UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File No. 033-97034
HELP AT HOME, INC.
DELAWARE 36-4033986
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
223 W. Jackson Blvd., Suite 500
Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
(312)663-4244
(Issuer's telephone number, including area code)
Indicate by checkmark whether the issuer (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer s classes
of common equity, as of the latest practicable date:
Common Stock, par value $.02 per share, 1,869,375 shares outstanding
as of November 5, 1997.
Transitional Small Business Disclosure Format: Yes No X
<PAGE>
Help at Home, Inc.
Index
PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets at
June 30, 1997 and September 30, 1997 1
Consolidated Statements of Income
for the three month periods ended
September 30, 1996 and 1997 2
Consolidated Statements of Cash Flows
for the three month periods ended
September 30, 1996 and 1997 3
Notes to the Consolidated Financial Statements 4
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5
PART II: OTHER INFORMATION 14
ITEM 1 LEGAL PROCEEDINGS 14
ITEM 2 CHANGES IN THE RIGHTS OF THE COMPANY'S
SECURITY HOLDERS 14
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 14
ITEM 5 OTHER INFORMATION 14
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Balance Sheet
September 30 June 30
1997 1997
(Unaudited) (Audited)
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 453,012 $ 870,634
Accounts receivable (net of
allowance for doubtful accounts of
$261,000 and $167,000, respectively) 5,619,982 5,055,469
Prepaid expenses and other 239,348 154,774
Federal income tax receivable 315,562 281,052
Deferred income taxes - current 164,150 119,000
------------ ------------
Total current assets 6,792,054 6,480,929
Furniture and equipment, net 466,159 474,979
Other Assets:
Due from officer 124,974 121,564
Goodwill (net of amortization of
$188,000 and $154,000, respectively) 2,367,740 2,401,816
Other assets 88,275 88,275
------------ ------------
Total other assets 2,580,989 2,611,655
------------ ------------
Total Assets $ 9,839,202 $ 9,567,563
============ ============
Liabilities
Current Liabilities:
Accounts payable $ 800,841 $ 685,466
Accrued expenses 1,340,349 1,142,735
Due to third party payors 364,436 239,436
Current maturities of long term debt 1,381,091 1,290,485
Income taxes payable 151,337 151,337
Deferred income taxes - current 146,000 146,000
------------ ------------
Total current liabilities 4,184,054 3,655,459
Deferred income taxes - noncurrent 206,948 242,000
long-term debt, less current portion 155,350 162,475
------------ ------------
Total Liabilities 4,546,352 4,059,934
Stockholders Equity
Preferred stock, par value $.01 per share;
1,000,000 share authorized, none outstanding
Common stock, par value $.02 per share;
14,000,000 shares authorized, 1,869,375
issued and outstanding 37,388 37,388
Additional paid in capital 3,694,406 3,694,406
Retained earnings 1,561,056 1,775,835
------------ ------------
Total Stockholders Equity 5,292,850 5,507,629
------------ ------------
Total Liabilities and
Stockholders Equity $ 9,839,202 $ 9,567,563
============ ============
The accompanying notes to these financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30
1997 1996
<S> <C> <C>
Service fees $ 6,192,975 $ 4,759,894
Direct costs of services 4,231,881 3,156,384
------------ -----------
Gross margin 1,961,094 1,603,510
Selling, general and
administrative expenses 2,250,109 1,324,673
------------ -----------
(Loss) Income from operations (289,015) 278,837
Interest (expense) income (29,058) 21,254
------------ -----------
(Loss) income before income taxes (318,073) 300,091
Federal and state income taxes (103,293) 127,000
------------ -----------
Net (Loss) Income $ (214,780) $ 173,091
============ ===========
Earnings per common share:
Primary $ (.11) $ .09
Fully diluted $ (.02) $ .07
Weighted average number of shares:
Unadjusted 1,869,375 1,869,375
Fully diluted 3,799,375 3,508,125
The accompanying notes to these financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended September 30
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net (Loss) Income $ (214,780) $ 173,091
Non cash changes in net (loss)income:
Depreciation 36,207 32,288
Amortization 34,076 35,800
Deferred income taxes (80,202) 2,000
Changes in:
Accounts receivable (564,513) (210,591)
Prepaid expenses and other (84,575) (63,087)
Accounts payable 115,376 (576)
