10-Q 1 d99253e10vq.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-21343 MAII HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TEXAS 73-1347577 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5808 SEPULVEDA BLVD., SUITE 502 VAN NUYS, CALIFORNIA 91411 (Address of principal executive offices) (Zip Code) (818) 909-7425 (Registrant's telephone number, including area code) 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 --- --- As of August 14, 2002, there were 3,466,058 shares outstanding of the registrant's common stock, $0.002 par value. 1 PART I. FINANCIAL INFORMATION

2 MAII HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001

SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 3 MAII HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001 AND FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 4 MAII HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 5 MAII HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION OF AND FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2002 AND 2001 IS UNAUDITED) 1. ORGANIZATION AND LINE OF BUSINESS MAII Holdings, Inc. ("MAII"), formerly Medical Alliance, Inc. ("Medical Alliance"), was incorporated in Texas in 1989 and is headquartered in Van Nuys, California. Until December 31, 2000, the Company provided office based surgical services which allowed certain minimally invasive operative and diagnostic procedures to be performed in the physician's office. The Company provided its services throughout the United States. In 1993, the Company created two new wholly owned subsidiaries. MAI Safety Compliance Services, Inc. provided assistance to physician offices and other alternate site healthcare facilities to comply with OSHA standards. Physicians Marketing Services, Inc. provided group advertising services to physicians who utilized the Company's office based medical services and sold medical equipment and devices to physicians. Effective December 31, 2000 the Company consummated the sale of substantially all of its assets to ICN Pharmaceuticals, Inc. and on August 16, 2001, the Company acquired Car Rental Direct.com, Inc. Therefore, the results of operations for the six months ended June 30, 2002 are not comparable to those for the six months ended June 30, 2001. On August 16, 2001, the Company acquired Car Rental Direct, Inc. ("CRD"). CRD was incorporated in the state of Nevada on September 22, 1999. CRD is a rental car company that specializes in renting cars to customers whose personal or corporate vehicle is out of service for an extended period of time. CRD currently has 28 daily rental locations, four satellite locations and one wholesale used car facility in California and Arizona and has a fleet of approximately 2,300 cars. On May 1, 2002, the Company entered into an agreement ("Asset Purchase Agreement") to acquire substantially all of the operating assets of a Discount Rent-A-Car franchisee ("Seller"). The closing is subject to the obtaining of certain assignments and other conditions. In conjunction with the Asset Purchase Agreement, CRD has entered into an operating agreement ("Operating Agreement") with Seller to operate the Seller's Business. The Operating Agreement is effective May 1, 2002 and will be terminated upon the closing or termination of the Asset Purchase Agreement. As of August 14, 2002, the closing of this acquisition has not yet occurred and the assets and liabilities of the Seller have not been transferred to the Company. Upon closing of the asset purchase agreement the company expects that between 305 and 405 vehicles will be transferred to the Company. On June 12, 2002, the Company entered into an agreement (the "Reorganization Agreements") with Gump & Company, Inc. ("Gump") pursuant to which Gump acquired all of the outstanding common stock of CRD in exchange for an aggregate of 8,250,000 shares of newly issued common stock of Gump. In connection with the Reorganization Agreements, Gump changed its name to CRD Holdings, Inc. The Company's ownership percentage of CRD Holdings, Inc. was 96% as of June 30, 2002. Gump was originally incorporated on September 28, 1988 under the laws of the State of Delaware under the name of Brian Capital, Inc. On September 15, 1993, Brian Capital, Inc. changed its name to Sea Pride Industries, Inc. On August 18, 1997, Sea Pride Industries, Inc. changed its name to Gump & Company, Inc. and on June 19, 2002 Gump & Company, Inc. changed its name to CRD Holdings, Inc. as part of the transaction with CRD. Gump had minimal assets and liabilities at the date of the acquisition and did not have significant operations prior to the acquisition. 