UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1996
Commission file Number 000-28976
Acadia National Health Systems, Inc.
(Exact name of registrant as specified in its charter.)
Colorado 10509781
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
460 Main Street, Lewiston, Maine U.S.A. 04240
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(207) 784-9185
(800) 274-9185
Indicate by check mark whether the registrant(1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, $0 Par Value - 3,733,987 shares as of
December 31, 1996.
1
PART I. - FINANCIAL INFORMATION
ACADIA NATIONAL HEALTH SYSTEMS, INC.
STATEMENT OF INCOME
FOR THE THREE MONTHS
ENDED DECEMBER 27, 1996 AND DECEMBER 31, 1995
(Unaudited)
Three months ended Three months ended
December 27 December 31
__________________ _________________
1996 1995
________ ________
Sales $195,339 $140,081
Operating Expenses $123,359 $142,411
-------- --------
Net Operating Income 71,980 (2,330)
Other Income/(Expense), Net (83,970) (4,569)
--------- ---------
Net Income (Loss)
Before Taxes (11,990) (6,899)
Provision (Benefit) for
Income Taxes 4,400 0
--------- --------
Net Income (Loss) ($7,590) ($6,899)
========= ========
Net Income (Loss)
Per Common Share ($0.002) ($0.002)
Weighted Average Number of
Common Shares Outstanding 3,733,987 3,733,987
<FN>
See Accompanying Notes to Financial Statements
2
ACADIA NATIONAL HEALTH SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
December 27 1996 December 31 1995
________________ ________________
Current Assets:
Cash-Operating $ 19,525 $ 85,138
Accounts Receivable 494,244 239,506
Inventories 3,234 7,630
Other Current Assets 3,874 18,636
-------------- --------------
Total Current Assets $520,877 $350,910
Prop., Plant & Equip.:
Cost 159,285 93,634
Less Accum. Depr. 59,993 51,987
-------------- --------------
99,292 41,647
Other Assets:
Deferred Income Taxes 11,900
Organization Cost 32,819 0
-------------- --------------
Total Assets $684,888 $392,557
============== ==============
Current Liabilities:
Accounts Payable $ 2,568 $ 1,922
Line of Credit 249,717 110,917
Accrued Expense 45,108 102,839
Current Portion of
Long Term Notes 18,000
-------------- --------------
Total Current Liabilities $315,393 $215,679
Long Term Liabilities:
Long Term Debt 105,445 162,046
Other Non-Current Liab.
-------------- --------------
Total Liabilities $420,838 $377,725
3
Stockholders' Equity:
Common Stock 251,640
Paid In Capital & Treas. 1,000
Retained Earnings (Deficit) (7,590) 13,832
-------------- --------------
Total Equity $244,050 $14,832
-------------- --------------
Total Liabilities & Equity $664,888 $392,557
============== ==============
<FN>
See Accompanying Notes to Financial Statements
4
ACADIA NATIONAL HEALTH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 27, 1996
AND DECEMBER 31, 1995
(Unaudited)
Quarter Quarter
Ending Ending
December 27, December 31,
1996 1995
------------- -------------
Net Income (Loss) $(7,590) ($6,899)
Depreciation & Amortization $10,920 $1,475
Changes in Assets & Liabilities:
Accounts Receivable ($273,961) ($126,140)
Other Current Assets ($302) $915
Other Non-current Assets ($ 2,158) $7,980
Accounts Payable ($30,934) $1,343
Other Current Liabilities $31,536 ($3,152)
------------- -------------
Net Cash (Used for) Provided
By Operating Activities ($272,489) ($124,478)
Investment Activities $0 $0
Financing Activities $171,026 $1,249
------------- -------------
Net Increase (Decrease) in ($101,463) ($123,228)
Cash or Cash Equivalents
Cash & Cash Equivalents:
Beginning of Period $120,988 $208,366
------------- -------------
End of Period $19,525 $85,138
============= =============
<FN>
See Accompanying Notes to Financial Statements
5
ACADIA NATIONAL HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Note 1. Summary of Significant Accounting Policies
The accompanying unaudited financial statements have been
prepared in accordance with Generally Accepted Accounting Principles
for interim financial information and with the instructions to Form
10QSB and Rule 310 of Regulation S-B. Accordingly, they do not include
all of the information and footnotes required by Generally Accepted
Accounting Principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included.