Other current liabilities 197,615 297,240
Due to third-party payors 125,000 0
Current income taxes (34,510) (541,000)
------------ -----------
Net cash used in operating activities (470,306) (273,835)
Cash flows from investing activities:
Acquisition of property (27,387) 7,309
Increase in shareholder loan (3,410) (6,528)
Increase in other investments - (65,163)
------------ -----------
Net cash used in investing activities (30,797) (64,382)
Cash flows from financing activities:
Proceeds from long-term debt 100,000 -
Repayment of long-term debt (16,519) (418,890)
------------ -----------
Net cash provided by (used in)
financing activities 83,481 (418,890)
------------ -----------
Net decrease in cash and cash equivalents (417,622) (757,107)
Cash and cash equivalents:
Beginning of period 870,634 2,734,705
------------ -----------
End of period $ 453,012 $ 1,977,598
============ ===========
Supplemental disclosure of noncash investing
and financing activities:
Cash payments for:
Interest $ 12,199 $ 10,741
Income taxes 11,400 666,666
The accompanying notes to these financial statements are an
integral part hereof.
</TABLE>
<PAGE>
HELP AT HOME, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Basis of Presentation
These unaudited Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included in Help at Home, Inc.'s (the Company) Annual Report on Form 10-
KSB for the fiscal year ended June 30, 1997 (1997 Form 10-KSB). The
following Notes to the Unaudited Consolidated Financial Statements
highlight significant changes to the Notes included in the 1997 Form
10-KSB and such interim disclosures as required by the Securities
and Exchange Commission. Certain financial information that is normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles but is not required for interim
reporting purposes has been omitted. The accompanying unaudited Consoli-
dated Financial Statements reflect, in the opinion of management, all
adjustments necessary for a fair presentation of the interim financial
statements. All such adjustments are of a normal and recurring nature.
The financial results for interim periods may not be indicative of
financial results for the full year.
Note 2: Debt
Principal outstanding on the Company's revolving credit facility, due on
September 30, 1998, was increased to the $1 Million borrowing limit
during the first quarter of fiscal 1998. The loan, collateralized by
the assets and capital stock of Help at Home, Inc. (Illinois) was in
technical default as of September 30, 1997 with respect to the loan
covenant requiring maintenance of a current ratio of at least 1.75:1.
The Company's current ratio, as of September 30, 1997, was l.6:1.
Note 3: Commitments and Contingencies
Litigation. The Company has been named in various legal proceedings in
connection with matters that arose during the normal course of its
business and related to certain acquisitions. While the ultimate result
of the litigation or claims cannot be determined, it is management's
opinion, based upon information it presently possesses, that it has
adequately provided for losses that may be incurred related to these
claims. It is management's opinion that losses, if any, in excess of
the amounts provided for in the financial statements will not have a
material effect on the Company.
Settlements Due to Medicare: As a Medicare provider, the Company
continually has estimated settlements due to and from Medicare.
Estimated settlements due to Medicare in the accompanying financial
statements are the result of interim reimbursement rates (rates at which
the Company has been paid for its services throughout the year) in
excess of actual allowable costs of providing home health care services
to the Medicare beneficiaries it serves. Historically, the Company has
funded settlements due to the Medicare program when they become due in
conjunction with filing of year-end cost reports. Among the Company's
four Medicare certified home health providers, the estimated amounts due
to the Medicare program are as follows:
<PAGE>
Lakeside Home Health Agency, Inc.(MO) $ 15,117
Rosewood Home Health, Inc. 22,479
Homemakers of Montgomery, Inc. 326,840
--------
Total $364,436
========
Medicare Provider Status. The Company operates Homemakers of Montgomery,
Inc. pursuant to an established Certificate of Need (CON) that has,
historically, enabled the Company to offer home health care services
only to Medicare beneficiaries residing in Montgomery County, Alabama.