2. UNAUDITED INTERIM FINANCIAL INFORMATION The consolidated balance sheet as of June 30, 2002, and the consolidated statements of operations for the three and six months ended June 30, 2002, and consolidated statement of cash flows for the six months ended June 30, 2002 and 2001, have been prepared by the Company without an audit. The December 31, 2001 consolidated balance sheet is derived from the audited consolidated balance sheet as of that date. In the opinion of management, all adjustments (which include only normal, recurring adjustments) necessary to present fairly the financial position at June 30, 2002, and the results of operations and cash flows for all periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents The Company considers cash on hand, deposits in banks, and all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying amounts of these assets approximate fair value due to the short maturity of the investments. On April 19, 2002, the Company increased its' line of credit with a lender and was required to reserve $2 million as part of the new credit facility. Revenue Recognition Revenue consists primarily of fees from vehicle rentals and the sale of related rental products. The Company recognizes revenue over the period in which the vehicles are rented and recognizes revenue on the sale of the vehicles upon execution of a bill of sale. Revenue Generating Equipment Revenue generating equipment consists of rental vehicles that are stated at cost, less accumulated depreciation. The straight-line method is used to depreciate revenue generating equipment to estimated residual values over periods typically ranging from 44 months to 60 months. However, for certain vehicles purchased from a manufacturer that has filed for bankruptcy protection, depreciation was accelerated to 33 months to account for the decline in value of those vehicles. In accordance with industry practice, depreciation expense includes gains and losses on revenue generating vehicle sales in the ordinary course of business and is included as a component of cost of revenues in the accompanying statements of operations. At June 30, 2002, revenue generating equipment was $18,803,088, net of accumulated depreciation of $3,624,037, compared to revenue equipment $11,428,698, net of accumulated depreciation of $4,404,605 at December 31, 2001. Depreciation expense for the three and six months ended June 30, 2002 was $1,841,201 and $1,044,540, respectively. Goodwill In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is effective for fiscal years beginning after December 15, 2001. SFAS 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives but requires that these assets be reviewed for impairment at least annually or on an interim basis if an event occurs or circumstances change that could indicate that their value has diminished or been impaired. Other intangible assets will continue to be amortized over their estimated useful lives. Pursuant to SFAS 142, amortization of goodwill and assembled workforce intangible assets recorded in business combinations prior to June 30, 2001 ceased effective January 1, 2002. Goodwill resulting from business combinations completed after June 30, 2001 will not be amortized. The Company will test goodwill and intangible assets with indefinite lives for impairment during the fiscal year beginning January 1, 2002 and any resulting impairment charge will be reflected as a cumulative effect of a change in accounting principle. Earnings (Loss) Per Share The Company calculates earnings (loss) per share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The following potential common shares have been excluded from the computation of diluted net loss per share for the three and six months ended June 30, 2002 and 2001 because the effect would have been anti-dilutive:

6 Recent Accounting Pronouncements In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 updates, clarifies, and simplifies existing accounting pronouncements. This statement rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in APB No. 30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4 and is no longer necessary as SFAS No. 4 has been rescinded. SFAS No. 44 has been rescinded as it is no longer necessary. SFAS No. 145 amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-lease transactions. This statement also makes technical corrections to existing pronouncements. While those corrections are not substantive in nature, in some instances, they may change accounting practice. The Company does not expect adoption of SFAS No. 145 to have a material impact, if any, on its financial position or results of operations. In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3 a liability for an exit cost as defined was recognized at the date of an entity's commitment to an exit plan. The Company does not expect adoption of SFAS No. 146 to have a material impact, if any, on its financial position or results of operations. 4. PROPERTY AND EQUIPMENT Property and equipment at June, 2002 consisted of the following: Computers and software $ 489,266 Furniture and fixtures 195,824 Building improvements 202,476 ---------- 887,566 Less accumulated depreciation and amortization 240,712 ---------- TOTAL $ 646,854 ==========

