SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Form 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended June 30, 1996
Commission File No. 033-97034
HELP AT HOME, INC.
(Exact Name of registrant as specified in its charter)
DELAWARE 36-4033986
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
223 West Jackson Blvd.
Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
(312)663-4244
(Registrant s telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class: Name of Exchange on which
registered:
Common Stock, Par Value $0.02 NASDAQ National Market
Indicate by checkmark 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 by check mark if disclosure of delinquent filers pursuant to
item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10KSB or any amendment in this Form 10-KSB.[X]
Registrant s revenues for its most recent fiscal year: $11,886,000
The aggregate market value of the registrant s Common Stock held by non-
affiliates of the registrant as of September 27, 1996 was approximately
$5,998,125 (for purposes of the foregoing calculation only, each of the
registrant s officers and directors is deemed to be an affiliate).
There were 1,869,375 shares of registrant s Common Stock outstanding as
of September 27, 1996.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format(Check One) Yes [ ]No [X]
<PAGE>
PART I.
Item 1. DESCRIPTION OF BUSINESS.
Help at Home, Inc. and its subsidiaries (collectively, the Company)
provide homemaker, custodial and skilled home health care services to
elderly and disabled persons within their homes. Such services consist
of nutritional planning and assistance, household management, personal
care, skilled nursing interventions, rehabilitative therapy, and medical
social work services. The majority of the Company s clients are obtained
and served through 14 regional contracts with the Illinois Department on
Aging (IDOA) and contracts with other state and municipal agencies. Help
at Home also provides medically necessary, skilled home health care
services through its subsidiaries certified as Medicare home health
agencies. The Company operates through 24 offices in Illinois, Indiana,
Missouri, Alabama and Mississippi.
History of the Company.
The Company was incorporated on August 7, 1995 in the State of Delaware.
On December 5, 1995, the Company completed an initial public offering
through which 819,375 units were offered and sold to the general public.
The Company received gross proceeds of $5,162,063 from the initial public
offering. Each unit consisted of one share of Common Stock, $.02 par
value, of Help at Home, Inc. and two redeemable common stock purchase
Warrants. The Common Stock and Warrants were immediately detached upon
the effective date of the offering and are separately transferable. The
Warrants are immediately exercisable Each Warrant generally entitles the
holder to purchase one share of Common Stock for $6.00 commencing one
year after the offering, or sooner if the Warrants are called for
redemption, until the close of business on December 5, 2000. The
Warrants are redeemable, in whole or in part, at a price of $.10 per
Warrant, commencing one year after December 5, 1995 and prior to the
expiration date, provided that prior written notice of not less than 30
days is given to the Warrant holders and the closing price of the Common
Stock is at least $9.00 for ten consecutive trading days.
Help at Home, Inc., an Illinois corporation, was incorporated on October
29, 1974 and through a merger on June 17, 1982, merged with and into Help
at Home of Evanston, Inc., an Illinois corporation, which was originally
incorporated on February 27, 1975. Simultaneously with the merger, the
surviving entity changed its name to Help at Home, Inc.
Lakeside Home Health Agency, Inc. was incorporated in the state of
Missouri on April 20, 1993. Lakeside Home Health Agency, Inc., a Medicare
certified home health agency, was acquired by the Company on July 20,
1995. Lakeside Home Health Agency, Inc., an Illinois corporation, was
incorporated on August 3, 1995.
Rosewood Home Health, Inc. was incorporated in the State of Illinois on
March 4, 1994. A Medicare certified home health agency, the corporation
was acquired by the Company on January 30, 1996.
As of May 31, 1996, the Company acquired HASC Staffing Services, Inc.,
Homemakers of Montgomery, Inc. and Statewide Healthcare Services, Inc.,
all doing business as Oxford Healthcare. HASC Staffing Services, Inc., a
Mississippi corporation, was incorporated on March 23, 1986. Homemakers
of Montgomery, Inc., an Alabama corporation was incorporated on March 27,
1995. Statewide Healthcare Services, Inc., a Mississippi corporation,
was incorporated on January 10, 1974.
<PAGE>
The Company s principal executive offices are located at 223 West Jackson
Blvd., Chicago, IL 60606. The telephone number of the executive office
is (312)663-4244.
Pending Acquisition.
In May 1996, the Company signed an asset purchase agreement with
Dependable Nursing Home Health Services, Inc. (Dependable) through which
it acquired the right, title and interest in Dependable s Medicare
license, certification, provider number, related business records and
information subject to review and approval by the Illinois Department of
Public Health relative to transfer of Dependable s Medicare certification
and licensure. Consideration for the transaction is $149,000, which has
been placed in escrow.<PAGE>
Overview of the Home Care Industry.
The home care industry serves the elderly as well as persons with
temporary or permanent disabilities of any age. The primary purpose of
home care programs is to keep clients from becoming institutionalized and
to fill the gap created by inadequate health insurance coverage. The
need for such services has escalated over the last decade due to the
general aging of the population and the desire of elderly or disabled
persons to maintain their quality of life by remaining independent and
living in their own homes.
According to published industry data, the home care industry in 1994
constituted a $23 Billion market, with annual growth rates for this
sector of the economy exceeding 20%. In addition to the general aging of
the population, primary reasons cited for such rapid growth include the
substantial cost savings achievable through at-home care as an
alternative to more expensive institutional care, medical and
technological advances which enable a growing number of treatments to be
administered at home rather than in a medical facility and Medicare
reimbursement policies which provide certain incentives to minimize the
length of in-patient hospital stays.
Moreover, it has been predicted that long-term maintenance home care
services will be the largest area of growth in the home care field.
Fully 20% of those over 65 can be considered frail elderly who experience
functional limitations secondary to chronic disease processes; while 46%
of those over the age of 85 fall into the frail elderly grouping and are,
therefore, candidates for continuous, long-term custodial home care
services. The need for assistance with the activities of daily living
such as eating, dressing, bathing, walking and household management is
sometimes thought of as a social need rather than a medical requirement.
However, the provision of these basic services, often by a paid home care
worker, is crucial to the health and well-being of the elderly patient
and is being considered more and more often as medically necessary,
preventive care.
The majority of home care recipients obtain services by participating in
federally or state-funded programs for which they are eligible.
Medically necessary, skilled home health care interventions, such as
those provided through the Company s Medicare certified home health
agencies, are reimbursed through Medicare Part A payments. Similarly,
non-medical, custodial services to homebound clients are provided
pursuant to contracts with agencies such as the Illinois Department on
Aging or various Medicaid Waiver Programs. The Company is a provider to
Medicare, Medicaid and other state program recipients through various
contractual arrangements.
<PAGE>
There have been a number of proposals offered in recent years through
which the Federal government would increase its involvement in the
delivery of health care, lower reimbursement rates for home care services
and/or modify the payment methodology for Medicare home health services.
The Company cannot predict what effect, if any, such proposals may have
given the wide variety of proposals and the changing nature of the
political, economic and regulatory influences at work in the government
and U.S. economy. The Company believes, however, that such proposals will
take time to enact, will likely have a phased-in approach and will,
therefore, have minimal impact on the Company s business in the immediate
future.
In August, 1996, the U.S. Congress ratified an increase in the Minimum
Wage to $5.15 as of September, 1997. The minimum wage amendment to the
budget bill will affect the Company through imposition of an increase in
the minimum wage as of October 1, 1996 to $4.75. The Company, in
anticipation of such a wage increase, is working to effect pro-rata rate
increases in each of its affected homemaker service contracts.
Business Strategy.
The Company s business strategy is to provide a variety of home care
services, through skilled therapeutic interventions (nursing and therapy
services) and custodial (homemaker services), to a diversified mix of
groups and individuals in the geographic markets served by the Company.
The Company expects to expand the number of locations and markets it
serves through development of additional service contracts, acquisition
of existing home care businesses and introduction of complementary
services. Key elements of the Company s strategy include:
1) Broadening Customer Relationships. The Company has revamped
its marketing program in an effort to identify and obtain additional
contracts and grants from local, state and federal government programs.
Likewise, the Company has focused on involvement in community
organizations and senior service activities, such as those offered by
local senior service provider councils and coalitions for the purpose of
enhancing the Company s name and service recognition among the its
constituencies.
2) Cross-Marketing Services. The Company believes that numerous
opportunities exist to cross-market services, thus ensuring retention of
clients who may experience fluctuations or changes in their home care
needs. For example, an elderly home care client who becomes ill may
require skilled services for a time, after which his/her needs may revert
back to custodial care. Help at Home will be in a position, either
through its homemaker service divisions or Medicare home health agencies,
to meet the needs of such clients. As the Company continues to strengthen
its ability to continuously meet changes in the home care requirements
of its elderly clientele it will avoid loss of business to other
providers with a wider, or different, array of service offerings.
3) Acquiring Complementary Businesses. The Company intends to
continue to pursue acquisition of businesses that complement the
Company s existing locations and/or service offerings. Desirable
acquisition targets include Medicare-certified providers of skilled
nursing and related services proximately located to current operating
units. The Company will also continue to focus on existing home care
companies whose service lines can be readily expanded through the
addition of new services, such as skilled service providers that can be
readily expanded through the addition of custodial services.
<PAGE>
4) Achievement of Operating Efficiencies. The Company believes
that, as it increases in size and market share, it will be able to
reduce, as a percentage of revenues, corporate overhead and operating
costs including personnel, insurance, computer and communications
systems, legal, accounting, and marketing expense. By increasing the
Company s revenue base through internal growth and acquisitions, the
Company believes it can achieve certain economies of scale, that will
allow the Company to recoup a larger profit from its services.
5) Increasing Market Penetration in Selected Markets. The
Company has focused on increasing its market share in Alabama and
Mississippi in connection with the acquisition of Oxford Healthcare. The
Company has opened 11 new offices in Illinois, Indiana, Missouri and
Alabama for the purpose of strengthening its market presence. The Company
will continue to focus on business development and acquisitions in
neighboring areas throughout the Midwest, Southeastern, Mid-Atlantic and
Southwestern part of the United States.
Services.
The Company maintains contracts with several state and municipal agencies
to provide custodial services to elderly and disabled clients. Such
custodial services generally entail homemaker services, household
management, and assistance with activities of daily living. The Company
provides in-depth training to its workers who provide such services to
ensure consistency of approach and adequacy of care.
Case managers, engaged by the state agencies, generally refer custodial
care clients to the Company after eligibility for service is determined.
Case managers generally refer clients to home care companies on a
rotating basis unless a specific home care provider is identified by the
client to be served. Approximately 90% of the Company s revenues in
fiscal 1996 were derived from the delivery of custodial services.
