UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 28, 1997
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
March 28, 1997.
1
PART I. - FINANCIAL INFORMATION
ACADIA NATIONAL HEALTH SYSTEMS, INC.
STATEMENT OF INCOME
FOR THE THREE MONTHS
ENDED MARCH 28, 1997 AND MARCH 31, 1996
(Unaudited)
Three months ended Three months ended
March 28 March 31
__________________ _________________
1997 1996
________ ________
Sales $176,839 $136,499
Operating Expenses $144,446 $113,102
-------- --------
Net Operating Income 32,393 23,397
Other Income/(Expense), Net (16,252) (14,628)
--------- ---------
Net Income
Before Taxes 16,141 8,769
Provision for
Income Taxes (5,624) 0
--------- --------
Net Income $10,517 $8,769
========= ========
Net Income
Per Common Share $0.003 $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)
March 28, 1997 March 31, 1996
________________ ________________
Current Assets:
Cash-Operating $153,222 $ 32,766
Accounts Receivable 491,216 455,741
Unbilled Work at Estimated
Realizable Value 86,200 57,816
Inventories 3,754 4,915
Other Current Assets 7,397 3,069
-------------- --------------
Total Current Assets $741,789 $554,307
Prop., Plant & Equip.:
Cost 168,688 101,557
Less Accum. Depr. 67,135 54,925
-------------- --------------
101,553 46,632
Other Assets:
Deferred Income Taxes 7,500 0
Organization Cost 34,354 17,850
Less Accum. Amort. (3,198) 0
-------------- --------------
Total Assets $881,998 $618,789
============== ==============
Current Liabilities:
Accounts Payable $ 2,861 $ 214
Line of Credit 180,051 163,917
Accrued Expense 322,468 244,342
Current Portion of
Long Term Notes 18,000 0
-------------- --------------
Total Current Liabilities $523,380 $408,473
Long Term Liabilities:
Long Term Debt 103,652 162,046
Other Non-Current Liab. 0 0
-------------- --------------
Total Liabilities $627,032 $570,519
3
Stockholders' Equity:
Common Stock 251,640 1,000
Paid In Capital & Treas. 400 1,426
Retained Earnings 2,926 45,844
-------------- --------------
Total Equity $254,966 $48,270
-------------- --------------
Total Liabilities & Equity $881,998 $618,789
============== ==============
<FN>
See Accompanying Notes to Financial Statements
4
ACADIA NATIONAL HEALTH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 28, 1997
AND MARCH 31, 1996
(Unaudited)
Quarter Quarter
Ending Ending
March 28, March 31,
1997 1996
------------- -------------
Net Income (Loss) $10,517 $8,769
Depreciation & Amortization $10,339 $3,067
Changes in Assets & Liabilities:
Accounts Receivable ($83,172) ($246,371)
Other Current Assets ($4,043) $432
Other Non-current Assets $4,400 $0
Accounts Payable $293 ($1,708)
Other Current Liabilities $277,360 $138,088)
------------- -------------
Net Cash (Used for) Provided
By Operating Activities $215,694 ($97,723)
Investment Activities ($10,938) ($7,923)
Financing Activities ($71,059) $53,275
------------- -------------
Net Increase (Decrease) in $133,697 ($52,372)
Cash or Cash Equivalents
Cash & Cash Equivalents:
Beginning of Period $19,525 $85,138
End of Period $153,222 $32,766
============= =============
<FN>
See Accompanying Notes to Financial Statements
5
ACADIA NATIONAL HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
March 28, 1997
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 March 28, 1997 and
3,733,987 shares for the three months ending March 31, 1996 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 March 28, 1997 was $180,051
on a $500,000 demand line limit, compared to $163,917 at March 31, 1996.
On October 01, 1996, Bank provided the Company an
additional $100,000 term loan, of which $94,802 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 term loan.
B. Since October 01, 1996, the Company utilized and has outstanding
$94,802 of the credit facilities provided by Peoples Heritage Bank.