In August 1997 the Company prevailed in a long-standing effort to secure
an additional CON that will, when activated by the Alabama State Health
Planning and Development Agency, allow the Company to extend its service
area to include Macon County, Alabama. The Company intends to provide
service to residents of Macon County under its current Medicare provider
number and should not be affected, as a result, by the six-month
moritorium on certification of new home health agencies announced
by President Clinton in September 1997.
The Company established Lakeside Home Health Agency, Inc., an Illinois
corporation (Lakeside IL), in fiscal 1997 for the purpose of providing
Medicare home health services to patients residing in and around
metropolitan Chicago. In August 1997, Lakeside IL received notification
of its certification as a Medicare provider. Pursuant to its
certification and prior to the announcement of the President' s
moritorium, Lakeside IL applied for its Medicare provider number. To
date, Lakeside IL has not received its Medicare provider number and
cannot, as a result, bill the Medicare program for services rendered to
Medicare home health patients. As a result, even though the Company
believes that Lakeside IL's provider number will be retroactive to the
agency' s initial certification date, no revenues have been recognized
for Lakeside IL and services are being held to a minimum pending further
notification of Lakeside IL's provider status.
Termination and Benefits Agreements. As of October 1997 the Company's
Compensation Committee established a termination and benefits policy
with respect to certain key employees which provides for payment of
severance and benefits in the event of involuntary termination and/or a
change in control. The maximum aggregate salary commitment pursuant to
this policy would be approximately $435,000.
Self-Funded Insurance Plan. The Company instituted a partially self-
funded employee health coverage program on July 1, 1997. The Company
is required, under the program, to fund claims for its participating
employees up to an established per-employee limit. Claims in excess of
such limits are insured by a third-party reinsurer. The Company
estimates its liability for both outstanding as well as incurred, but
not reported, claims based on historical loss experience. Differences
between actual losses and reserve estimates are recognized in the period
in which such differences become known. Management believes that any
difference between actual losses incurred after September 30, 1997 (and
related to the period then ended) and available reserves will not be
material.
<PAGE>
Note 5: Earnings Per Share
Earnings per share have been determined by dividing earnings by the
weighted-average number of shares of Common Stock outstanding during
each period. The modified treasury method of calculating earnings per
share has been utilized by the Company for reporting purposes.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW:
Help at Home, Inc. (the Company) provides skilled nursing and
therapeutic services together with general homemaker services to the
elderly, medically fragile and disabled in their homes. The Company has
engaged in the provision of unskilled homemaker services for over two
decades and entered the skilled services market in 1995. Help at Home
operates 40 locations in Illinois, Missouri, Indiana, Alabama and
Mississippi. The Company derives a significant portion of its revenues
from 15 contracts with the Illinois Department on Aging. Similarly, the
Company contracts with other state, regional and municipal agencies for
the provision of custodial home care services. The Company also
provides Medicare home health services to homebound persons through its
four Medicare certified home health agencies located in Illinois,
Missouri and Alabama.
The statements which are not historical facts contained in this Form 10-
QSB are forward looking statements that involve risks and uncertainties,
including, but not limited to, the integration of new acquisitions into
the operations of the Company, the ability of the Company to locate
attractive acquisition candidates, the effect of economic conditions and
interest rates, general labor costs, the impact and pricing of
competitive services, regulatory changes and conditions, the results of
financing efforts, the actual closing of contemplated transactions and
agreements, the effect of the Company's accounting policies, and other
risks detailed in the Company s Securities and Exchange Commission
filings. No assurance can be given that the actual results of
operations and financial condition will conform to the forward-looking
statements contained herein.