In addition to custodial services, the Company provides skilled services
to those with an established medical need as determined by a physician.
Skilled home care services include nursing interventions, physical
therapy for improvement of range of motion and pain reduction,
occupational therapy for enhancement of the patient s ability to perform
routine activities of daily living, speech therapy directed at resolution
of swallowing or language difficulties and medical social work services
to address and help resolve issues related to the psycho-social aspects
of home care . Through its Medicare certified home health agencies, the
Company also provides home health aide services that are provided under
the direct supervision of a nurse.
The Company has indicated its intention to enter into hospice care
through which it will provide in-home care to terminally ill patients.
In-home hospice care offers an alternative to hospice centers or nursing
homes for terminally ill individuals who prefer to live out the remainder
of their lives in their own residences. It is the Company s intention to
provide such services, through licensed and certified hospice
organizations, to Medicare and Medicaid patients. The Company has
completed its first applications to form hospices under the aegis of
Oxford Healthcare in Alabama and Mississippi; however, the hospices are
not yet operational.
<PAGE>
Customers.
The Company s customers include, but are not necessarily limited to, case
management units, third party administrators, physicians, hospital
discharge planners, social workers, third party payers including
Medicare, and other types of health care organizations. Approximately
73% of the Company s revenues during fiscal 1996 were derived from the
Illinois Department on Aging with another 17% attributable to other
homemaker service contracts and 10% attributable to the Medicare program.
The programs through which the Company derives its revenues require that
certain standards for eligibility and participation are continually met.
Billing and payment arrangements with the Company s customers are
specified in payor contracts that are non-exclusive and which do not
obligate the payor to utilize a certain volume of services over a
specified time period. The Company s customers often use a variety of
providers in addition to the Company, thus necessitating competition
among several providers on the basis of pricing, array of service
offerings, availability of caregivers and/or quality of services.
With regard to the Company s contractual arrangement with the Illinois
Department on Aging (IDOA), the Company must ensure that the direct costs
associated with providing service to IDOA clients is at least 73% of
charges. The Company is in compliance with this contract requirement.
Should the Company be unable to maintain its compliance in this regard,
the contractual arrangement could be subject to immediate termination.
Regulation.
Custodial services are generally unregulated. The Company must, however,
maintain certain state and/or federal licenses or certifications in order
to offer specific health services. With respect to licensure of skilled
home health care services, each state specifies the manner in which home
health agencies will operate. Approximately half of the states,
including Alabama and Mississippi, require that home health agencies
possess one or more valid Certificates of Need (CON) in order to qualify
as a provider of Medicare home health services. Absent a valid CON, a
home health agency may be precluded from providing certain services or
expanding its operations into new geographic areas. Recently, however,
several states have initiated a process through which the requirement may
be reconsidered and many expect that, within the next several years,
reliance on CONs as a means of controlling home health care costs will
significantly diminish. In the meantime, however, new Certificates of
Need are generally unavailable, thus limiting the ability of would-be
Medicare home health providers to enter CON markets. The Company
possesses a Certificate of Need in Montgomery County, Alabama through
Homemakers of Montgomery, Inc. and has initiated an action in the Circuit
Court of Montgomery County Alabama (15th Judicial Circuit) to secure CON
authorization in the Alabama counties of Bullock, Elmore, Macon and
Tallapoosa.
All Medicare home health agencies must also successfully demonstrate, on
an annual basis, compliance with Medicare Conditions of Participation in
order to continue to provide services to Medicare beneficiaries. Such
conditions generally embody established standards for home health agency
management of personnel, adherence to patients rights, supervision of
care, financial management and the presence of an independent,
professional advisory group. All of the Company s Medicare provider
units have successfully passed their annual Medicare surveys.
<PAGE>
As well, Homemakers of Montgomery, Inc. has been accredited by the Joint
Commission on the Accreditation of Healthcare Organizations (JCAHO). The
Company intends to apply for JCAHO accreditation for each of the
operating units providing skilled home health services.
Competition.
The Company competes with other providers of custodial services for
various state and municipal contracts pursuant to a competitive bidding
process. Each company competing for a bid is required to provide
specific information regarding its history and duration as a provider of
services. Depending on each bidder s responses to requested information
and the fulfillment of specific evaluative criteria, points are awarded
to each provider with contracts going to the bidders with the greatest
number of accumulated points. With respect to this process, the key
competitive factors are the length of time in business and the geographic
areas served by the provider. As a result of the Company s long history,
market penetration and presence, the Company has been highly successful
in obtaining contracts for provision of custodial services.
Competition among home health agencies for Medicare patients is based, in
part, on availability of qualified personnel who can be dispatched to
care for a patient in a timely manner. Likewise, a home health agency s
array of service offerings, geographic coverage and relationships with
major referral sources significantly influences competitive position. In
states with applicable CON regulations, competition may be more limited
due to the smaller number of providers in any one market. There is
limited, if any, price competition with regard to services provided to
Medicare and/or Medicaid coverage recipients.
Employees.
Exclusive of field personnel who work on a per diem basis, the Company
has 133 administrative employees.
The number of caregivers providing services to clients varies from day to
day. These personnel do not, necessarily, work full time shifts; nor do
they exclusively work for the Company. Certain of the Company s
employees in Chicago are represented by a union. Relations with the
union are considered to be good.
The Company has in place a screening process for all of its caregivers to
ensure compliance with laws generally, and the absence of criminal
convictions and/or disciplinary actions that limit professional activity.
Item 2. Description of Property.
The Company s principal executive offices are located at 223 West Jackson
Blvd., Chicago, IL and consist of approximately 3,100 square feet of
rented space. Similarly, the Company leases office space in each of its
24 operating locations as follows:
Help at Home, Inc. - Corp Offices Help at Home, Inc. - Chicago
223 West Jackson Blvd, Suite 500 223 West Jackson Blvd., Suite 510
Chicago, IL 60606 Chicago, IL 60606
Lease expires November 30, 2000 Lease expires November 30, 2000
<PAGE>
Help at Home, Inc. - St. Charles Help at Home, Inc. - Ottawa
103 North 11th St. Suite 107 615 West Main Street
St. Charles, IL 60174 Ottawa, IL 61350
Lease expires March 31, 1999 Lease expires July 9, 1997
Help at Home, Inc. - Alton Help at Home, Inc. - St. Louis
627 South Bellwood, Suite 6, 300 Biltmore Drive - Suite 336
Alton, IL 62002 Fenton, MO 63026
Lease expires February 28, 1997 Lease expires July 31, 1998
Help at Home, Inc. - Waukegan Help at Home, Inc. - Oak Forest
2504 Washington Street, Suite 101 15337 S. Cicero Ave., Suite F
Waukegan, IL 60085 Oak Forest, IL 60452
Lease expires June 30, 1997 Lease expires May 31, 1998
Help at Home, Inc. - Quad Cities Help at Home, Inc. - Munster
2100 18th Avenue, Suite 5 9250 Columbia, Suite D2
Rock Island, Il 61201 Munster, IN 46321
Lease expires July 31, 1998 Lease expires June 30, 1997
Help at Home, Inc. - Macomb Help at Home, Inc. - Belleville
107 Business and Tech Center 213 South Illinois, Suite 101
Western Illinois University
Macomb, IL 61455 Belleville, IL 62220
Lease expires March 31, 1997 Lease expires April 14, 1999
Lakeside Home Health Agency - MO Lakeside Home Health Agency - IL
300 South Biltmore 223 West Jackson Blvd.
Fenton, MO 63026 Chicago, IL 60606
Lease expires July 31, 1998 Month to Month Lease
Rosewood Home Health, Inc. Rosewood Home Health, Inc.
621 South Bellwood 213 South Illinois
East Alton, IL 62024 Belleville, IL 62220
Lease expires February 28, 1997 Lease expires April 14, 1999
Homemakers of Montgomery, Inc. Statewide Healthcare Services, Inc.
229 Interstate Park Drive 3828 Interstate 55 North
Montgomery, AL 36109 Jackson, MS 39211
Lease expires December 31, 1998 Lease expires May 31, 2001
Statewide Healthcare Services,Inc. Statewide Healthcare Services, Inc.
420 B Snow Street 956 Montclair Road, Suite 218
Oxford, AL 36203 Birmingham, AL 35213
Month to Month Lease Lease expires July 31, 1997
Statewide Healthcare Services,Inc. Statewide Healthcare Services, Inc.
115B Longwood Drive SE 1141 Montlimar Drive, Suite 2400
Huntsville, AL 35801 Mobile, AL 36609
Lease expires July 31, 1997 Lease expires July 31, 1997
Statewide Healthcare Services, Inc.Statewide Healthcare Services, Inc.
188 North Foster, Suite 200 2000 Flint Road, Suite 102
Dothan, AL 35708 Decatur, AL 35602
Lease expires September 30, 1998 Lease expires September 30, 1997
HASC Staffing Services, Inc.
3828 Interstate 55 North
Jackson, MS 39211
Lease expires May 31, 2001
<PAGE>
Office leases are generally for terms of one to five years. The Company
believes that its office facilities, which are utilized exclusively for
administrative purposes, will be generally suitable to fulfill the
Company s needs for the foreseeable future. The Company maintains
insurance on all of its properties.
Item 3. Legal Proceedings.
The Company is not a party to any legal proceedings which it believes may
have a materially adverse effect on the Company s financial condition or
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders of the
Company during the fourth quarter.
PART II.
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company s Common Stock and Warrants are traded on the NASDAQ National
Market under the symbols HAHI and HAHIW, respectively. The following
table shows the high and low bid price information, as quoted by NASDAQ.
Such quotations reflect inter-dealer prices, without retail mark-ups,
markdowns or commissions, and may not necessarily represent actual
transactions.
<TABLE>
Common Stock Bid Price
High Low
<S> <C> <C>
HAHI:
1996 Fiscal Year
First Quarter N/A(1) N/A(1)
Second Quarter $6.00 $5.50
Third Quarter 6.19 5.38
Fourth Quarter 8.38 5.50
HAHIW:
First Quarter N/A(1) N/A(1)
Second Quarter $1.25 $ .75
Third Quarter 1.63 1.13
Fourth Quarter 3.13 1.50
- ----------------
(1) The Company s Common Stock and Warrants commenced trading on
December 5, 1995.
</TABLE>
There were approximately 11 holders of record of the Company s Common
Stock as of September 27, 1996 and approximately 5 holders of record of
the Warrants as of the same date. This number includes shareholders of
record who may hold stock for the benefit of others.
