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 June 30, 1998
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.)
95 Park Street, Lewiston, Maine U.S.A.04240
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:
(207) 777-3423
(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 -
3,737,987 shares as of June 30, 1998.
1
PART I - FINANCIAL INFORMATION
ITEM 1
ACADIA NATIONAL HEALTH SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
June 30, 1998 June 27, 1997
_____________ _____________
Current Assets:
Cash-Operating $ 2,963 $ 101,585
Accounts Receivable 400,826 498,667
Un-billed Work at Estimated
Realizable Value 133,525 74,836
Inventories 4,256 4,091
Other Current Assets 69,035 4,371
------------- -------------
Total Current Assets $ 610,605 $ 683,550
Prop., Plant & Equip.:
Cost 218,150 169,596
Less Accum. Depr. (101,281) (73,837)
------------- -------------
$ 116,869 $ 95,758
Other Assets:
Other 7,000 7,500
Organization Cost 35,502 34,110
Less Accum. Amort. (8,272) (4,912)
Notes Receivable 52,400
-------------- -------------
$ 86,630 $ 36,698
Total Assets $ 814,104 $ 816,006
============== =============
Current Liabilities:
Accounts Payable $ 12,358 $ 1,568
Line of Credit 269,127 259,446
Accrued Expense 38,159 196,220
Current Portion of
Long Term Notes 18,000 18,000
-------------- -------------
Total Current Liabilities $ 337,644 $ 475,233
2
June 30, 1998 June 27, 1997
______________ _____________
Long Term Liabilities:
Long Term Debt 114,578 93,349
Other Non-Current Liabilities 0 0
-------------- -------------
Total Liabilities $ 452,222 $ 568,582
Stockholders' Equity:
Common Stock 276,640 251,640
Treasury Stock (1,272) 0
Paid In Capital 43,961 1,175
Retained Earnings 42,553 (5,391)
-------------- -------------
Total Equity $ 361,882 $ 247,424
-------------- -------------
Total Liabilities & Equity $ 814,104 $ 816,006
============== =============
See Accompanying
Notes to Financial Statements
3
ACADIA NATIONAL HEALTH SYSTEMS, INC.
STATEMENT OF INCOME
FOR THE THREE MONTHS
ENDED JUNE 30, 1998 AND JUNE 27, 1997
(Unaudited)
Three months ended Three months ended
June 30 June 27
__________________ __________________
1998 1997
__________________ __________________
Sales: $ 309,228 $ 156,355
Operating Expenses $ 278,754 $ 159,312
------------------ ------------------
Net Operating Income $ 30,474 $ (2,957)
Other Income/(Expense), Net $ 5,161 $ (7,767)
------------------ ------------------
Net Income (Loss) Before Taxes $ 35,635 $ (10,724)
Provision for Income Taxes $ 7,213 $ 2,405
------------------ ------------------
Net Income $ 28,422 $ (8,318)
================== ==================
Net Income (Loss) Per Share $ 0.008 $ (0.002)
Weighted Average Number
of Common Shares Outstanding 3,737,987 3,733,987
See Accompanying
Notes to Financial Statements
4
ACADIA NATIONAL HEALTH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1998
AND JUNE 27, 1997
(Unaudited)
Quarter Ending Quarter Ending
June 30, 1998 June 27, 1997
--------------- ---------------
Net Income (Loss) $ 28,422 $ (8,318)
Depreciation & Amortization 9,602 8,417
Changes in Assets & Liabilities:
Accounts Receivable 269,668 3,914
Other Current Assets 13,685 2,688
Other Non-current Assets 244
Accounts Payable (34,624) (1,293)
Other Current Liabilities (132,395) (126,248)
--------------- ---------------
Net Cash (Used for) Provided
By Operating Activities $ 154,357 $ (120,598)
Investment Activities (38,376) (908)
Financing Activities (132,707) 69,866
--------------- ---------------
Net Increase (Decrease) in
Cash or Cash Equivalents (16,726) (51,639)
Cash & Cash Equivalents:
Beginning of Period 19,689 153,222
End of Period $ 2,963 $ 101,583
=============== ===============
See Accompanying Notes to
Financial Statements
5
ACADIA NATIONAL HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
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 1997 Annual Report filed on Form 10KSB. 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 3,737,987
shares for the three months ending June 30, 1998 and 3,733,987 shares for the
three months ending June 27, 1997.