This report covers the Company's operations for the first quarter of its
1998 fiscal year which will end on June 30, 1998. References herein to
the first quarter of 1998 are specifically intended to relate to the
quarter ended September 30, 1997, while references to the first quarter
of 1997 are specifically intended to relate to the quarter ended
September 30, 1996.
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1996:
Reportable Segments: In keeping with the adoption of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ,
the Company has identified reportable segments based on the geographic
areas (states) generally disclosed above. Revenues in all four segments
are derived from the provision of both skilled nursing services and
unskilled homemaker/respite services. In addition to the disclosures
made elsewhere herein, the following table presents a quarter to quarter
comparison (in thousands) of the Company's segments:
Alabama Illinois Missouri Mississippi Total
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
Revenue $1,497 $ 928 $3,795 $3,028 $296 $205 $605 $599 $6,193 $4,760
Direct
Costs 1,130 553 2,521 2,072 183 135 397 396 4,231 3,156
------------ ------------- --------- ----------- -------------
Gross
Margin 367 375 1,274 956 113 70 208 203 1,962 1,604
Operating
Expenses 456 506 816 412 102 60 266 126 1,640 1,103
------------ ------------- --------- ----------- -------------
Operating
Income
(Loss) $( 89)$ (131) $ 458 $ 544 $ 11 $ 10 $(58) $ 77 $ 322 $ 501
============= ============== ========== =========== =============
Total
Assets $3,250 $2,051 $3,760 $4,194 $ 115 $227 $1,552 $1,264 $8,677 $7,736
============= ============= ========== ============= =============
Reconciliation of segments' operating income to Consolidated Net Income
(Loss) is as follows:
1997 1996
Segments' Operating Income $ 321 $ 500
Less:
Income tax (benefit) expense (103) 127
Corporate overhead expense 639 200
---- -----
Net (Loss) Income $(215) $ 173
===== =====
Reconciliation of segments' total assets to Consolidated Assets is
as follows:
Segments' Total Assets $8,677 $7,736
Plus:
Corporate/support entities
Total Assets 1,162 947
------ ------
$9,839 $8,683
====== ======
<PAGE>
Client Service Revenue: Revenues derived from services to the Company's
clients for the three months ended September 30, 1997 grew to
approximately $6.2 Million reflecting an increase of $1.4 Million or 30%
over the same quarter of the previous fiscal year. Custodial and
homemaker services accounted for approximately $1.3 Million (93%) of
the revenue growth while the bulk ($93,000)of the remaining 7%
($100,000) came from increased services to Medicare beneficiaries. A
comparison of the first quarter of fiscal 1998 as contrasted to the same
period in fiscal 1997 by state, shows the greatest revenue growth
($767,000 or 25%) in Illinois followed by Alabama ($569,000 or 61%),
Missouri ($92,000 or 45%) and Mississippi ($6,000 or 1%). Of the
Company's first quarter 1998 revenues, approximately $3,273,000 (53%)
was realized through 15 service contracts with the Illinois Department
on Aging as compared to $2,503,000 (53%) the previous year. Homemaker
services reimbursed through other state, regional and/or municipal
sources represented $1,380,000 or 22% of total 1998 revenues as compared
to $1,500,000 (31%) during the previous year. The decline in this
revenue category is attributable to decreased budget appropriations for
agencies associated with the City of Chicago which were not offset by
growth among similar contracts in other areas. The remaining $1,541,000
(25%) of the Company's first quarter 1998 revenue came from the Medicare
program and other commercial/private pay sources as compared to $757,000
(16%) for this category during the same quarter of the previous year. On
a stand-alone basis, Medicare revenues constituted 13% of total revenues
during the first quarter of 1998 ($799,000) as opposed to 15% in the
first quarter of 1997 ($706,000).