The Company does not expect to pay dividends on its Common Stock in the
foreseeable future. Management intends to retain all available funds for
the development of the business and for use as working capital.
<PAGE>
Item 6. Management s Discussion and Analysis or Plan of Operation
Overview.
The Company provides home care services in Illinois, Indiana, Missouri,
Alabama and Mississippi. The Company s fiscal year ends on June 30.
Unless otherwise noted, references to fiscal 1995 and 1996 relate to the
fiscal years ended June 30, 1995 and 1996.
The Company s revenues are derived primarily from custodial services.
Additionally, approximately 10% of the Company s revenues, during fiscal
1996, were derived from skilled home health care services. The Company
believes that the home care market will continue to experience
significant growth due to aging of the population, continued emphasis on
preventive health care services, early patient discharges from acute care
institutions, and new advances in medical technology. The Company
believes that it is well positioned to take advantage of the expected
growth in both the custodial home care and home health care segments of
the market.
The Company s overall strategy is focused on providing a continuum of
services to elderly and disabled clients in their homes, concentrating on
geographic areas with favorable demographics and reimbursement trends.
The Company will implement this business strategy through a combination
of internal growth of existing services/locations, expansion into new
areas adjacent to existing locations, and acquisition of geographically
proximate businesses with complementary service mixes and locations.
The Company strives to maintain an overall gross profit margin of at
least 30% and intends to generate additional operating profits through
increased economies of scale to be derived from savings in general and
administrative expenses. Personnel is the single largest component of
the Company s costs, comprising approximately 80% of net sales which the
Company believes is typical for similarly situated home care providers.
Results of Operations:
The following table sets forth, for fiscal years 1995 and 1996, certain
items from the Company s Consolidated Statement of Operations expressed
as a percentage of net sales.
<TABLE>
Fiscal Years Ended June 30
1995 1996
--------------------------
<S> <C> <C>
Net Sales 100% 100%
Direct Cost of Services 73% 69%
Gross Margin 27% 31%
Operating Expenses 16% 21%
Income Before Taxes 11% 11%
Income Taxes 4% 5%
Net Income 7% 6%
</TABLE>
Fiscal 1995 Compared to Fiscal 1996:
Net revenue derived from client/patient services increased by $4.0
Million or 50%, from $7.9 Million to $11.9 Million from 1995 to 1996.
The increase in sales relates to a $2.8 Million, or 35%, increase derived
from the expansion of homemaker services. Of the general homemaker
service growth, $312,000 or 1% is attributable to the Oxford Healthcare
acquisition with the remainder ($2.5 Million) coming from continued
development of the Company s established Illinois and Missouri locations.
<PAGE>
Also, the addition of medically necessary, skilled home health services
comprised $1.2 Million, or 29%, of the overall increase in revenues.
The Illinois Department on Aging accounted for approximately 81% of total
homemaker revenues of $10.7 Million. Illinois Department on Aging
revenues, as a percentage of total homemaker service revenue, remained
essentially unchanged from 1995 to 1996. The contractual arrangement
with IDOA requires that, at a minimum, 73% of receipts from IDOA client
services be spent for direct costs of providing care. The Company is in
compliance with this requirement; however, should the Company s IDOA
direct costs, as a percentage of IDOA revenues, fall below 73%, the
contract could be subject to termination.
The Medicare program provided approximately 74% of the $1.2 Million in
revenues attributable to home health care services. There were no home
health care revenues for 1995.
Direct costs of providing services constituted $5.8 Million and $8.2
Million in 1995 and 1996, respectively, representing 73% and 69% of total
revenues. The 30% growth of $2.4 Million in the cost of providing
services relates directly to revenue growth with homemaker services
comprising a constant 73% of related revenues and costs of providing home
health services accounting for 34% of related revenues. The gross margin
increased, from $2.1 Million or 27% of revenues in 1995 to $3.7 Million,
or 31% of revenues, in 1996. The improvement in the overall relationship
between revenues and cost of services relates directly to the addition of
home health care services.
Operating expenses ($1.2 Million in 1995 and $2.5 Million in 1996)
comprised 16% and 21% of revenues, respectively. Administrative salaries
and benefits grew $674,000 from $547,000 to $1.2 Million due primarily to
the addition of administrative staff members ($419,000 or 62% of the
increase) to handle increased work loads related to higher revenue
levels. In connection with the Company s IPO and acquisition program,
certain managerial level positions were added, accounting for
approximately $255,000 of annual salaries and benefits that constituted
approximately 38% of the overall growth in such expenses.
Professional fees increased by $29,000 to $141,000 for overall growth of
26%. The increase is attributable to general labor matters and other
routine issues typically associated with the increase in overall
business.
Office expense increased from $237,000 (3% of revenues) to $543,000 (5%
of revenues) with the bulk of the increase (43% or $233,000) coming from
the opening of additional Illinois, Missouri and Indiana offices of Help
at Home, Inc. Opening of the corporate headquarter offices accounted for
14% or $76,000 of additional office expense with the remainder of the
growth ($228,000,700 or 42%) stemming from acquired businesses.
Travel expenses grew by $82,000, or 65%, to $206,000 due to an increase
in the reimbursable travel between clients/patients, increased travel
among operating units, travel associated with investor meetings, and
visits to potential acquisition candidates.
Insurance expense increased by $82,000 to $136,000, or 150%, due to the
growth in the business and increased number of entities requiring general
insurance coverages.
<PAGE>
Depreciation and amortization expense increased by $71,000 to $117,000
for a total increase of 155%. The increase is due to capital asset
additions together with amortization of goodwill related to acquisitions
made during year.
Marketing expenses went from $86,000 to $124,000 for an overall increase
of 69%. The increased expense is the result of escalated marketing
efforts which have contributed to the overall growth in homemaker
revenues.
Provision for income taxes grew from 38% of pre-tax income to 44% of pre-
tax income, due in part to increased state income taxes and the
adjustment of accrued tax benefits ($55,000) that were recorded in prior
years. Before the adjustment, current year tax provisions approximated
40% of pre-tax income.
Earnings per share of common stock were $.52 (fully diluted) in 1995 and
$.41 in 1996 based on weighted average shares outstanding of 1,050,000
and 2,243,227, respectively. As noted herein, the Company has
approximately 1.6 Million Warrants outstanding as a result of its initial
public offering. The Company has adopted the modified treasury method of
presenting earnings per share for the year ended June 30, 1996. On a
fully diluted basis, the Company s earnings per share in 1996 represented
a decrease of $.11 or 21% from the preceding year on a corresponding
increase of 1,193,227 shares.
Liquidity and Capital Resources.
The Company s primary cash requirements are for operating expenses,
generally comprised of labor, occupancy and administrative costs, and
acquisition expenditures. Historically, the Company s primary sources of
cash have been from operations. The Company s long term debt obligations
are to a former shareholder of Oxford Healthcare ($325,000) and various
equipment lessors ($64,000).
In 1996, $1.5 Million of cash was realized from operations as compared to
$169,000 in the preceding year. The Company realized net proceeds from
its initial public offering of $3.7 Million. The Company presently has
1,638,750 Warrants outstanding with an exercise price of $6.00. The
Warrants can be exercised at any time subsequent to the public offering
and can be called anytime after December 5, 1996 provided the closing
price of the Company s Common Stock is equal to or greater than $9.00 for
ten consecutive days. The Company stands to realize a maximum of
approximately $9.8 Million from the exercise of its Warrants.
In May, 1996 the Company acquired all of the capital stock of the
companies doing business as Oxford Healthcare for $2,150,000 including
$1,875,000 in cash and $325,000 in a note payable. Subsequently, the
Company caused $884,000 of Oxford Healthcare s indebtedness to be repaid.
The Company also deposited $149,200 in an escrow account in anticipation
of the acquisition of the assets of Dependable Nursing Home Health
Services, Inc.
The Company has approximately $780,000 of the proceeds from the initial
public offering remaining. As well, it has arranged for a $1 Million,
uncollateralized, line of credit from its bank at the bank s prime
interest rate. The line of credit has not been utilized, to date. The
Company is also negotiating with lending institutions to secure asset
based financing for use in business expansion activities.
<PAGE>
Management of the Company intends to pursue acquisitions in the future
and anticipates utilizing the proceeds from the exercise of Warrants,
future indebtedness and cash provided from operations to fund such
acquisitions.
Item 7. Financial Statements.
Financial Statements for the Years Ended June 30, 1995 and 1996.
Attached hereto and filed as a part of this Form 10-KSB are the
Consolidated Financial Statements of the Company.
Proforma Financial Results.
WAs of May 31, 1996, the Company acquired all of the outstanding stock of
HASC Staffing Services, Inc. (HASC), Homemakers of Montgomery, Inc.
(Homemkrs) and Statewide Healthcare Services, Inc. (Statewide), all doing
business as Oxford Healthcare. The transaction was accounted for as a
purchase and the results of operations for the Company as of June 30,
1996 include one month of activity for the corporations collectively
referred to as Oxford Healthcare. The table below depicts proforma
results of operations for the year as if the Oxford Healthcare
transaction were consummated as of the beginning of fiscal 1996.
<TABLE>
Proforma Statement of Operations
Help at
Home HASC Homemkrs Statewide Total
June 30, May 31, May 31, May 31, June 30,
1996 1996 1996 1996 1996
--------------------------------------------------
<C> <C> <C> <C> <C> <C>
Revenues:
Home Care $11,885,712 $11,282 $1,501,789 $3,431,001 $16,829,784
Direct Costs
Home Care 8,204,259 672,203 1,673,177 10,549,639
--------- ------ --------- --------- ----------
Gross Margin 3,681,453 11,282 829,586 1,757,824 6,280,145
Operating Expenses 2,525,442 6,871 845,449 1,715,325 5,093,087
--------- ------ --------- --------- ---------
Operating Income 1,156,011 4,411 (15,863) 42,499 1,187,058
Interest Income 130,834 (1,947) (1,625) 127,262
--------- ------ --------- --------- --------
Income before Taxes 1,286,845 4,411 (17,810) 40,874 1,314,320
Income Taxes 568,000 1,764 (7,124) 16,350 578,990
--------- ------ --------- --------- ---------
Net Income $ 718,845 $ 2,647 $ (10,686)$ 24,524 $ 735,330
========== ======= =========== ========= ===========
Earnings Per
Common Share (Fully
Diluted) $.41 $.42
Weighted Average
Shares Outstanding
(Fully Diluted) 2,243,227 2,243,227
</TABLE>
<PAGE>
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
The Company s previous accountants, Richard A. Eisner & Company, LLP were
replaced pursuant to a vote of the Audit Committee of the Board of
Directors. The report prepared by Richard A. Eisner & Company, LLP did
not contain an adverse opinion, disclaimer of opinion, qualification or
modification as to uncertainty, audit scope or accounting principles.