The accompanying unaudited financial statements should be read
in conjunction with the audited balance sheet of Acadia National Health
Systems, Inc. ("the Company") included in the 1996 Registration Statement
filed on Form 10-SB. The unaudited financial statements have been prepared
in the ordinary course of business for the purpose of providing
information with respect to the interim period.
Note 2. Net Income Per Common Share
Computation of net income per common share was based on the weighted
average number of shares outstanding during such periods. These amounted
to 3,733,987 shares for the three months ending December 27, 1996 and
3,733,987 shares for the three months ending December 31, 1995 as
adjusted for the reorganization.
Note 3. Long Term Debt - Short Term Financing
The total of lines of credit drawn upon (outstanding) from
Peoples Heritage Bank ("Bank") as of December 27, 1996 was $249,717
on a $250,000 demand line limit, compared to $110,917 at December 31, 1995.
On October 01, 1996, Bank provided the Company an
additional $100,000 term loan, of which $96,594 is outstanding. All
loans made by Bank under such facilities are renewable annually.
All loans and repayment of lines of credit payable to Bank
and future borrowings under any such credit facilities have been
collateralized by the accounts receivable and equipment of the
Company, as well as the personal guarantee of the chief executive
officer and majority stockholder.
6
Note 4. Majority Stockholder
Mr. Thomas N. Hackett and Peacock Hill Farm Limited Liability
Company, of which Mr. Hackett has total voting authority, presently
owns approximately 77% of the Common Stock of the Company.
Peacock Hill Farm Limited Liability Company is a Maine limited
liability company which the Company's chief executive officer and
majority stockholder, Mr. Hackett, is an 8.0% member/manager,
and has total voting power over other members, collectively.
Note 5. Additional Events
A. On October 01, 1996 Peoples Heritage Bank provided the
Company an additional $100,000 line of credit facility.
B. Since October 01, 1996, the Company utilized and has outstanding
$96,594 of the credit facilities provided by Peoples Heritage Bank.
7
ACADIA NATIONAL HEALTH SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
December 31, 1996
RESULTS OF OPERATIONS:
======================
THREE MONTHS ENDING DECEMBER 27, 1996
=====================================
Note:
Acadia National Health Systems purchased the assets of Physician
Resources, Inc. on September 27, 1996, and took over the operations
of that company as of September 28, the first day of the fiscal
quarter and year. It did not conduct operations prior to the
beginning of the quarter ended December 31, 1996. All activities
for the quarter are compared with the operations of Physician
Resources for the same quarter a year earlier. Comparative results
have not been adjusted for the difference between Physician Resources'
calendar quarters ending in a calendar month end and Acadia's fiscal
quarters ending on the last Friday of a calendar month.
Financial Accounting Standard No. 96 "Accounting for Income
Taxes" which requires that no later than 1996, companies change
from the deferred method to the liability method of accounting
for income taxes, has not been adopted by the Company for 1996.
Implementation of the Standard is not expected to have any
material affect on the Company's financial condition or results
of operations.
SALES
Sales for the period of $195,339 were up $54,258 or 39.0% from the
corresponding period in 1995. This was principally due to a 169% growth
in the Waivered Foster Care program. Additionally, billing service for
three new medical practices contributed to sales. There were no software
or franchise sales during the period.
OPERATING EXPENSES
Operating expenses were $19,052 less during the period, principally
because Physician Resources paid its owners a management fee in the last
calendar quarter to zero full-year earnings, a practice that is not
appropriate for Acadia. Partially offsetting these savings were
increases in depreciation, office supplies and salaries & wages.
8
OPERATING INCOME
Operating income for the quarter was $71,980, compared to a loss of
$2,330 for the comparable quarter in 1995. The improvement of $74,310
was principally due to increased sales and elimination of the management
fee.
OTHER INCOME (EXPENSE)
Non-operating expenses increased 1,738% to $83,970. The Company incurred
non-recurring expenses of $10,644 associated with the software conversion
and for consulting services related to becoming a reporting company.
Interest expense increased 61% to $6,826 as a result of higher credit
line balances and $66,500 which represents the unamortized portion of
development costs which the Securities and Exchange Commission requested
the Company expense for book earnings purposes.
INCOME TAXES
Physician Resources was an S Corporation and incurred no tax liability.
Acadia is a C Corporation that accrued $20,000 combined State and Federal
tax liability for current quarter earnings.