Direct Costs of Providing Services: Direct costs of providing services
to clients, comprised entirely of wages and related expenses paid to
field staff members, increased by 34% ($1,075,000) to $4,232,000 in the
first quarter of fiscal 1998 and constituted 68% of revenues. Overall
direct costs, as a percentage of revenues, increased by 2% for the three
months ended September 30, 1997. A comparison of direct costs by
segment shows that, as a percentage of revenue, first quarter direct
costs rose to 75% in Alabama as compared to 60% for the same quarter
last year. The proportionate increase in direct costs attributable to
Alabama operations was offset by a 2% and 4% proportionate reduction of
direct costs in Illinois and Missouri, respectively, due, primarily, to
rate increases which took effect after September 30, 1996. However, in
Illinois and Missouri operations were affected by the increase in the
Federal minimum wage which was implemented as of September 1, 1997.
Direct costs associated with provision of services to Medicare
beneficiaries dropped, as a percentage of revenue, from 52% as of
September 30, 1996 to 51% as of the same date in 1997.
The gross margin on services grew by 22% or $358,000 and reached
$1,961,000 for the quarter ended September 30, 1997 as compared to
$1,604,000 as of September 30, 1996. Gross margin contributions by state
include $1,274,000 for Illinois (as compared to $956,000 for the same
quarter in 1996), $367,000 for Alabama (as compared to $375,000 for the
same quarter in 1996), $208,000 for Mississippi (as compared to $203,000
for the same quarter in 1996) and $113,000 for Missouri (as compared to
$70,000 for the same quarter in 1996).
Selling, General and Administrative Expense: The increase in the
Company's gross margin was more than offset by a $976,000 (75%) increase
in selling, general and administrative costs which caused operating
expenses to grow from $1,303,000 in the first quarter of 1997 to
$2,280,000 during the first quarter of 1998.
<PAGE>
Selling, general and administrative expense for the first quarter of
fiscal 1998 represented 37% of revenues as compared to 27% of revenues
for the corresponding quarter in fiscal 1997. The increase of
administrative expenses resulted in the first quarter 1998 loss of
$215,000 as compared to a first quarter 1997 profit of $173,000,
producing a quarter to quarter negative variance of $388,000.
Administrative salaries and benefits grew from $789,000 as of September
30, 1996 to $1,203,000 for the quarter ended September 30, 1997.
Expenditures associated with growth of the Company's corporate staff in
the amount of $153,000 were offset by reductions of similar positions in
the Oxford companies amounting to $78,000. The remainder of the overall
growth in administrative salaries and benefits is, essentially,
attributable to Help at Home (IL) which incurred $328,000 of increased
staffing expense in fiscal 1998 as compared to the same period in fiscal
1997. Salaries and benefits comprised 19% and 17% of associated
revenues in fiscal 1998 and 1997, respectively.
Professional fees and insurance grew from $55,000 for the quarter ended
September 30, 1996 to $176,000 for the quarter ended one year later.
Approximately $30,000 of the $121,000 increase is related to ongoing
litigation brought by the estate of the former owner of the Oxford
companies (as more fully disclosed in Part II., Item 1, hereof). The
remaining increase of $91,000 stems from increased insurance costs and
routine legal fees associated with the Company's ongoing affairs.
Professional and legal fees grew, as a percentage of revenue, from 1% to
3% for the quarter ended September 30, 1997.
Occupancy and general office expenses realized in the first quarter of
fiscal 1998 increased by $173,000 (from $286,000 to $459,000) over the
same quarter a year earlier. Approximately $143,000 of the increase is
attributable to the Company's new offices in Mississippi ($104,000) and
opening of four new offices in Illinois ($38,000). The remainder of the
increase is attributable to expansion of the Company's corporate offices
($26,000) and overall increases in the cost of supplies and minor
equipment. Occupancy costs grew, as a percentage of revenue, from 6%
for the quarter ended September 30, 1996 to 7% as of September 30, 1997.
Travel expenses grew from $58,000 to $91,000 during the quarters ended
September 30, 1996 and 1997, respectively. The entirety of the $33,000
( 56 %) increase stems from efforts to develop new business in
Mississippi.