There were no disagreements between the firm and the Company regarding
any matter of accounting principles or practices, financial statement
disclosure or audit scope. Richard A. Eisner & Company, LLP was notified
of the decision of the Audit Committee on May 30, 1996.
The firm has been replaced by Coopers & Lybrand, LLP. There have been no
disagreements with Coopers & Lybrand regarding accounting principles or
financial disclosures.
PART III.
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
Directors and Executive Officers.
The following table sets forth certain information concerning each of the
current executive officers and directors of the Company. The company s
officers and directors are elected to serve in such capacities until the
earlier to occur of the election and qualification of their respective
successors or until their respective deaths, resignations or removal by
the Company s Board of Directors or shareholders, respectively, from such
positions. Directors do not currently receive compensation for their
services as such. One director has received shares of Common Stock in
consideration for agreeing to serve as director. One director, Marlene
Schaffer, resigned from the Board of Directors. See Certain Relationships
and Related Transactions.
<TABLE>
Name Age Positions and Offices
- --------------------------------------------------------------------
<S> <C> <C>
LouIs Goldstein 53 Chairman of the Board, Chief
Executive Officer and
Treasurer
Joel Davis 32 Chief Operating Officer,
Secretary and Director
Sharon Harder 47 Chief Financial Officer
Robert Rubin 55 Director
Steven L. Venit 37 Director
</TABLE>
All of the Company s officers devote full time to the Company s business.
Louis Goldstein. Mr. Goldstein, the founder of the Company, has
served as the Company s chief executive officer and director since its
inception.
Joel Davis. Mr. Davis joined the Company in July, 1995 as General
Counsel. Mr. Davis was named Chief Operating Officer of the Company in
March, 1996. From October, 1989 through July, 1995 Mr. Davis was engaged
as an Associate at the law firm of Hlustik, Huizenga, Williams &
VanderWoude, Ltd. in Chicago.
<PAGE>
Sharon Harder. Ms. Harder joined the Company in March, 1996 as
Chief Financial Officer. For six years prior to joining the Company, Ms.
Harder was Chief Operating Officer and Chief Financial Officer for Child
Health Systems, Inc. and Pediatric Homecare of America. The companies
offered a wide range of alternate site services including center based
day health care, skilled home nursing care, rehabilitative therapies,
infusion therapy, home medical equipment and case management services.
Robert Rubin. Mr. Rubin has been a Director of Kaye Kotts
Associates, Inc., a company providing services to delinquent tax payers,
since 1994. Mr. Rubin has served as an officer of Western Power &
Equipment Corporation, a construction equipment distributor, since
October, 1990. From October, 1990 to January, 1994 Mr. Rubin served as
Chief Executive Officer of American United Global, Inc. Since 1994, Mr.
Rubin has served American United Global as its Chairman of the Board.
Since October, 1992 Mr. Rubin has been President and Director of Trans
Cap, Inc., a blind pool company.
Mr. Rubin was formerly a Director and Vice Chairman of American Complex
Care, Inc. (ACCI), a public company which provided on-site health care
services including intradermal infusion therapies. In April, 1995 the
principal operating subsidiaries of ACCI petitioned in the Circuit Court
of Broward County, Florida for an assignment for the benefit of
creditors. Mr. Rubin is also a Director, Chairman and minority
stockholder of Universal Self Care, Inc., a public company engaged in the
sale of products used by diabetics; and Response USA, Inc., a public
company engaged in the sale and distribution of personal emergency
response systems. Mr. Rubin is a Director and minority stockholder of
Diplomat Corporation, a public company engaged in the manufacture and
distribution of baby products. Mr. Rubin is also Chairman, Chief
Executive Officer and a Director and principal stockholder or ERD Waste
Corporation, a public company specializing in the management and disposal
of municipal solid waste, industrial and commercial nonhazardous solid
waste and hazardous waste. He is also a minority stockholder of STAT
Health Care, Inc., a public company providing physician contract
management services to associations that provide emergency room services
to hospitals.
Steven Venit. Mr. Venit has been a sole practitioner with the law
offices of Steven L. Venit, Esq. for more than ten years and is licensed
to practice law in the states of Illinois, Nevada and Wisconsin. See
Certain Relationships and Related Transactions.
Section 16 Compliance.
During fiscal 1996 there were no failures to timely report on Forms 3 or
4 pursuant to the provisions of Section 16(a) of the Exchange Act.
Item 10. Executive Compensation.
The following table sets forth the cash compensation, as well as certain
other compensation paid or accrued, by the Company to the Company s Chief
Executive Officer and its former President for the fiscal years ended
June 30 1994, 1995 and 1996. No other executive officers had total
annual salaries and bonus exceeding $100,000 during the fiscal year.
<PAGE>
<TABLE>
Long Term
Compensation
Annual Compensation Stock Options
Name and Position Year Salary Bonus Granted
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louis Goldstein, 1996 $192,611 $ - -
Chairman, Chief 1995 155,082 - -
Executive Officer,
Director
Marlene Schaffer, 1996 $104,654 $ - -
President (former) 1995 100,594 - -
- --------------------------------------------------------------------
<FN>
Note: With respect to each named officer, the aggregate amount of
perquisites and other personal benefits was less than either $50,000 or
10% of the salary reported.
</TABLE>
Employment Agreement.
In August 1995, the Company entered into an employment agreement with
Louis Goldstein. Pursuant to the agreement, Mr. Goldstein will receive a
base annual salary of $175,000 in the first year and $200,000 in the
second year, subject to increase in each successive year of the contract
term at the discretion of the Compensation Committee of the Board of
Directors. In addition, Mr. Goldstein is entitled to receive a benefit
allowance in lieu of health, life and disability insurance and other
similar benefits, in the amount of 10% of Mr. Goldstein s base salary per
year. The agreement is for a period of five years and is automatically
renewable for additional one year terms unless prior notice is given not
less than 90 days prior to the end of the initial term or any succeeding
year. The agreement also subjects Mr. Goldstein to non-competition
provisions.
Stock Option Plan.
The Company adopted a Stock Option Plan in August, 1995. The plan is
administered by the Board of Directors through its Compensation
Committee. Pursuant to the plan, options to acquire an aggregate of
264,375 shares of Common Stock may be granted, 20,000 of which have been
granted to date, at an exercise price of $5.88. The plan provides for
grants to employees, consultants and directors of the Company.
The 1995 Stock Option Plan authorizes the Board to issue incentive stock
options (ISOs) as defined in Section 422 A of the Internal Revenue Code
of 1986, as amended (the Code), as well as stock options that do not
conform to the requirements of the Code section (Non-ISOs). Consultants
and directors who are not also employees of the Company could be granted
only Non-ISOs. The exercise price of each ISO may not be less than 100%
of the fair market value of the common Stock at the time of grant, except
that in the case of a grant to an employee who owns 10% or more of the
outstanding stock of the Company or a subsidiary or parent of the company
(a 10% Stockholder), the exercise price may not be less than 110% of the
fair market value on the date of the grant. The exercise price of each
Non-ISO shall be determined by the Board of Directors in its discretion
and may be less than the fair market value of the Common Stock (but not
less than 85%) on the date of grant. Notwithstanding the foregoing, the
exercise price of any option granted on or after the effective date of
the registration of any class of equity security of the Company pursuant
to Section 12 of the Securities Exchange Act of 1934, and prior to six
<PAGE>
months after the termination of such registration may be no less than
100% of the fair market value per share on the date of the grant. ISOs
may not be exercised after the tenth anniversary (fifth anniversary in
the case of any option granted to a 10% Stockholder) of their grant.
Non-ISOs may not be exercised after the tenth anniversary of the date of
grant. Options may not be transferred during the lifetime of an option
holder. No stock options could be granted under the plan after August
15, 2005.
Subject to the provisions of the Plan, the Board has the authority to
determine the individuals to whom the stock options are to be granted,
the number of shares to be covered by each option, the exercise price,
the type of option, the option period, the restrictions, if any, on the
exercise of the option, the terms for the payment of the option price and
other terms and conditions. Payments by option holders upon exercise of
an option may be made (as determined by the Board) in cash or such other
form of payment as may be permitted under the plan, including without
limitation, by promissory note or by shares of common stock.
Indemnification of Officers and Directors.
The Articles of Incorporation and Bylaws of the Company provide for
indemnification of each director and officer or former director or
officer or any person who may have served at the request of the Company
as a director or officer of another corporation in which the Company owns
shares of capital stock or is a creditor. The Company will indemnify
against reasonable costs and expenses incurred in connection with any
action, suit or proceeding to which any of the individuals described
herein were made a party by reason of his/her or their being or having
been such a director or officer, unless such director has been
adjudicated to have been liable for negligence or misconduct in his or
her corporate duties. As of the date of this filing the Company is
unaware of any existing, threatened or pending litigation involving a
former or current director that will require the indemnification of the
Company.
Notwithstanding the foregoing indemnification provisions of the Company s
Articles of Incorporation and Bylaws, the Company has been informed that,
in the opinion of the Commission, indemnification for liabilities arising
under the Securities Act is against public policy and is, therefore,
unenforceable.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of the date of this filing, certain
information with respect to stock ownership of (I) all persons known by
the Company to be beneficial owners of 5% or more of its outstanding
shares of common Stock; (ii) all directors and officers individually and
as a group, together with their respective percentage ownership of such
shares. Unless otherwise noted, the beneficial owners have sole voting
and investment power over the shares of Common Stock listed.
<PAGE>
<TABLE>
Shares Percentage
Name Owned Owned
- ------------------------------------------------------------------
<S> <C> <C>
Louis Goldstein (1) 960,000 51.38%
Robert Rubin (1) 52,500 2.80%
Joel Davis (1) - -
Sharon Harder (1) - -
Steven Venit (1) - -
All officers and directors as a
group 1,012,500 54.18%
- -------------------------------
<FN>
(1) The address for the named individual is 223 West Jackson Blvd.,
Chicago, IL 60606.
</TABLE>
Item 12. Certain Relationships and Related Transactions.
In connection with the formation of the Company, on August 7, 1995, the
Company issued to Louis Goldstein 962,500 shares of Common Stock in
exchange for 2,750 shares of common stock of Help at Home, Inc., an
Illinois company (Help Illinois). In exchange for 143 shares of common
stock of Help Illinois the Company issued to Mr. Rubin 50,000 shares of
the Company s Common Stock.