Depreciation and amortization expense for the three and six months ended June, 30 2002 was $ 71,754 and $34,116. The Company had no depreciation and amortization expense for the three and six months ended June 30, 2001 because the assets of the company were sold effective December 31, 2000 when the Company consummated the Asset Sale with ICN. 5. Line of credit In January 2002, the Company discovered an additional $798,269 of lines of credit outstanding in connection with the acquisition of CRD, which in turn increased goodwill. On April 19, 2002, the Company increased its line of credit with a lender from $10 million to $18 million. Cash of $2 million was restricted for use as collateral for this line of credit. As of June 30, 2002, the Company's outstanding line of credit was $16,558,024 compared to $9,392,866 at December 31, 2001. Interest expense for the three and six months ended June 30, 2002 was $230,456 and $379,190 respectively. The lines of credit expire between August 2002 and June 2005. 6. Notes payable At June 30, 2002 and December 31, 2001, notes payable was $191,517 and $0, respectively. The balance at June 30, 2002 is comprised of a promissory note in the amount of $80,000, bearing no interest, due on demand and a promissory note with an outstanding balance of $111,517 which bears interest at 10% per annum, with monthly payments of $22,864 to be paid over a period of six months, starting on June 1, 2002. 7. COMMITMENTS Leases The Company leases its office facilities and car rental lots under various operating lease agreements with third parties. In addition, the Company also leases certain computer equipment and software under capital leases. The leases have initial terms of between 18 months and five years and require fixed monthly payments. Rent expense was $238,156 and $414,910 for the three and six months ended June 30, 2002. 8. BUSINESS RELATIONSHIP RESTRUCTURING AGREEMENT Effective March 26, 2002, the business relationship between the Company and Mr. Tyler was restructured pursuant to a Business Relationship Restructuring Agreement (the "Restructuring Agreement"). Pursuant to the Restructuring Agreement, among other things: (i) the term of Mr. Tyler's Employment Agreement with the Company (the "Tyler Agreement") was extended until January 1, 2005, and the severance thereunder in the event of a termination of the Tyler Agreement by the Company without "Just Cause" or by Mr. Tyler for "Good Reason" was amended to be Mr. Tyler's then current monthly salary multiplied by the lesser of: (1) the number of months remaining in the term of the Tyler Agreement; or (2) twelve; (ii) the option agreement issued by the Company to Mr. Tyler on January 12, 2001, to purchase 233,333 shares of the Company's common stock was canceled; (iii) $800,001 of a promissory note, dated February 1, 2001, issued by Mr. Tyler to the Company (the "Tyler Note") will be deemed to be repaid by the delivery of 2,012,582 ordinary shares of Solution 6 (the "Solution 6 Shares") to the Company by Mr. Tyler; on or prior to May 15, 2002; (iv) $554,931 of the Tyler Note was deemed to be reduced as a result of Mr. Tyler's purchase of 137,700 shares of the Company's common stock from other shareholders of the Company; (v) the remaining principal of and interest on the Tyler Note was canceled; and (vi) 413,333 shares of the Company's common stock issued to Mr. Tyler pursuant to a stock purchase agreement, dated as of February 1, 2001, by and between the Company and Mr. Tyler were canceled. To date, the delivery of the Solution 6 Shares has not occurred. 9. FINANCIAL ADVISORY AGREEMENT On March 8, 2002, the Company entered into a financial advisory agreement with a consultant. Under the terms of the agreement, the Company is to pay a non-refundable retainer of $75,000 and a fee of the greater of $250,000 or 2% of the aggregate gross proceeds of any automobile asset financing with new lenders, or 1% if the automobile financing is with the Company's current lenders, completed by the Company during the twelve months following the date of the financial advisory agreement. In the event the Company raises funds, during the twelve months following the date of the financial advisory agreement, with investors introduced to the Company by the consultant, the consultant will be paid a placement fee of 7% of the aggregate gross proceeds raised and will be issued warrants to purchase shares of the Company's common stock. The exercise price of the warrants will be equal to the purchase price of the shares being sold and the number of warrants issued will be equal to 7% of the gross proceeds raised divided by the exercise price of the warrants. The warrants will vest immediately and will expire ten years from the date of issuance. 