Note 3. Long Term Debt - Short Term Financing
The total of lines of credit drawn upon (outstanding) from Northeast Bank, FSB
("Bank") as of June 30, 1998 was $269,127 on a $650,000 demand line limit,
compared to $259,446 at June 27, 1997 on a line of credit from Peoples
Heritage Bank.
On July 24, 1997, Bank provided the Company an $100,000 term loan, and on June
24, l998 an additional $30,000, of which $111,728 is outstanding. All loans
made by Bank under such facilities are renewable at six month terms.
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.
6
Note 4. Majority Stockholders
Mr. Paul W. Chute, Mrs. Jacquelyn J. Magno and Mr. Mark T. Thatcher, members
of the Board of Directors, had total voting authority, on June 30, 1998 and
owned approximately 67% of the Common Stock of the Company.
Note 5. Additional Bank Financing Events
A. On July 24, 1997 and renewed on July 1, l998, Northeast Bank FSB of
Auburn, Maine provided the following loans, which were used to retire all
outstanding debt obligations to Peoples Heritage Bank, with the following
balance for operations:
1.) $400,000 line of credit for operations and funding
of its waivered billing/foster care product, variable at
1.25% over national prime APR.
2.) $100,000 term loan, 5 year variable, at 1.25%
over national prime APR.
3.) $250,000 line of credit to fund a new billing
service product, variable at 1% over national
prime APR.
4.) On June 24, l998 an additional $30,000 term loan, 4 year
variable at 1.25% over national prime APR was authorized
and combined with loan No. 2 above.
These new term loans and lines of credit are secured by the accounts
receivable, inventory and equipment of the Company.
Note 6. Account Receivable Financing
The Company has arrangements with certain customers whereby the Company
advances the customers amounts based on their security and collateralized by
their accounts receivable. The Company then assumes the responsibility for
billing and collecting such receivables.
06/30/98 06/27/97
Accounts Receivable (Trade) $201,114 $129,405
Accounts Receivable (Advances) 333,237 444,098
Total Accounts Receivable $534,351 $573,503
========= =========
7
The Advances are secured by third party collateral and pre-approval from the
State of Maine Department of Human Services.
Item 7. Note Receivable
The Company holds $86,293 in a conditional note receivable from a vendor of
which $75,000 earns 10% interest, due in monthly installments of $2,420,
including interest beginning November 1, l998. The $75,000 note is secured by
accounts receivable, equipment and inventory of the vendor.
8
ITEM 2.
ACADIA NATIONAL HEALTH SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
June 30, 1998
RESULTS OF OPERATIONS:
======================
THREE MONTHS ENDING JUNE 30, 1998
=====================================
The Company's financial statements and notes thereto for the current period
and the audited financial statements and notes thereto for the fiscal year
ending September 27, l997, should be read in conjunction with this
Management's Discussion.
FORWARD-LOOKING INFORMATION
This Analysis and Discussion contains certain forward-looking statements
within the meaning of Section 27 (A) of the Securities and Exchange Act of
1933 and Section 21 (E) of the Securities and Exchange Act of 1934. Actual
results could differ materially from those projected in the forward-looking
statements as a result of certain risks factors set forth below and elsewhere
in this report. In addition to the other information contained in this
report, individuals should carefully consider the following risk factors:
1. The Company believes that its assumptions are based upon reasonable
data derived from and known about its business and operations. No assurances
are made that actual results of operations or the results of the Company's
future activities will not differ materially from its assumptions;
2. Additional risks factors such as the uncertainty of the Company's
marketing activities, and the results of bringing additional acquisitions and
affiliations into a smooth operation with Company are unknown;
3. Additional concerns regarding the year 2000 compliance standards as
they effect the Company's operating technology as well as the technologies of
the industry which effect payment and processing of Company's billings;
4. In addition to the uncertainties regarding Federal and state
government regulations; specifically, Medicare compliance standards relative
to fraud, abuse and the Company's approach to defining and maintaining an
appropriate and thorough compliance program for such Federal and state
standards;
9
5. Additional uncertainties regarding the ability for operating cash to
meet the current and projected cash flow needs of the organization;
6. Readers are cautioned not to place undue reliance on these
forward-looking statements, as they attempt to speak only of activities known
or anticipated as of this date.