NET INCOME (LOSS)
Acadia net losses of ($7,590) were ($0.002) per share on 3,733,987
outstanding common shares for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
Accounts Receivable increased $254,738 from December 31, 1995, to December
27, 1996, principally due to the rapid growth of the Foster Home accounts
receivable financing program. During this same period, the Company added
$65,651 in property, plant and equipment, principally computer systems
and related equipment. Acadia spent $102,819 in Corporate organization
costs and $10,644 non-recurring costs associated with new computer networks,
software conversion, preparation of a Uniform Franchise Offering Circular
(UFOC) and startup of Acadia as a reporting company. Nearly all
of the Company's existing $350,000 line of credit has been expended.
Anticipated Acadia market activities and a planned acquisition will place
additional demands on liquidity during the remainder of the year.
Management is currently discussing an expanded line of credit with its
principal lender, Peoples Heritage Bank. The proposed loan will be secured
by the personal guarantee of Thomas N. Hackett and will be used to fund
working capital, increased organizational infrastructure and a potential
acquisition. The loan, which is expected to be concluded in the third
quarter of FY 1997 (by June 1997), will bridge to a stock issue anticipated
in the fourth quarter of FY 1997 or the first quarter of FY 1998. The
timing and amounts of these financing actions are consistent with Acadia's
business plan and its strategy of using short term debt to fund operations
ahead of periodic stock offerings.
9
OTHER INFORMATION
=================
SOFTWARE CONVERSION AND PREPARATION FOR EXPANDED SALES ACTIVITY
During the first quarter, Acadia converted billing software from an
obsolete Unix-based system to state-of-the-art data base technology and the
Microsoft NT server. This system will enable Acadia to offer clients a
variety of its own products and also Microsoft products running on the
network. The conversion and training ramp up were necessary first steps,
learning internally in anticipation of offering these technologies to
outside clients. During the second quarter, the Company is continuing this
process and will be offering the software for sale. The software will be
an important part of its franchise system offering as well. The Company
will derive significant income late in FY 1997 from the sale and rental of
these software products under agreements with its software vendors.
As of February 7, 1997, three major software sales are in the late stages
of negotiation.
UNIFORM FRANCHISE OFFERING CIRCULAR (UFOC)
The Company is preparing a UFOC for filing with the FTC in the second
quarter and anticipates selling Acadia franchises during in the third
quarter. Franchisees will be offered the opportunity to market Acadia's
billing systems technology, other brand name products and related support
services to tertiary markets throughout the country.
MAJOR ACQUISITION
The Company will initiate discussions considering a major acquisition that
will greatly strengthen the product line.
SALES TRENDS
Trends in Acadia's existing business lines, medical billing services and
billing & receivable financing for waivered foster home care, are positive,
with 1996 growth anticipated continuing at an expanded rate throughout
FY 1997. Software sales, franchising and related support services are
expected to result in major revenue and earnings increases in FY 1997 and
beyond. A unique franchising structure will enable the Company to grow
at a network pace that is much faster than the growth of individual
operating units.
10
BUSINESS AND PROPERTIES OF ACADIA NATIONAL HEALTH SYSTEMS, INC.
===============================================================
HISTORY
Thomas N. Hackett founded what later became Physician Resources (PRI)
in 1971 as the financial services arm of Advantage Business Services.
In 1990 bookkeeping and doctor billing were separated as Bookkeeping
Resources, Inc. In 1992 doctor billing was moved to a new company,
Physician Resources, Inc., and commercial bookkeeping operations ceased.
Physician Resources provided practice management, invoicing and accounts
receivable collection services for doctors offices, foster homes and
hospital-based practices. During this entire period, the company was
not focused on growth, but concentrated on quality operations and
long-term business relationships. In the summer of 1996, the principals
formed Acadia National Health Systems, a Colorado corporation that will
be the legal platform for a nationwide Physician Practice Management
Company (PPMC). The assets of Physician Resources were acquired by
Acadia in September 1996. Personnel, procedures and experiences gained
in 25 years of medical billing & practice management, combined with
experience in software & hardware sales and coupled with innovative
franchising methods will allow Acadia to become a national competitor.
The doctor billing service has undergone several technical transitions
since its inception. In the early days the service supported physicians
who wished to avoid an elaborate business function or complex computer
systems. As computer systems became simpler and easier to use, the
company found other value added services to retain clients. This led
to practice management consulting and, in the last few years, electronic
billing and accounts receivable financing. Many health service payers,
led by Medicare and Medicaid, have begun to require electronic billing
to reduce processing costs. Electronic billing brought the added benefit
of improved reliability and timeliness of third party payments. This
improved medical practice asset utilization and profitability. Since
electronic billing requires complex data modalities and sophisticated
software procedures, it is more adaptable to a high volume billing service
than to a single medical practitioner. This was a very successful service
for Physician Resources and continues to grow briskly within Acadia.