Advertising and promotional expense grew from $60,000 for the first
quarter of 1997 to $157,000 for the first quarter of fiscal 1998.
Approximately $75,000 of the $97,000 increase stems from new business
development among the Oxford companies' locations. The remaining $22,000
of growth is attributable to the new office locations in Illinois.
Advertising and promotional expenses represented 1% of revenue in
fiscal 1997 versus 3% of revenue generated during the first quarter of
1998.
Interest expense increased by $61,000, quarter to quarter, due entirely
to diminishment of the Company's cash reserves on deposit in interest
bearing accounts together with debt service associated with the
Company's $1,000,000 bank line of credit. Non-cash expenses, including
amortization, depreciation and bad debt reserves increased by $87,000 to
$95,000 for the quarter ended September 30, 1997 due to the Company's
decision to routinely increase its bad debt reserves.
<PAGE>
With respect to the Company's identified segments, Illinois operations
realized increased selling, general and administrative expenses of
$404,000 as operating expenses grew from $412,000 to $816,000. The bulk
of the increase ($327,000) is attributable to growth in administrative
salaries. Alabama operating expenses declined by $50,000 (from $506,000
to $456,000) due to the elimination of certain administrative positions
in the second quarter of fiscal 1997. Mississippi selling, general and
administrative expenses increased by $140,000 from $126,000 to $266,000
due to the addition of new offices in that state. Missouri selling,
general and administrative expenses increased by $42,000 from $60,000
to $102,000 due to revenue increases that necessitated more staff.
Operating expenses associated with the corporate offices increased by
$439,000, moving from $200,000 to $639,000 for the quarter ended
September 30,1997. Approximately $154,000 of the increase comes from
additional salary expense, $89,000 from professional fees/insurance,
$41,000 from travel expenditures, $16,000 from advertising and promotion
efforts related to development of Mississippi operations, $28,000 from
occupancy expenses and $66,000 from non-cash expenses and interest.
Earnings: The net loss of $215,000 in the first quarter of fiscal 1998
compares to net income of $173,000 for the quarter ended September 30,
1996. Earnings per share of common stock were $(.11) and $.09
(unadjusted) for the quarters, respectively. On a fully diluted basis,
1998 and 1997 earnings per share were $(.02) and $.07, respectively,
based on 3.8 Million and 3.5 Million shares, respectively. The EPS
calculation is based on the modified treasury method of computing
earnings. The Company has 1,710,000 warrants outstanding as a result of
its initial public offering, 71,250 of which are underwriter's warrants.
As noted in its 10-KSB for the year ended June 30, 1997, the Company has
invested in the establishment of approximately 14 new offices in
Mississippi and Illinois in anticipation of securing clients pursuant to
new contracts with state and/or area agencies on aging. During the
first quarter of fiscal 1998, the Company invested in several
promotional campaigns designed to establish name recognition and
awareness in the new communities it serves. While the Company
anticipates the realization of projected new business in Illinois and
Mississippi, there can be no assurance that such business will actually
materialize within the time frames projected by the Company. As a
result, the Company will continue to closely monitor each of its
operating locations and may elect to consolidate one or more such
locations if operating losses exceed planned thresholds.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's basic cash requirements are for operating expenses,
generally comprised of labor, occupancy and administrative costs. The
Company relied in 1997 on remaining cash proceeds from its initial
public offering and borrowed capital to augment cash flows from
operations for the purpose of expanding its business. For the remainder
of fiscal 1998 the Company intends to secure expansion capital by
financing certain of its receivables. The Company's net working capital
as of September 30, 1997 stood at $2,608,000. The ratio of current
assets to current liabilities as of September 30, 1997 was 1.6:1.