YEAR 2000 COMPLIANCE
The Company continues to review its technology systems to attempt to discover
what effects year 2000 issues may have on its operations. Many of the earlier
systems, found not to be compliant, have been replaced while others are being
modified to comply. The Company is working with its known suppliers of
technology or services controlled by technology that might be effected by the
year 2000 events and are seeking written assurances from those determined to
have a potential effect upon Company's operations. However, there can be no
assurance that the Company will identify all of its data handling problems in
its business systems or those of its suppliers or clients in advance of any
effect upon Company's operations. The Company, therefore, bears some
unlimited and unknown risks to the year 2000 issue and could also be adversely
effected if other entities (State of Maine Department of Medicaid or
Medicare)does not adequately or timely resolve their payment mechanisms as it
relates to the Company's ongoing billing operations for its clients.
SALES
Sales for the period were $309,228 compared to $156,355 for the corresponding
period in 1997. This represents a 98% increase in volume for the period.
This sales increase was due to new client business starting mid March 1998.
Acadia has been successful in adding six (6) new clients during mid March with
annualized revenues of $325,000 and three (3) contracts for mid April 1998
with revenues of $100,000.
These new clients are medical specialists in radiology, anesthesiology,
behavioral and family medicine which further compliments our solid base in
these disciplines.
The Company anticipates successfully signing in July 1998 a significant
contract with a major local behavioral medicine group for a one year term with
expected revenue of $250,000. Half of this contract requires Acadia to work
out old receivables from the client's previous billing company. No assurances
of a contract extension for the ongoing work exists and both parties have
agreed to review the companies results in May 1999 to determine if any future
contractual relationship should take place.
Two additional client contracts have been signed effective August 1, l998 and
September 1, l998, with anticipated gross sales of $50,000 to $65,000 for the
Company's fiscal year 1999.
10
OPERATING EXPENSES
Increases in operating expenses during the period were principally due to
routine operating expenses, addition to increases in depreciation, office
expenses, legal and accounting fees and hiring additional members of senior
management. Reactive operating expenses are anticipated with the major
behavioral client contract and the other contracts signed for July, August
and September.
OPERATING INCOME
An operating gain for the quarter June 30, l998 was $28,422, compared to a
loss of $8,318 for the three month period in 1997.
INCOME TAXES
Acadia is a C Corporation with current period June 30, l998 accruals for state
and Federal taxes of $7,213 versus a tax credit of $2,405 for the period
ending June 27, l997.
NET INCOME
Acadia's gain of $28,422 was $0.008 per share on 3,737,987 outstanding common
shares for the three months ended June 30, l998 compared to a loss of $8,318
or ($0.002) per share on 3,733,987 outstanding common shares for the period
ended June 27, l997. The fiscal year 1998, fourth quarter ending September
30, l998, should show an improved net income due in part to the large
behavioral medicine client and its immediate effect on positive cash flow.
The Company is experiencing an improved cash flow due to improved payments
from major payers and is anticipating an additional cash flow from the active
collections of the old receivables of the behavioral medicine client.
LIQUIDITY AND CAPITAL RESOURCES
The Company's non-trade accounts receivable decreased to $333,237 due to the
reimbursement from the State of Maine for waivered foster home and non-medical
billing programs. These are clean secured receivables with the majority due
from the State of Maine. Acadia completed most of its corporate organization
costs prior to this quarter. Anticipated public reporting expenses and
planned acquisitions will place additional demands on liquidity. Management,
with its new principal lender, Northeast Bank FSB maintain routine analysis
of the lines of credit and the Company's capital needs.
The Company received a $30,000 four (4) year term loan, variable rate of 1.25%
over national prime APR on June 24, l998. This Loan was used for capital
costs of bringing on new clients and working capital.
11
The Company plans on investing $75,000 to $100,000 in technology and software
during the fourth fiscal quarter of 1998 ending September 30th. The Company
anticipates cash flow from operations and the $30,000 term loan to adequately
meet these expenditures.
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
4,000 shares of common stock, no par value, were issued to new
management staff as recruiting inducements to join the Company.
