler, M.D., Stephanie Tucker,
Winifred Fulgham and Joyce Johnson entered into on September
6, 1996.
*10.13 Promissory Note by David N. Birman, M.D. and payable to the
Company.
*10.14 Loan and Security Agreement dated August 21, 1996 by and
between American National Bank and Trust Company of Chicago
and Birman & Associates, Inc.
*10.15 Loan and Security Agreement dated August 21, 1996 by and
between American National Bank and Trust Company of Chicago
and Hughes & Associates, Inc.
*10.17 Form of Indemnification Agreement for Birman Managed Care,
Inc.
*10.18 Executive Bonus Plan to be supplied by amendment.
*10.19 Agreement by and between National Benefit Resources, Inc. and
Birman Managed Care, Inc. entered into on April 16, 1996.
*10.20 Agreement dated September 17, 1996 by and between Birman
Managed Care, Inc.
21
and Community Medical Center.
*10.21 Form of Escrow Agreement.
*10.22 Lease dated December 2, 1996 between Arc Builders, LLC and
Birman Managed Care, Inc.
*10.23 Form of Consulting Agreement between Birman Managed Care, Inc.
and Royce Investment Group, Inc.
*10.24 Form of Merger and Acquisition Agreement between Birman
Managed Care, Inc. and Royce Investment Group, Inc. to be
supplied by amendment.
**10.25 Employment Agreement by and between Birman Managed Care, Inc.
and Samuel S. Patterson.
**10.26 Employment Agreement by and between Birman Managed Care, Inc.
and Jeffrey L. Drake.
*10.27 Consulting Agreement Amendment by and among Birman Managed
Care, Inc. and Richard M. Ross and RRCG, LLC.
*10.28 Employment Agreement by and between Birman Managed Care, Inc.
and Richard A. Andrews.
**16.1 Letter on Change in Certifying Accountants.
*21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule, Nine months ended March 31, 2000.
27.2 Financial Data Schedule, Twelve months ended June 30, 1999.
B. Reports on Form 8-K
No reports on Form 8-K was filed by the Company during the third
quarter of the fiscal year ended June 30, 2000
* Incorporated by Reference from the Company's Registration Statement on
Form SB-2 (No. 333-111957).
** Incorporated by Reference from the Company's Quarterly Report on Form
10-QSB for the quarterly period ended December 31, 1996.
*** Incorporated by reference from the Company's quarterly report on Form
10-QSB for the fiscal quarter ended December 31, 1997
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.
Birman Managed Care, Inc. (Registrant)
Date May 6, 2000 /s/ David N. Birman, M.D., Chairman of the
Board
(Signature)*