In 1992, 1993 and 1994 Help Illinois loaned to Mr. Goldstein $135,470,
$101,135 and $92,721, respectively. The loans bear interest at nine
percent per year. The balance of such loans at June 30, 1996 was
approximately $128,000. The balance of the shareholder loan decreased by
approximately $14,000 during the year.
During 1996, the Company paid an aggregate of approximately $29,000
(including accrued fees from a prior year) to Steven Venit, a director,
for certain routine legal services.
The Company has adopted a policy that all future transactions, including
loans between the Company and its officers, directors, principal
stockholders and their affiliates must be approved by a majority of the
Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will be on
terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Except as otherwise noted, the Exhibit listed below has
previously been filed as an exhibit to the Company s Registration
Statement on Form SB-2 Registration No.33-97034 (the Registration
Statement), and is incorporated herein by reference to such exhibits.
3.1 Articles of Incorporation of Help at Home of Evanston, Inc.,
an Illinois corporation, dated February 27, 1975 as amended
on June 17,1982 changing its name to Help at Home, Inc.
3.2 Certificate of Incorporation of Help at Home, Inc., a
Delaware corporation, dated August 7, 1995.
3.3 Certificate of Incorporation of Lakeside Home Health Agency,
Inc., a Missouri corporation, dated April 20, 1993.
3.4 Certificate of Incorporation of Rosewood Home Health, Inc.,
an Illinois corporation, dated March 4, 1994.
3.5 Certificate of Incorporation of HASC Staffing Services,
Inc., a Mississippi corporation, dated March 23, 1986.*
3.6 Certificate of Incorporation of Homemakers of Montgomery,
Inc., an Alabama corporation, dated March 27, 1985.*
3.7 Certificate of Incorporation of Statewide Healthcare
Services, Inc.,a Mississippi corporation, dated
January 10, 1974.*
3.8 Help at Home, Inc. Bylaws.
4.1 Specimen Common Stock Certificate.
4.2 Specimen Redeemable Common Stock Purchase Warrant.
4.3 Form of Warrant Agreement.
4.4 Form of Underwriter s Warrant.
10.1 Employment Agreement with Louis Goldstein.
10.2 Form of contract with the Illinois Department on Aging.*
10.3 1995 Stock Option Plan.
11.1 Computation of Earnings Per Share.
21.1 Subsidiaries.
27.1 Financial Data Schedule.
(b) Reports filed on or in conjunction with Form 8-K. Except as
otherwise noted, the reports noted below have been previously filed with
the Commission and are incorporated herein by reference.
16.1 Letter from Richard A. Eisner, LLP regarding change in
certifying accountant.**
99.1 8-K as amended for May 29, 1996 - Change in the Registrant s
Certifying Accountant.
99.2 8-K as amended for June 7, 1996 - Acquisition of Assets.
thereto.
* Filed herewith.
** Filed with the 8-KA referenced as Ex. 99.1.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated September 27, 1996 HELP AT HOME, INC.
By:/s/ Louis Goldstein
Chairman and Chief Executive
Officer
By:/s/ Sharon S. Harder
Chief Financial Officer
By: /s/ Joel Davis
Chief Operating Officer
By: /s/ Steven L. Venit
Director
By: /s/ Robert Rubin
Director
<PAGE>
HELP AT HOME, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS REPORT
TABLE OF CONTENTS
Independent Auditors Reports . . . . . . . . . . . . . . . . . . 1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 3
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations . . . . . . . . . . . . 4
Consolidated Statements of Stockholders Equity . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . 6
Notes to the Financial Statements. . . . . . . . . . . . . . . . . 7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Help at Home, Inc.
Chicago, Illinois
We have audited the consolidated balance sheet of Help at Home,
Inc. (the "Company") as of June 30, 1996, and the related
consolidated statements of operations, stockholders equity and cash
flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of Help
at Home, Inc. for the year ended June 30, 1995, were audited by
other auditors, whose report, dated October 25, 1995, expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Help at Home, Inc as of June
30, 1996 and the consolidated results of its operations and its
cash flows for the year then ended, in conformity with generally
accepted accounting principles.
Coopers & Lybrand, LLP
Chicago, Illinois
September 26, 1996
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Help at Home, Inc.
Chicago, Illinois
We have audited the accompanying balance sheet of Help at Home, Inc.
As at June 30, 1995 and the related statements of operations, changes in
stockholder s equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company s management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of Help at Home,
Inc., at June 30, 1995, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
October 25, 1995
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Balance Sheets
June 30, 1995 and 1996
June 30 June 30
1996 1995
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $2,734,705 $ 24,994
Accounts receivable (net of allowance for
doubtful accounts of $131,000 and
$25,000 respectively) 3,002,415 2,258,139
Prepaid expenses and other 133,728 57,864
--------- ----------
Total Current Assets 5,870,848 2,340,997
Furniture and equipment, net 309,017 178,071
Due from officer 128,007 142,556
Restricted cash 149,200
Goodwill (net of amortization of $23,434) 2,586,857
Other assets 128,350 85,299
Deferred income taxes 110,000
--------- ----------
$9,172,279 $2,856,923
========== ==========
Liabilities
Current Liabilities:
Accounts payable $ 378,898 $205,363
Accrued expenses 659,072 250,818
Notes payable 320,000
Current maturities of long-term debt 265,417 12,395
Current income taxes 644,000 54,092
Deferred income taxes - current 146,000 738,000
--------- ---------
Total Current Liabilities 2,413,387 1,260,668
Deferred income taxes - noncurrent 383,000
Long-term debt, less current portion 389,073 39,075
--------- ---------
Total Liabilities 3,185,460 1,299,743
Stockholders Equity
Preferred stock, par value $.01 per share;
1,000,000 shares authorized, none
issued and outstanding
Common stock, par value $.02 per share;
14,000,000 shares authorized, 1,869,375
and 1,050,000, respectively, issued
and outstanding 37,388 21,000
Additional paid in capital 3,694,406
Retained earnings 2,255,025 1,536,180
--------- ---------
Total Stockholders Equity 5,986,819 1,557,180
--------- ---------
$9,172,279 $2,856,923
========== =========
The accompanying notes to these consolidated financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Statements of Operations
For the Years Ended
June 30,
1996 1995
-----------------------
<S> <C> <C>
Revenues:
Homemaker services $ 10,719,310 $7,928,649
Home Health services 1,166,402
------------ ----------
Total Revenues 11,885,712 7,928,649
Direct Costs of Services:
Homemaker services 7,807,487 5,824,584
Home health services 396,772
--------- ---------
Total Direct Costs of Services 8,204,259 5,824,584
--------- ---------
Gross Margin 3,681,453 2,104,065
Selling, general and administrative expense 2,525,442 1,233,097
--------- ---------
Income from operations 1,156,011 870,968
Interest income 130,834 12,009
--------- ---------
Income before income taxes 1,286,845 882,977
Provision for income taxes 568,000 335,551
--------- ---------
Net Income $ 718,845 $ 547,426
========= =========
Earnings per common share- primary $ .48 $ .52
Earnings per common share - fully diluted $ .41 $ .52
Weighted average number of common shares
(fully diluted) 2,243,227 1,050,000
Weighted average number of common shares
(unadjusted) 1,503,391 1,050,000
</TABLE>
The accompanying notes to these consolidated financial statements
are an integral part hereof.
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Statements of Changes in Stockholders Equity
Years Ended June 30,
1996 1995
------------------------
<S> <C> <C>
Common Stock Shares:
Balance, beginning of year 1,050,000 1,050,000
Stock issued 819,375
--------- ---------
Balance, end of year 1,869,375 1,050,000
========= ==========
Common Stock:
Balance, beginning of year $ 21,000 $ 21,000
Stock issued 16,388
---------- ----------
Balance, end of year $ 37,388 $ 21,000
========== ==========
Additional Paid in Capital:
Balance, beginning of year
Stock issued $3,694,406
---------- ----------
Balance, end of period $3,694,406 $ 0
========== ==========
Retained Earnings:
Balance, beginning of year $1,536,180 $ 988,754
Net income for year
ended June 30 718,845 547,426
---------- ----------
Balance, end of year $2,255,025 $1,536,180
========== ==========
</TABLE>
The accompanying notes to these financial statements
are an integral part hereof.
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Statements of Cash Flows
Years Ended June 30,
1996 1995
-------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 718,845 $ 547,426
Noncash changes in net income:
Depreciation 93,551 45,964
Amortization 23,434
Deferred tax (benefit) expense (99,000) 288,394
Changes in:
Accounts receivable 328,171 (911,775)
Prepaid expenses and other (69,251) (51,435)
Accounts payable 33,295 110,948
Other current liabilities (138,611) 96,587
Current income taxes 644,000 42,900
---------- ---------
Net cash provided by operating activities 1,534,434 169,009
---------- ---------
Cash flows from investing activities:
Acquisition of property (133,399) (167,943)
Proceeds from sale of property 45,000
Acquisition of subsidiaries (2,172,564)
Decrease (Increase) in stockholder loans 15,113 (81,830)
Other (179,058) 4,520
--------- ----------
Net cash (used in) investing activities (2,425,430) (245,253)
---------- ----------
Cash flows from financing activities:
Proceeds from common stock issued 5,162,068
Financing costs for common stock issued (1,451,274)
(Retirement)Issuance of long-term debt (110,087) 51,470
--------- ----------
Net cash provided by financing activities 3,600,707 51,470
--------- ----------
NET INCREASE (DECREASE) IN CASH 2,709,711 (24,774)
Cash and cash equivalents:
Beginning of period 24,994 49,768
---------- ---------
End of period $2,734,705 $ 24,994
============ ==========
Supplemental disclosure of cash flow information:
Cash payments for:
Interest $ 10,645 $ 1,257
Income taxes 81,435 4,257
Supplemental disclosures of noncash investing
and financing activities:
Execution of capital leases 61,300
Assumption of debt 582,000
</TABLE>
The accompanying notes to these consolidated financial statements
are an integral part hereof.
<PAGE>
HELP AT HOME, INC.
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1996
Note 1 - Organization and Business
Help at Home, Inc., a Delaware corporation (Help (Delaware) or
the Company), was incorporated on August 7, 1995. In
connection with the formation of the Company, it issued
2,100,000 shares of common stock to the shareholders of Help at
Home Inc., an Illinois corporation (Help (Illinois)) in
exchange for all the common stock of Help (Illinois). In
November 1995, the Company effected a one-for-two reverse stock
split. The accompanying financial statements give retroactive
effect to this reverse stock split.