7 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS: Forward-looking statements in this Form 10-Q are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. CRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial conditions and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements require managers to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates, including, but not limited to, those related to revenue recognition, accounts receivable and impairment of intangibles. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our consolidated financial statements. Revenue Recognition The Company's revenue was generated solely by its majority owned subsidiary CRD. Revenue from CRD consists primarily of fees from rentals and the sale of related rental products. The Company recognizes rental revenue over the period in which the vehicles are rented. Three and Six months ended June 30, 2002 AND 2001 Effective December 31, 2000 the Company consummated the sale of substantially all of its assets to ICN Pharmaceuticals, Inc. and on August 16, 2001, the Company acquired Car Rental Direct.com, Inc. Therefore, the results of operations for the six months ended June 30, 2002 are not comparable to those for the six months ended June 30, 2001. On June 12, 2002, the Company entered into an Agreement and Plan of Reorganization whereby it sold all of the outstanding common stock of CRD to CRD Holdings, Inc., a Delaware corporation ("CRDH"), in exchange for an aggregate of 8,250,000 shares of newly issued common stock of CRDH. For accounting purposes, the transaction has been treated as a recapitalization of CRD, with CRD as the accounting acquirer (reverse acquisition), and has been accounted for in a manner similar to a pooling of interests. The operations of CRDH have been included with those of CRD from the acquisition date. After this transaction MAII owned approximately 96% of the issued and outstanding common stock of CRDH. CRDH had minimal assets and liabilities at the date of the acquisition and did not have significant operations prior to the acquisition. Therefore, no pro forma information is presented. CRDH has changed its year-end to December 31, as part of the merger with CRD. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following tables list the Company's quarterly financial information for the first two quarters ended March 31, 2002 and June 30, 2002:

NET REVENUES. Net revenues for the three and six months ended June 30, 2002 were $7.7 and $11.8 million, respectively, net revenues of $7.7 million in the second quarter increases by $3.6 million or 85% from net revenues of $4.1 million in the first Quarter. The growth in revenues is primarily a result of CRD operating nine new offices during the second quarter. COST OF REVENUES. Cost of revenues was $5.1 and $7.8 million for the three and six months ended June 30, 2002 and consisted primarily of vehicle depreciation, interest on lines of credit, and cost of vehicle sales. Cost of revenues increased by $2.4 million from $2.7 to $5.1 million for the first and second quarter in 2002. GROSS PROFIT. Gross profit was $2.6 and 4.0 million for the three and six months ended June 30, 2002. Gross profit of $2.6 million in the second quarter increased by $1.2 million or 81% from gross profit of $1.4 million in the first quarter. The increase in gross profit is primarily attributable to expanding CRD's market presence in Arizona under the Operating Agreement as referred to in Note 2. SALARIES AND BENEFITS EXPENSE. Salaries and benefits expense was $1.5 and $2.7 million for the three and six months ended June 30, 2002. The increase in salaries and benefits was a result of hiring approximately 40 additional employees in May 2002. The Company had 172 employees for the six months ended June 30, 2002. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative expense was $1.8 and $2.6 million for the three and six months ended June 30, 2002. These expenses were primarily insurance expenses, consulting expenses, and expenses associated with the operation of the rental facilities and corporate offices. Also included in selling, general and administrative expenses is facilities expense of $287,000 and $504,000 for the three and six months ended June 30, 2002, respectively, consisting primarily of rent and utilities, and provision for uncollectible accounts of $56,131 and $77,353 for the three and six months ended June 30, 2002. OPERATING INCOME (LOSS). As a result of the items discussed above, the operating loss was $719,680 and $1.5 million for the three and six months ended June 30, 2002. OTHER INCOME AND (EXPENSE), NET. Other income and expense, net was $10,349 and ($71,146) for the three and six months ended June 30, 2002 and consisted primarily of interest earned on a certificate of deposit less interest on the Tyler note which was forgiven as discussed in Note 8. 8 BENEFIT FROM INCOME TAXES. During the three and six months ended June 30, 2002 The Company did not record a tax provision, however, the Company did receive a refund of $334,000 NET INCOME (LOSS). The Company's net loss was $710,667 and $1,561,220 for the three and six months ended June 30, 2002. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2002, the Company has an accumulated deficit of $3,403,481. CRD currently has a $18,000,000 flooring line with Ford Motor Credit Corporation ("Ford"), which bears interest at a revolving rate equal to the prime rate from time to time plus such prime rate minus Ford's A-1/P-1 paper note. As a condition of such flooring line, the Company has pledged to Ford a $2,000,000 certificate of deposit. This flooring line is for the purchase of Ford vehicles for CRD's fleet. As of June 30, 2002, CRD has drawn down approximately $16.6 million under this flooring line. CRD also has loans outstanding for vehicle credit facilities. CRD's flooring line and credit facilities are secured by titles to vehicles purchased with funds from such facilities. Net cash provided by operating activities was $83,547 for the six months ended June 30, 2002, primarily from net losses, other receivables and prepaid expenses offset by depreciation and amortization and accounts payable. Net cash used in investing activities for the six months ended June 30, 2002 was $1,199,279, primarily for the purchase and sale of vehicles and property and equipment. Net cash used in financing activities for the six months ended June 30, 2002 was $4,422,085, primarily for payments on lines of credit. As a result of the preceding, net cash decreased by $3,139,259 for the six months ended June 30, 2002. RECENT ACCOUNTING PRONOUNCEMENTS In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 updates, clarifies, and simplifies existing accounting pronouncements. This statement rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in APB No. 30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4 and is no longer necessary as SFAS No. 4 has been rescinded. SFAS No. 44 has been rescinded as it is no longer necessary. SFAS No. 145 amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-lease transactions. This statement also makes technical corrections to existing pronouncements. While those corrections are not substantive in nature, in some instances, they may change accounting practice. The Company does not expect adoption of SFAS No. 145 to have a material impact, if any, on its financial position or results of operations. In June 2002, the FASB issued SFAS No. 146 " Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability s incurred. Under Issue 94-3 a liability for an exit cost as defined was recognized at the date of an entity's commitment to an exit plan. The Company does not expect adoption of SFAS No. 146 to have a material impact, if any, on its financial position or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. None. PART II ITEM 1. LEGAL PROCEEDINGS. As of the date hereof, there are no legal proceedings pending against or involving the Company that in the opinion of management, could have a material adverse effect on the business, financial condition or results of operations of the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Effective March 26, 2002, the business relationship between the Company and Mr. Tyler was restructured pursuant to the Restructuring Agreement in which, among other things: (i) $800,001 of the Tyler Note will be deemed to be repaid by the delivery of the Solution 6 Shares to the Company by Mr. Tyler; on or prior to May 15, 2002; (ii) $554,931 of the Tyler Note was deemed to be reduced as a result of Mr. Tyler's purchase of 137,700 shares of the Company's common stock from other shareholders of the Company; (iii) the remaining principal of and interest on the Tyler Note was canceled; and (iv) 413,333 shares of the Company's common stock issued to Mr. Tyler pursuant to the Tyler Purchase Agreement were canceled. Additionally, the Company canceled 2,923,838 shares of treasury stock. 9 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

(1) Previously filed as an exhibit to the Company's Current report on Form 8-K filed June 27, 2002, and incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (No. 333-09815) and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement on form S-8 (No. 333-18545) and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference. (5) Management contract or compensatory plan or arrangement, which is being identified as such pursuant to Item 14(a)3 of Form 10-K. (6) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, and incorporated herein by reference. (7) Previously filed as Appendix A to the Company's Proxy Statement, filed November 9, 2000. (8) Previously filed as an exhibit to the Company's Form 8-K dated October 12, 2000, and incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Form 8-K dated August 27, 2001, and incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Annual report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference. 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAII Holdings, Inc. DATE: August 19, 2002

11 INDEX TO EXHIBITS

MAII HOLDINGS INC 10-Q