C. On March 18, 1997 Peoples Heritage Bank provided the Company
an additional $250,000 line of credit bringing the total line of credit to
$500,000. This total line of credit is secured by the accounts receivable
and equipment of the Company, with a personal guarantee by the chief
executive officer and majority stockholder.
7
ACADIA NATIONAL HEALTH SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
March 28, 1997
RESULTS OF OPERATIONS:
======================
THREE MONTHS ENDING MARCH 28, 1997
=====================================
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 this date.
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 $176,839 were up $40,340 or 29.6% from the
corresponding period in 1996. This was principally due to a 134% 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 $31,344 more during the period, principally
due to ongoing consulting services in addition to increases in
depreciation, office supplies and salaries & wages.
8
OPERATING INCOME
Operating income for the quarter was $32,393, compared to a gain of
$23,397 for the comparable quarter in 1996. The improvement of $8,996
was principally due to increased sales from the Waivered Billing program.
OTHER INCOME (EXPENSE)
Non-operating expenses increased 11% to $16,252. The Company incurred
non-recurring expenses of $8,227 associated with the software conversion
and for consulting services related to becoming a reporting company
under the Securities Exchange Act of 1934 (the "Exchange Act").
Interest expense increased 66% to $8,025 as a result of higher credit
line balances.
INCOME TAXES
Physician Resources was an S Corporation and incurred no tax liability.
Acadia is a C Corporation that accrued $5,624 combined State and Federal
tax liability for current quarter earnings.
NET INCOME
Acadia earnings of $10,517 were $0.0028 per share on 3,733,987
outstanding common shares.
LIQUIDITY AND CAPITAL RESOURCES
Accounts receivable increased $63,859 from March 31, 1996, to March 28,
1997, principally due to the rapid growth of the Waivered accounts
receivable financing program. During this same period, the Company added
$67,131 in property, plant and equipment, principally computer systems
and related equipment. Acadia spent $16,504 in Corporate organization
costs associated with preparation of a Uniform Franchise Offering Circular
(UFOC) and startup of Acadia as a reporting company. The Company has
spent $180,051 of the expanded $500,000 line of credit.
Anticipated Acadia market activities and a planned acquisition will place
additional demands on liquidity during the remainder of the year.
On March 18, 1997, Management expanded its line of credit with its
principal lender, Peoples Heritage Bank, by an additional $250,000.
The loan is secured by accounts receivable and equipment with a personal
guarantee of Thomas N. Hackett and will be used to fund working capital,
increased organizational infrastructure and a potential acquisition.
The loan 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 second quarter, Acadia finished its conversion of its billing
software from an obsolete Unix-based system to state-or-the-art data
base technology and the Microsoft NT server. This system now enables
Acadia to offer clients a variety of its own products as well as 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 third quarter,
the Company 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 May 12, 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 Federal Trade
Commission ("FTC") in the third quarter and anticipates selling Acadia
franchises during the fourth 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. This timeline is not consistent with the Company's original
business plans and will adversely effect future sales and earnings.
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 and 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 substantially 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 and practice management, combined with
experience in software and hardware sales that are 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.
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
11
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 Securities and Exchange Commission (the
S.E.C.") application Form 10SB was effectuated. On May 12, 1997 the
Division of Corporation Finance at the S.E.C. issued "clearance" on
all previous comments to the registration statement and subsequently filed
amendments. Currently, the Company is awaiting the National Association
of Securities Dealers (the "N.A.S.D.") acceptance pursuant to the filing
of a Form 211 and accompanying Information and Disclosure Statement. The
Company will then commence trading on the Over-the-Counter ("OTC") Bulletin
Board market during the third quarter of FY 1997. This will ultimately
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 Mr. 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.
Acadia completed implementation of significantly expanded software
technology in the second 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.
12
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
May 15, 1997 Mark T. Thatcher
Date MARK T. THATCHER,
Filing Agent
May 15, 1997 Thomas N. Hackett
Date THOMAS N. HACKETT
Principal Executive Officer