The consolidated financial statements presented include the
accounts of Help (Delaware) and its wholly owned subsidiaries
Help (Illinois), Rosewood Home Health Inc. (Rosewood),
Lakeside Home Health Agency, Inc. (Lakeside), and the Oxford
group (see Note 4).
The Company, through its Help (Illinois) subsidiary, provides
homemaker and general housekeeping services to elderly and
disabled persons within their homes in the Midwestern region of
the United States. The vast majority of the clients are
obtained and served through 14 regional contracts with various
state and municipal agencies.
The Company, through its Lakeside, Rosewood and Oxford
subsidiaries, provides in-home skilled nursing services.
Lakeside and Rosewood operate in the St. Louis metropolitan area
and Oxford operates in the south central United States.
Lakeside, Rosewood and Homemakers of Montgomery, Inc. (part of
the Oxford group) are certified in their respective states to
receive Medicare reimbursement.
Note 2 - Summary of Significant Accounting Policies
[1] Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and all wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated in
consolidation.
[2] Revenue and expense recognition
The accompanying financial statements are prepared using the
accrual method of accounting, whereby income is recognized when
earned and expenses as recognized as incurred. Service revenues
are recognized in the period in which the services are performed
at the contracted established rate or the amount agreed to with
third-party payers (e.g. Medicare, Medicaid, HMO's, and other
insurance companies).
<PAGE>
[3] Goodwill
Goodwill has been recognized for the excess of cost over the
fair value of assets acquired and is being amortized on a
straight-line basis over periods of ten to twenty years (see
Note 4). Management calculates expected undiscounted future
cash flows from operations to evaluate recoverability whenever
events or changes in circumstances indicate a possible
impairment.
[4] Accounts Receivable
Accounts receivable are stated at estimated net realizable
value. The allowance for doubtful accounts is based on
management's estimate of collectibility, which considers
outstanding accounts receivable, historical experience and
current economic conditions.
[5] Property and Equipment
Property and equipment are stated at cost. Depreciation is
provided using accelerated and straight-line methods over the
estimated useful lives of the assets. Amortization of
capitalized lease costs is included in depreciation expense. The
estimated useful lives of property and equipment are as
follows:
Computers, software, autos and
medical equipment 5 years
Furniture and fixtures 7 years
Leasehold improvements 10 years
[6] Earnings per share
Earnings per common share is based on the weighted average
number of common shares and common share equivalents outstanding
during the period. Common stock equivalents consist of stock
options and warrants. Earnings per share have been stated on a
fully diluted basis using the modified treasury method.
[7] Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or
less are considered to be cash equivalents.
[8] Income Taxes
Deferred taxes are recognized for the temporary differences
between the bases of assets and liabilities for financial and
tax reporting purposes. Deferred income taxes are provided for
certain transactions which are reported in different periods for
financial reporting than for income taxes. Such differences
relate primarily to the reporting of income and expenses of
Help (Illinois) on the cash basis of accounting for income tax
purposes and on the accrual method of accounting for financial
reporting purposes.
<PAGE>
Under current IRS regulations, the Company will be required to
change to the accrual method for reporting its income for tax
reporting purposes for the years ending June 30, 1997 and
thereafter. Such change will require that the Company include
in its taxable income, starting with the year ended June 30,
1997, the cumulative difference between the cash and accrual
methods, as of June 30, 1996, over a period not to exceed four
years. This change is not expected to have a material effect
on net income or earnings per share.
[9] Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and
expenses during the reporting period. Significant estimates
include allowances, accruals, third-party settlements and deferred taxes.
The actual results will differ from those estimates and the
differences could be material.
Note 3 - Concentration of Risk
For the year ended June 30, 1996, the Company earned over 73% of
its revenue from the Illinois Department on Aging, 10% from services to
Medicare beneficiaries and 17% from other sources. This funding
is dependent upon timely approval of appropriation bills by the
respective state or local legislatures and executive officers.
With the acquisition of Oxford, Lakeside and Rosewood (see Notes
1 and 4), the Company will derive a higher percentage of its
revenues from Medicare reimbursements. The Medicare program is
highly regulated and subject to budgetary, statutory and other
constraints. In recent years, several proposals have been
introduced in Congress which could limit the growth of federal
spending under the Medicare program; however no specific
proposals are pending that would, in management's opinion,
materially change Medicare reimbursement to the Company in the
foreseeable future.
Note 4 - Acquisitions
On July 21, 1995, the Company purchased all of the stock of
Lakeside Home Health Agency, Inc. for $100,000. The Company
recognized goodwill in the amount of $66,000 based on an
allocation of cost to the fair value of the assets acquired.
The goodwill is being amortized on a straight-line basis over a
ten year period.
On January 30, 1996, the Company purchased all of the stock of
Rosewood Home Health, Inc. for $20,000. The Company recognized
goodwill in the amount of $171,000 based on an allocation of
cost to the fair value of the assets acquired. The goodwill is
being amortized on a straight-line basis over a ten year period.
<PAGE>
On May 31, 1996, the Company purchased all of the stock of
Statewide Healthcare Services, Inc., Homemakers of Montgomery,
Inc., and HASC Staffing Systems, Inc. (collectively referred to
as "Oxford") for $2,150,000. The agreement allows for the
purchase price to be adjusted based on book value of Oxford's
consolidated assets on the purchase date. The Company
recognized goodwill in the amount of $2,384,000 based on an
allocation of cost to the fair value of the assets acquired.
The goodwill is being amortized on a straight-line basis over a
twenty year period. The following table presents proforma
results of operations had the acquisition occurred at July 1,
1994.
<TABLE>
For the years ended
June 30, 1996 June 30, 1995
---------------------------------
<S> <C> <C>
Revenues $16,829,784 $ 10,563,295
Other income 127,262 12,009
Cost of sales (10,549,639) (7,487,794)
Operating expenses (5,093,087) (2,184,165)
Income before income taxes 1,314,320 903,345
Income tax expense (578,990) (335,551)
----------- ------------
Net income $ 735,330 $ 567,794
=========== ============
</TABLE>
The results of operations of these acquisitions, all of which
were accounted for using the purchase method, are reported in
the consolidated results of operations from the date of
acquisition.
On May 4, 1996, the Company entered into an agreement to acquire
certain assets of a home health care services business. The
purchase price to be paid at closing is approximately $149,200,
which has been placed in escrow. The closing is dependent upon
the satisfaction or waiver of all conditions of the parties to
consummate the transaction as specified in the agreement.
Note 5 - Property and Equipment
Property and equipment consists of the following:
<TABLE>
June 30,
1996 1995
------------------------
<S> <C> <C>
Furniture and fixtures $87,508 $46,548
Office and computer equipment 330,808 127,370
Medical and automotive
equipment 58,224 107,562
-------- --------
476,540 281,480
Less accumulated deprecation (167,523) (103,409)
-------- --------
$309,017 $178,071
======== ========
</TABLE>
<PAGE>
The total amount of office and computer equipment recorded under
capital leases included above was $61,300 at June 30, 1996.
Accumulated amortization on capital leases was $3,800 at June
30, 1996 (see Note 9). There were no capital leases at June 30,
1995.
Note 6 - Major Customer
Fees billed to one major customer, the Illinois Department on
Aging ("IDOA"), accounted for approximately $8,674,000 (73%) and
$6,500,000 (82%) of the total fees for the years ended June 30,
1996 and 1995 respectively. The amounts due under such
contracts totaled $1,281,000 and $1,776,000 at June 30, 1996 and
1995, respectively.
The Company is subject to the IDOA's requirement whereby the
Company must expend a minimum of 73% of the total service fees
from the department on direct service worker costs, as defined.
As a participant with the IDOA the Company is subject to an
audit of its systems and procedures to determine whether the
Company is in compliance with the rules and regulations of the
contract. As of June 30, 1996, the Company is compliance
with the contract. Should the Company be unable to maintain its
compliance in this regard, the contractual arrangement could be subject
to immediate termination.<PAGE>
Note 7 - Commitments and Contingencies
[1] Leases
The Company has operating lease commitments for office space and
equipment which have various expirations through 2001. (See Note
9 for capital lease information.) Operating leases for office
space include escalation clauses for increases in real estate
taxes and certain operating expenses. Future minimum lease
payments under operating leases as of June 30, 1996 are as
follows:
<TABLE>
Year Ending June 30,
----------------------
<S> <C>
1997 $ 345,000
1998 93,000
1999 43,000
2000 6,000
2001 2,000
-------
$ 489,000
============
</TABLE>
Rental expense under operating leases was $175,000 and $101,000
for the years ended June 30, 1996 and 1995, respectively.
[2] Litigation
The Company has been named in several legal proceedings in
connection with matters which arose during the normal course of
its business. While the ultimate result of the litigation or
claims cannot be determined, it is management's opinion, based
upon information it presently possesses, that is has meritorious
defenses to the above litigation or claims. The possibility of
a material adverse effect on the Company's financial position or
results of operations and cash flows is, in management's
opinion, remote.
Note 8 - Related Party Transactions
Approximately 54% of the Company s stock is held by Company officers or
directors.
The Company has a loan outstanding to its majority shareholder
in the amount of $128,007 and $142,556, including accrued
interest thereon, as of June 30, 1996 and 1995 respectively.
The loan bears interest at 9% per year. The principal plus
accrued interest is due on July 31, 1998.
<PAGE>
The Company entered into an employment agreement with the
Chairman, Chief Executive Officer and major stockholder effective in
December 1995. Pursuant to the agreement, the stockholder's base annual
salary and subsequent increases are at the discretion of the Board of
Directors. In addition, the stockholder is entitled to receive a benefit
allowance in lieu of health, life and disability
insurance and other similar benefits, in the amount of 10% of
the shareholder's base salary per year. The agreement is for a
period of five years and is automatically renewable for
additional one year terms unless prior notice is given not less
than 90 days prior to the end of the initial term or any
succeeding year. The agreement also subjects the stockholder to
noncompetition provisions.
The Company, acting as a subcontractor, billed $183,000 and
$98,000 in service fees for the years ended June 30, 1996 and
1995, respectively, to a not-for-profit organization in which
the majority stockholder is an officer. The amount due from
this organization was approximately $119,000 and $73,000 at June
30, 1996 and 1995, respectively. The organization is provided
certain space in the Company's leased facilities without charge.
Note 9 - Long-term Debt
The following schedule details long-term debt outstanding as of
June 30:
<TABLE>
1996 1995
----------------------
<S> <C> <C>
A note due January 2, 1998 used
to finance the purchase of
the Oxford group (see Note 4).