The company just completed expanding its state-of-the-art full-featured
software system that will become a key component for a national billing
service.
11
In January 1995, Physician Resources began billing for foster homes under
guidelines and funding established by the Maine Department of Human
Services. This electronic billing service offers clients well-regulated
cash flow and differentiates Acadia as the only billing service in Maine
to finance provider receivables. As a result, it has obtained new business
through referral without major marketing effort. The waivered foster care
approach is undergoing explosive growth nationally and the potential
national revenue from this and other small health providers is significant.
OBJECTIVES, NEAR-TERM
On January 13, 1997, Acadia's SEC application Form 10SB was effectuated.
Currently, the Company is awaiting NASD acceptance pursuant to the filing
of a Form 211 and accompanying Information and Disclosure Statement, and
hopes to begin trading on the OTC market during the second quarter of FY
1997. This will allow the Company to approach capital markets and enable
it to position itself for the raising of equity needed to fuel growth.
Access to public markets is critical, since the growth rates will be too
rapid to fund through earnings or debt.
The founder and CEO of Acadia, Thomas N. Hackett, also founded a nationally
franchised payroll processing company, Advantage Business Services. Since
franchising began thirteen years ago, Advantage has grown to become the
eighth largest payroll company in the United States. Although Hackett is
not active in Advantage on a daily basis, his many years of managing PRI
and his experiences in franchising a financial/data processing service are
directly transferable to medical billing. Acadia will complete franchising
documents for FTC compliance during the third quarter of FY 1997.
Senior professional staff will be added in marketing, compliance management,
operations and finance to prepare the Company for regional and then national
presence. Since practice management is closely tied to medical billing,
Acadia will increase its affiliation with practice management consultants
in various parts of the country. These services will complement billing
services and eventually lead Acadia to become a full service PPMC.
12
Acadia completed implementation of significantly expanded software
technology in the first quarter of FY 1997. This system includes the
capability of: automated patient appointment scheduling, electronic charting
features, electronic billing, direct funds transfer and distributed data
processing with multiple location data entry and discrete paper copy
printing, unlimited client accounts and patient census, all running on the
NT platform. Later, full service computerized patient charting systems,
document management systems and state of the art dictation technology will
be added. These attributes will provide the technological base that will
reinforce the company as a major player in tertiary markets and a
clearinghouse for franchised medical billing activities.
OBJECTIVES, LONG-TERM
Acadia will create a franchised network of local entrepreneurs and other
companies to market full service Physician Practice Management (PPM)
services regionally and then nationally. Franchisees (Associates) will
sell practice management, billing, accounts receivable financing, accounting
and office systems services to doctors, foster homes and other small and
medium sized health care providers. They will also seek joint venture and
strategic partner alliances. Acadia's home office will provide centralized
and decentralized professional and data support, training, counseling, cash
control and other management services for Franchisees (Associates). Much of
the franchising support, processing, and cash management techniques will be
drawn from Hackett's experience in the payroll industry.
Besides franchising, the Company will grow through acquisitions, joint
ventures and internal expansion. Many smaller billing services and some
practice management consultancies are ill equipped to deal with the changes
occurring in the health care market and the regulatory environment. Some
will reach a point of personal and/or financial distress before they seek
help. These are candidates for affiliation with Acadia.
13
PART II - OTHER INFORMATION
Item #1 Legal Proceedings
Neither the Registrant nor any of its affiliates are a
party, nor is any of their property subject, to material
pending legal proceedings or material proceedings known
to be contemplated by governmental authorities.
Item #2 Changes in Securities
None
Item #3 Defaults Upon Senior Securities
None
Item #4 Submission of Matters to a Vote of Security Holders
None
Item #5 Other Information
None
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during this
quarter.
14
ACADIA NATIONAL HEALTH SYSTEMS, INC.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly cause this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ACADIA NATIONAL HEALTH SYSTEMS, INC.
Registrant
February 14, 1997 Mark T. Thatcher
Date MARK T. THATCHER,
Filing Agent
February 14, 1997 Thomas N. Hackett
Date THOMAS N. HACKETT
Principal Executive Officer