<PAGE>
The Company' s indebtedness was $1,536,000 as of September 30, 1997
divided among a bank loan secured by certain receivables in the amount
of $1 Million, a $325,000 note secured by the capital stock of
Homemakers of Montgomery, Inc. arising from the purchase of Oxford
Health Care, a $172,000 secured note used to finance the purchase of an
airplane, capital leases of $32,000 and automobile installment loans in
the amount of $7,000. The Company, as of September 30, 1997, was in
technical default relative to one of two financial ratios enumerated in
the loan agreement for its credit line in the amount of $1 Million. At
September 30, 1997 the loan agreement required that the Company's
current ratio be maintained at a level of at least 1.75:1. As of
September 30, 1997 the current ratio was 1.62:1. The Company has not
received a waiver of this default from its lender. Approximately $2.8
Million of the Company' s accounts receivable related to its Illinois
operations have been pledged as security on its revolving credit
line. The remaining $2.8 Million of the Company s patient/client
receivables are unencumbered.
Cash used by operations for the first quarter of fiscal 1998 amounted to
$470,000 as compared to $274,000 of cash used for operations in the same
quarter of the previous year. Cash used by investing activities in the
amount of $31,000 compares to $64,000 for the quarter ended September
30, 1996. Cash realized from an increase of the Company's indebtedness
in September reached $83,000, yielding a net decrease in the Company' s
cash position of $418,000. For the same quarter a year earlier, the
Company used $419,000 of cash to pay down indebtedness of the Oxford
companies which yielded an overall decrease in the Company's cash posi-
tion for that quarter of $757,000.
The Company' s cash position at September 30, 1997 stood at $453,000
as compared to $1,978,000 for the quarter ended September 30, 1996. As
of September 30, 1997, the accrued obligations that may require large
or unusual amounts of cash include final settlement of the June 30,
1997 workers compensation audit with the Company' s carrier ($225,000),
payment of amounts that may be owed to the Medicare program on the part
of Homemakers of Montgomery, Inc. ($327,000) and payment of the note and
accrued interest due in January, 1998 arising from the purchase of the
Oxford companies ($366,000).
For the remainder of fiscal 1998, cash flows from operations will be
insufficient to fund the expansion of the Company's business. The
Company is in the final stages of arranging an increase in its line of
credit and expects to borrow funds sufficient to sustain its plans to
increase its business. Although the Company does not anticipate
difficulty in securing a larger line of credit, there can be no
guarantee of final success in this regard. In the event that the
Company is unsuccessful in securing the expanded line of credit, it will
be forced to scale back and/or abandon certain business expansion
activities.
The Company presently has 1,638,750 Warrants outstanding with an
exercise price of $6.00 The Warrants can be exercised at any time
prior to December 5, 2005 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. There can be no assurance, however, that the closing price
of the Company's common stock will reach a level sufficient to precipi-
tate exercise of the Warrants. As of the close of business November 10,
1997, the closing price of the Common Stock on the NASDAQ Stock Market
was $2.438.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. 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.
The Company has been named as a party to a suit filed by the family of
Oxford Health Care' s former owner (now deceased) in which the family
seeks to claim, for the decedent s estate, approximately $300,000 in
life insurance proceeds payable under two key-man insurance policies
owned by the Company. The insurance proceeds are being held in escrow
pending resolution of the asserted claim. The Company has initiated a
counter claim in which it seeks to reduce the amount of the $325,000
note payable to the former owner by approximately $209,000. The proposed
reduction in the principal of the note, which is due in January 1998,
is the result of bad debts arising from periods prior to the acquisition
date, balance sheet adjustments arising from a post closing audit of
the Oxford companies and other extraordinary expenses. The transaction
agreement memorializing the acquisition of Oxford by the Company contem-
plates each of the proposed adjustments to the principal of the note.
The Company has not made entries in its financial statements to effect
either recognition of the insurance proceeds or the proposed reduction
of the note.
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HELP AT HOME, INC.
Registrant
Date: November 17, 1997 /s/ Louis Goldstein
Louis Goldstein
CEO/Chairman
Date: November 17, 1997 /s/ Sharon S. Harder
Sharon S. Harder
Principal Financial Officer
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