Interest is payable quarterly
at the prime rate plus 1%. $325,000
Note payable with monthly payments
of $5,200 through April 1997 with the
balance due May 1997. Interest
is incurred at 8.5%. It is
collateralized by the cash
balances and commercial paper
of two of the Company's
subsidiaries. Subsequent to
June 30, 1996, this note was repaid. 228,823
Notes secured by Company auto-
mobiles and various capital leases
for office and computer equipment
(see Note 5). The notes are
payable in equal monthly installments
and bear interest at various rates
between 9% and 18%. 100,657 $51,470
---------------------
Total long-term debt $654,490 $51,470
Less current portion 265,417 12,395
---------------------
Noncurrent portion of long-
term debt $389,073 $39,075
======== =======
</TABLE>
<PAGE>
The repayment schedule for long-term debt as of June 30, 1996 is as
follows:
<TABLE>
Amount due
----------
<S> <C>
1997 265,417
1998 356,713
1999 27,997
2000 4,363
</TABLE>
Interest expense included in the results of operations for the
years ended June 30, 1996 and 1995, respectively was $10,645 and
$1,257.
Note 10 - Income Taxes
The provision for federal and state income taxes consists of the
following:
<TABLE>
Year ended June 30,
1996 1995
---------------------------
<S> <C> <C>
Current:
Federal $563,000 $35,157
State 104,000 12,000
Deferred:
Federal (94,000) 230,394
State (5,000) 58,000
-------- --------
$568,000 $335,551
======== ========
</TABLE>
A reconciliation of income tax expense with federal income taxes
at the statutory rate follows:
<TABLE>
Year ended June 30,
1996 1995
---------------------------
<S> <C> <C>
Federal income taxes at the statutory rate 34.0% 34.0%
Increase (Decrease) in taxes resulting from:
State income tax, net of federal benefit 6.1 4.7
Nondeductible items 1.6 3.2
Other 2.4 (3.9)
---- -----
Income tax expense provided 44.1% 38.0%
==== ====
</TABLE>
The income tax effects of temporary differences that give rise
to the net deferred tax liability are as follows:
<TABLE>
1996 1995
---------------------------
<S> <C> <C>
Current deferred tax liabilities:
Accrual to cash basis adjustment $146,000 $739,000
-------- --------
<PAGE>
Noncurrent deferred tax liabilities(assets):
Accrual to cash basis adjustment 438,000
Alternative minimum tax
credit carryforward 0 (36,000)
Net operating loss carryforward 0 (16,000)
Other 0 (4,000)
Jobs tax credit carryforward (55,000) (55,000)
------- ------
Non-current deferred tax
liabilities(assets) 383,000 (111,000)
------- -------
Total deferred tax liability $529,000 $628,000
======== ========
</TABLE>
The Company has job tax credits of approximately $55,000 at June
30, 1996. These job credits will expire in 2008. It is management s
judgment that there will likely be sufficient future taxable income to
absorb these credits, therefore no valuation allowance has been estimated
as of June 30, 1996.
Note 11 - Stock Options
In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement on Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation." SFAS No. 123 is
effective for fiscal years beginning after December 15, 1995.
SFAS No. 123 introduces a preferable fair value-based method of
accounting for stock-based compensation. SFAS No. 123
encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options, and
other equity instruments to employees based on the new fair
value accounting rules. The Company intends to continue
applying the existing accounting rules contained in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and disclose net income and earnings per share on a
pro forma basis, based on the new fair value methodology.
In August 1995, the Company adopted the 1995 Stock Option Plan (the
"Plan"). Under the Plan, incentive stock options and
nonqualified stock options may be granted, at the discretion of
the Board of Directors, to purchase up to 264,375 shares of the
Company's common stock through the year 2005.
Incentive stock options are to be granted at a price not less
than the fair market value of the Company's common stock at the
date of the grant. The exercise price may not be less than 110%
of the fair market value of the Company's common stock at the
date of the grant if the shareholder owns 10% or more of the
Company's outstanding stock. Options may be granted to
employees, consultants, and directors of the Company and must be
exercised within ten years of the date of the grant. Incentive
options for a total of 20,000 shares were granted at a price of
$5.88 per share to two employees in April, 1996. There were no
excersiable options at June 30, 1996.
Nonqualified stock options are exercised at a price to be
determined by the Board of Directors for a period of ten years
after the grant date. No nonqualified options have been granted
under the Plan.
<PAGE>
Note 12 - Stock Warrants Outstanding
The Company has 1,638,750 issued and outstanding stock purchase warrants
as of June 30, 1996. Each warrant entitles the holder to purchase one
share of Common Stock at an exercise price of $6.00 per share at any time
until December 4, 2000. The exercise price of the Warrants is subject to
adjustment in certain events pursuant to the anti-dilution provisions
thereof. The Warrants are redeemable, in whole or in part, at a price of
$.10 per Warrant commencing December 5, 1996, or sooner with the sole
consent of the lead underwriter, provided that (I) the Company gives 30
days prior written notice to the registered holders of the Warrants, and
(ii) the closing high bid price or sale price per share of the common
Stock (if the common Stock is then traded on NASDAQ or a national
securities exchange, respectively) for a period of 10 consecutive trading
days, ending on the third business day prior to the date of any
redemption notice, equals or exceeds at least $9.00. The Warrants shall
be exercisable until the close of the business day preceding the date
fixed for redemption.
The Company has also issued to the underwriters, for nominal
consideration, the Underwriters Warrant to purchase from the Company up
to 71,250 Units. The Underwriters Warrant is exercisable at a price of
$10.08 per Unit for a period of four years commencing December 5, 1996.
These Units consist of one share of Common Stock and two redeemable
common stock purchase Warrants. Each Warrant entitles the holder to
purchase one share of Common Stock under terms identical to the Warrants
described in the preceding paragraph.
Note 13 - Note Payable and Line of Credit
As of June 30, 1996, the Company had notes payable totaling
$320,000 utilized as revolving credit. These notes had a fixed
interest rate of 10%. The notes were paid in full subsequent to
June 30, 1996.
In addition, in August, 1996 the Company arranged an
uncollateralized $1,000,000 line of credit with interest
chargeable at prime.
<PAGE>
HELP AT HOME, INC.
EXHIBIT 3.5
STATE OF MISSISSIPPI
SECRETARY OF STATE S OFFICE
ERIC CLARK
SECRETARY OF STATE
JACKSON, MISSISSIPPI
CERTIFICATE OF EXISTENCE/AUTHORITY
I, ERIC CLARK, Secretary of State of the State of Mississippi, and as
such, the legal custodian of the corporate records, required by the laws
of Mississippi, to be filed in my office, do hereby certify:
That on May 23, 1986 the state of Mississippi issued a
Charter/Certificate of Authority to:
HASC Staffing Systems, Inc.
That the state of incorporation is MISSISSIPPI.
That the period of duration is 99 years.
That according to the records of this office, Articles of Dissolution or
a Certificate of Withdrawal have not been filed.
That according to the records of this office, a current Annual REPORT
HAS BEEN DELIVERED TO THE SECRETARY OF STATE S OFFICE.
I further certify that all fees, taxes and penalties owed to this state,
as reflected in the records of the Secretary of State, have been paid
and that the corporation is in existence or has authority to transact
business in Mississippi.
Given under my hand
and seal of office
May 30, 1996
Eric Clark
Secretary of State
<PAGE>
EXHIBIT 3.6
CERTIFICATE OF INCORPORATION
OF
HOMEMAKERS OF MONTGOMERY, INC.
STATE OF ALABAMA
MONTGOMERY COUNTY
I, Richard E. Thompson, Judge of Probate of Montgomery County,
Alabama, hereby certify that the Certificate of Incorporation of
HOMEMAKERS OF MONTGOMERY, INC., has this day been filed for record in
t h e Probate Court of Montgomery County, Alabama; and that the
Certificate of Incorporation has been examined and approved by me as
being in compliance with the provisions of the Alabama Business
Corporation Act (Act No. 414, Acts of Alabama 1959), and that the
incorporatorsof said corporation, their successors and assigns,
c o nstitute a body corporate under the name set forth in said
Certificate, namely:
HOMEMAKERS OF MONTGOMERY INC.
IN WITNESS WHEREOF, I the said Richard E. Thompson as Judge of
probate of Montgomery County, Alabama, hereunto set my name and affix my
seal of said Probate Court on this the 27 day of March, 1975.
Richard E. Thompson
Judge of Probate, Montgomery County, Alabama
<PAGE>
EXHIBIT 3.7
STATE OF MISSISSIPPI
SECRETARY OF STATE S OFFICE
ERIC CLARK
SECRETARY OF STATE
JACKSON, MISSISSIPPI
CERTIFICATE OF EXISTENCE/AUTHORITY
I, ERIC CLARK, Secretary of State of the State of Mississippi, and as
such, the legal custodian of the corporate records, required by the laws
of Mississippi, to be filed in my office, do hereby certify:
That on January 10, 1974 the state of Mississippi issued a
Charter/Certificate of Authority to:
STATEWIDE HEALTHCARE SERVICES, INC.
That the state of incorporation is MISSISSIPPI.
That the period of duration is 99 years.
That according to the records of this office, Articles of Dissolution or
a Certificate of Withdrawal have not been filed.
That according to the records of this office, a current Annual REPORT
HAS BEEN DELIVERED TO THE SECRETARY OF STATE S OFFICE.
I further certify that all fees, taxes and penalties owed to this state,
as reflected in the records of the Secretary of State, have been paid
and that the corporation is in existence or has authority to transact
business in Mississippi.
Given under my hand
and seal of office
May 30, 1996
Eric Clark
Secretary of State
<PAGE>
HELP AT HOME, INC.
EXHIBIT 10.2
FORM OF CONTRACT WITH ILLINOIS DEPARTMENT ON AGING
ILLINOIS DEPARTMENT ON AGING
COMMUNITY CARE PROGRAM PROVIDER AGREEMENT
This Agreement made by and between the Illinois Department on Aging
(hereinafter referred to as IDoA) and Help at Home, Inc.,
__________________________ (hereinafter referred to as Vendor) sets
forth each and every one of the following as conditions for provision of
services and receipt of payment under the Community Care Program.
1. This Agreement shall become effective February 1, 1991 and shall
terminate June 30, 1992, unless extended by written letter from IDoA.
2. The Vendor agrees to provide service(s) to persons eligible for
Community Care Program services and provide said service(s) to persons
in the following geographic area:
3. The Vendor agrees to accept IDoA s payment based on IDoA s fixed
unit rate of reimbursement per unit, pursuant to rule Section 240.1930,
for the specified service(s) identified below:
Homemaker: Chore-Housekeeping:
Upon written notification from IDoA of a change in the fixed unit
rate of reimbursement per unit, the Vendor agrees to provide
service at that rate pursuant to all Community Care Program rules
and requirements. Upon receipt of the written notification, should
Vendor no longer wish to provide service at the newly established
fixed rate of reimbursement, Vendor may exercise its termination
rights within the time frames prescribed in the written
notification.