ITEM 3 Defaults Upon Senior Securities
None
ITEM 4 Submission of Matters to a Vote of Security Holders
None
ITEM 5 Other Information
OTHER INFORMATION
===================
Acadia spent the last of 1997 and first of 1998 preparing our organization for
rapid sales growth and expansion. We have completely revised our operating
policies, installed a new financial management system and recruited
experienced, operational and management personnel. We are now adding clients
at the rate of one to two per month, with current annualized sales more than
doubling as compared to the prior year. Additionally, we maintain our current
public reporting status pursuant to Section 12 of the Securities Exchange of
1934 (the "Exchange Act") and have our common equity listed for trading on
the OTC Bulletin Board under the symbol OTCBB: ACAD. During the third
quarter of 1997 year the Company negotiated three signed Letters of Intent
with other medical management service organizations and technology companies.
12
Due to the inability of management and advisors of Acadia to negotiate terms
favorable for the Company and its shareholders, discussions with these
businesses have been terminated. Acadia has initiated and maintains
discussions with other medical service businesses regarding potential
business alliances that are ongoing. The Company is working with investment
firms, specializing in health care companies, who might be interested in
arranging future capitalization. Acadia is also developing a relationship
with retail brokerage firms who will assist in providing support to our
public float. Due to Acadia's rapid growth, we are relocating our corporate
and operational office to a larger facility in the downtown business district
of Lewiston, Maine. This move will be completed by the end of July, 1998.
MAJOR ACQUISITION
The Company has ongoing discussions with various companies concerning
potential business combinations that would continue to strengthen Acadia
and its product lines.
SALES TRENDS
Growth in Acadia's existing business lines, medical billing services and
billing for waivered foster home care are positive. Current sales run rates
show a 100% increase in revenue since this same period last year.
BUSINESS AND PROPERTIES OF ACADIA NATIONAL HEALTH SYSTEMS, INC.
HISTORY
Physician Resources, Inc. the predecessor of Acadia was formed in 1972 as a
doctor billing and bookkeeping services company. In 1990 bookkeeping and
doctor billing functions were segregated into separate companies. The
successor company, Acadia, continued the operations of Physician Resources and
currently provides practice management, invoicing and accounts receivable
collection services for doctors offices, foster homes, hospital operating
departments and hospital-based practices.
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 current quarter
are compared with the operations for the same quarter a year earlier.
Comparative results have not been adjusted for the difference between
Acadia's calendar quarters ending June 30, l998 in a calendar month end and
Acadia's fiscal quarter ending June 27, 1997 on the last Friday of a calendar
month.
13
On January 13, 1997, Acadia's SEC application Form 10SB was effectuated. On
May 20, 1997, the Company received NASD clearance pursuant to the filing of a
Form 211 and accompanying Information and Disclosure Statement, allowing for
its common equity to commence trading on the OTC market during the third
quarter of FY 1997. This will allow the Company to approach capital markets
and initiate the raising of equity when needed to fuel growth through mergers
and acquisitions. Access to public markets is critical, since the growth
rates will be too rapid to fund through earnings or debt.
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 medical service
financing. Many health service payers, led by Medicare and Medicaid, require
electronic billing to reduce processing costs. Electronic billing brought the
added benefit of improved reliability and timeliness of third party payments,
therefore, 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 and
is a very successful service for Physician Resources.
Acadia principally uses MediSense software technology from CompuSense of
Nashua, New Hampshire. This software technology is rapidly becoming a major
supplier of complete medical billing solutions for physicians and medical
services organizations throughout the northeast. This system includes the
capability of: automated patient appointment scheduling, electronic charting
features, client/server based medical practice management, electronic billing
and direct funds transfer. The technology is capable of distributed data
processing with multiple location data entry and discrete paper copy printing,
unlimited client accounts and patient census, all running on the Novell
network. These attributes will provide the technological base that will
reinforce the Company's long-term objective as a major player in tertiary
markets.
The Company will grow through strategic acquisitions, joint ventures and
internal expansion. Promotion of our medical billing software technology and
medical practice management consulting services will add additional growth to
our front line business of medical billing. Many smaller billing services and
some practice management consultants are ill equipped to deal with the changes
occurring in the health care market and the regulatory environment and these
are candidates for affiliation. Acadia intends to grow its business through
mergers and acquisitions of companies who's business philosophy is based on
producing a high quality product, who's management is dedicated to long term
ethical growth and who's organization and structure are complimentary to
Acadia's vision of a superior company with a superior product.
14
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.
15
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
August 14, l998 /s/ Mark T. Thatcher
MARK T. THATCHER,
Filing Agent
August 14, l998 /s/ Paul W. Chute
PAUL W. CHUTE
Chief Executive Officer