IDoA s share of costs of service as established in IDoA s rules
shall constitute the complete satisfaction of IDoA obligation.
4. Payments under this Agreement shall be subject to the availability
of a sufficient appropriation from State and/or Federal funds for the
Community Care Program.
5. Time is of the essence when any action is required under this
Agreement to be completed by a stated time. Failure by Vendor to
complete such actions within the required time limits may result in a
disallowance of payment for services rendered under this Agreement.
6. Vendor agrees to conform to all Community Care Program rules
adopted pursuant to the Illinois Administrative Procedures Act (Illinois
Revised Statutes, 1983, Chapter 127, paragraph 1001 et seq.) And
policies and procedures issued by IDoA.
7. This Agreement shall be governed and construed in accordance with
the laws of the State of Illinois.
8. In the event any provision, term, or condition of this Agreement is
declared void, unenforceable or against public policy, then said
Agreement shall be construed as though said term did not exist.
<PAGE>
9. No subcontracts are authorized under this Agreement unless
authorized in advance by IDoA in writing.
10. This Agreement, including the rights, benefits and duties
hereunder, shall not be assignable.
11. Vendor is required to submit to IDoA by the 15th of each month a
Vendor Request For Payment (VRFP) for all authorized services rendered
under this Agreement in the preceding month, in the form prescribed by
IDoA.
12. All records and other information maintained by Vendor about
persons receiving services under this Agreement are confidential and
shall be protected by Vendor from unauthorized disclosure. However,
nothing in this paragraph shall affect the requirements or provisions of
paragraphs 13, 14, 15, 16, and 17.
13. Vendor shall maintain and make available to IDoA upon request, such
financial and other records as are required by IDoA to comply with
Federal and/or State reporting requirements. Vendor shall provide such
cost data as may be necessary to determine reimbursement rates. All
records, information and documentation shall be maintained by vendor for
a minimum of three (3) years from the termination date of this
Agreement, or for a period of time otherwise specified by IDoA.
14. If, as a result of IDoA review, billing discrepancies are
indicated, Vendor must upon IDoA request, purchase a limited scope
financial audit to reconcile Vendor Request For Payments, including
supplemental billings, to service documentation, client eligibility,
Client Agreement - Plan of Care and resultant payment by IDoA.
15. Vendor agrees to provide IDoA with an annual financial report
completed in accordance with Generally Accepted Audit Standards and
Audit Guidelines issued by the Department. The annual financial audit
report shall be filed within six (6) months after the close of the
Vendors business fiscal year.
16. Vendor agrees to adhere to all financial disbursement requirements
in addition to attendant reporting requirements regarding apportionment
revenues for homemaker and chore-housekeeping services as stated in the
Community Care program rule, Section 240.2040, adopted pursuant to the
Illinois Administrative Procedures Act.
17. IDoA and its designees shall be permitted access to all financial
and other records maintained by Vendor which pertain to services
rendered under this Agreement.
18. All program records, case notes, reports, related information and
documentation, including client files, which are generated as a result
of the Agreement shall be considered property of the Department.
19. IDoA assumes no liability for the actions of Vendor under this
Agreement. Vendor is an independent contractor and assumes all risk and
loss occasioned by Vendor s performance of this Agreement. Vendor
agrees to hold the State of Illinois, IDoA, its officers, agents and
employees harmless from any and all liabilities, claims, damages, suits,
costs, fees, and expenses incident thereto, for injuries or death to
persons or for loss of or damage to property because of Vendor s
actions. In the event of any demand or claim against the State of
Illinois, IDoA, or any of its officers, agents and employees, such
parties may elect to defend such claim, and be indemnified by Vendor.
<PAGE>
20. Any requirements upon Vendor to purchase insurance shall not limit
the liability of Vendor to make full indemnification for all costs in
responding to, defending, compromising or settling of any claim or
demand.
21. Vendor agrees not to claim to any State, Federal or other
regulatory agency or in any court proceeding that vendor is a co-
employer with the State of Illinois for the employees employed to
perform the services covered by this Agreement. Violation of this
provision shall be cause for termination and shall bar renewal of this
Agreement.
22. Nothing in the Agreement shall prevent the Vendor from performing
identical or similar services for other parties than Community Care
program clients.
23. Vendor certifies that it is/is not (circle one) a charitable
organization subject to the Illinois Charitable Trust or Solicitation
Acts and, if subject to either of these Acts, that all appropriate
registration material and annual reports have been filed with the State
of Illinois Attorney General.
24. Vendor certifies that he/she/ the firm has not been convicted of
bribery or attempting to bribe an officer or an employee of the State of
Illinois, nor has Vendor made an admission of guilt of such conduct
which is a matter of record.
25. Vendor shall abide by the Federal Civil Rights Act of 1964, the
Federal Rehabilitation Act of 1983, the Human Rights Act, the Federal
Immigration Reform and Control Act of 1986, and all other Federal and
State laws, regulations, or orders which prohibit discrimination because
of race, color, religion, sex, national origin, ancestry, age, marital
status, physical or mental handicap, including the non-discrimination
policy and procedures promulgated by IDoA with respect to Civil Rights
Compliance.
26. The contractor certifies that it is not in default on an
educational loan as provided in Public Act 895-827.
27. The contractor certifies that it has not been barred from
contracting with a unit of State or local government as a result of a
violation of Section 33E-3 or 33E-4 of the Criminal Code of 1961.
28. All terms and conditions of this contract and any subsequent
amendments, together with the Vendor Proposal, approved forms, and all
sheets and documents as are made a part hereof, shall constitute the
entire present Agreement between IDoA and Vendor and shall be considered
public information in accordance with the provisions of the Freedom of
Information Act (Illinois Revised Statutes, 1983, Chapter 116, paragraph
201, et seq.).
29. Any statements, provisions, or considerations contained in the
response to the Request for Proposal that are inconsistent with the
provisions of this Agreement shall be of no force or effect.
<PAGE>
30. The Vendor furnishes services with the understanding that payment
is made from Federal and/or State funds and that any falsification or
concealment of a material fact with regard to services provided or
charges submitted may lead to appropriate legal action and immediate
termination of this Agreement. Payments made for unauthorized services
must be repaid and amounts due for repayment for unauthorized service
may be deducted from any amounts due Vendor.
31. This Agreement may be amended by the mutual consent of both parties
at any time during its term. Amendments to this Agreement shall be in
writing, signed by both parties or their authorized representatives.
Vendor non-compliance with the terms of this Agreement may result in its
immediate termination or suspension of service or referrals or other
sanctions as appropriate and as outlined in rule.
32. This Agreement may be terminated without cause by either party upon
thirty (30) days written notice.
33. Under penalties of perjury, I certify that____________________ is
my correct Federal Taxpayer Identification Number. I am doing business
as a (please check one):
Individual Real Estate Agent Sole Proprietorship
Governmental Entity Corporation Tax Exempt Organization
Partnership Trust or Estate Not-for-profit Corporation
Medical and Health Care Services Provider Corporation
34. All notices required or desired to be sent by either party shall be
sent to the following respective addresses:
IDoA
Illinois Department on Aging Help at Home, Inc.
421 East Capitol Avenue 223 West Jackson Blvd.
Springfield, Illinois 62701 Chicago, IL 60606
Director Typed Name and Title of
Vendor Representative
<PAGE>
<TABLE>
HELP AT HOME, INC.
Computation of Earnings Per Share
Schedule 11.1
1996 1995
---- ----
<S> <C> <C>
Net income (loss)[A] $ 718,845 $ 547,426
Interest Adjustment 211,532
-------- --------
Adjusted net income (loss)[B] 930,377 547,426
======== ========
Weighted average number of shares
of Common Stock outstanding [C] 1,503,391 1,050,000
Weighted average number of Common
Stock Equivalents outstanding (1) 739,836
--------- ---------
Weighted average number of shares
for fully diluted computation [D] 2,243,227 1,050,000
========= =========
Net income (loss) per share:
Primary (unadjusted) [A/C] $ .48 $ .52
Fully Diluted [B/D] $ .41 $ .52
- ----------------------
<FN>
(1) Unexercised Warrants issued in connection with the Company s
initial public offering, on a weighted average basis as of June 30,
1996. Total Warrants issued in connection with the offering are
1,638,750.
</TABLE>
HELP AT HOME, INC.
Schedule of Subsidiaries
Exhibit 21.1
Parent:
Help at Home, Inc. (a Delaware Corporation)
223 West Jackson Blvd., Suite 500
Chicago, IL 60606
Subsidiaries:
1) Help at Home, Inc. (an Illinois Corporation)
223 West Jackson Blvd., Suite 510
Chicago, IL 60606
Subsidiaries of Help at Home, Inc.:
1) Lakeside Home Health Agency, Inc. (a Missouri Corporation)
300 South Biltmore
Fenton, MO 63026
2) Lakeside Home Health Agency, Inc. (an Illinois Corporation)
223 West Jackson Blvd., Suite 510
Chicago, IL 60606
2) Rosewood Home Health, Inc. (an Illinois Corporation)
621 South Bellwood
East Alton, IL 62024
3) Homemakers of Montgomery, Inc. (an Alabama Corporation)
229 Interstate Park Drive
Montgomery, AL 36109
4) HASC Staffing Services, Inc. (a Mississippi Corporation)
3828 Interstate 55 North
Jackson, MS 39211
5) Statewide Healthcare Services, Inc. (a Mississippi Corp.)
3828 Interstate 55 North
Jackson, MS 39211
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001001109
<NAME> HELP AT HOME
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 2734
<SECURITIES> 0
<RECEIVABLES> 3002
<ALLOWANCES> 131
<INVENTORY> 0
<CURRENT-ASSETS> 5871
<PP&E> 309017
<DEPRECIATION> 167523
<TOTAL-ASSETS> 9172
<CURRENT-LIABILITIES> 2413
<BONDS> 0
0
0
<COMMON> 37
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9172
<SALES> 11886
<TOTAL-REVENUES> 11886
<CGS> 8204
<TOTAL-COSTS> 8204
<OTHER-EXPENSES> 2525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (131)
<INCOME-PRETAX> 1287
<INCOME-TAX> 568
<INCOME-CONTINUING> 719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 719
<EPS-PRIMARY> .48
<EPS-DILUTED> .41
</TABLE>
