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, 1999
Commission File No. 033-97034
HELP AT HOME, INC.
DELAWARE 36-4033986
(State of 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 19, 1999
Transitional Small Business Disclosure Format: Yes No [X]
<PAGE>
Help at Home, Inc.
Index
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet at
September 30, 1999 3
Consolidated Statements of Income
for the three months ended
September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows
for the three months ended 5
September 30, 1999 and 1998
Notes to the Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
PART II: OTHER INFORMATION 13
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 13
ITEM 5. OTHER INFORMATION 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 14
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Balance Sheet
September 30
1999
(Unaudited)
----------
<S> <C>
Assets
Current Assets:
Cash and cash equivalents $ 634,000
Accounts receivable (net of allowance
for doubtful accounts of $2,061,000) 6,821,000
Prepaid expenses and other current
assets 285,000
Income tax receivable 50,000
Deferred income taxes - current 156,000
----------
Total Current Assets 7,946,000
Furniture and equipment, net 135,000
Due from officer 146,000
Other assets 88,000
----------
Total Assets $ 8,315,000
==========
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 625,000
Accrued expenses and other current
liabilities 6,967,000
Due to third party payors 454,000
Current maturities of short-term debt 198,000
Deferred income taxes - current 156,000
----------
Total Current Liabilities 8,400,000
Preferred stock, par value $.01 per share;
1,000,000 shares authorized, none issued
or outstanding
Common stock, par value $.02 per share;
14,000,000 shares authorized, 1,869,375
issued and outstanding 37,000
Additional paid in capital 3,694,000
Deficit (3,816,000)
----------
Total Stockholders' Deficit (85,000)
Total Liabilities and
Stockholders' Deficit $ 8,315,000
==========
The accompanying notes to these consolidated financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
HELP AT HOME, INC.
Consolidated Statements of Income
(Unaudited)
Three Months Ended September 30
1999 1998
---------- ----------
<S> <C> <C>
Service fees $ 7,931,000 $ 6,659,000
Direct costs of services 5,395,000 4,554,000
---------- ----------
Gross margin 2,536,000 2,105,000
Selling, general and
administrative expenses 2,381,000 1,967,000
---------- ----------
Income from operations
before income taxes 155,000 138,000
Income tax expense 44,000 37,000
---------- ----------
Net Income $ 111,000 $ 101,000
========== ==========
Basic and diluted
earnings per share $ .06 $ .05
========== ==========
Weighted average number of
common shares 1,869,375 1,869,375
The accompanying notes to these consolidated 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
1999 1998
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 111,000 $ 101,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 21,000 24,000
Bad Debt Expense 238,000
Deferred income taxes - (25,000)
Changes in:
Accounts receivable (277,000) (94,000)
Prepaid expenses and other
current assets (162,000) 29,000
Accounts payable 51,000 33,000
Other current liabilities 1,865,000 301,000
---------- --------
Net cash provided by
operating activities 1,847,000 369,000
Cash flows from investing activities:
Acquisition of property (18,000) (21,000)
(Increase) in shareholder loan - (3,000)
---------- --------
Net cash used in investing activities (18,000) (24,000)
Cash flows from financing activities:
Proceeds from short-term debt 1,637,000 -
Repayment of short-term debt (1,439,000) -
Repayment of long-term debt (1,607,000) ( 4,000)
---------- --------
Net cash used in
financing activities (1,409,000) (4,000)
Net increase in cash and
cash equivalents 420,000 341,000
Cash and cash equivalents:
Beginning of period 214,000 412,000
---------- --------
End of period $ 634,000 $ 753,000
========== ========
Supplemental disclosure of cash flow
information:
Cash payments for:
Interest $ 152,000 $ 173,000
Income taxes - -
The accompanying notes to these consolidated 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-KSB for the fiscal year ended June 30, 1999 (1999 Form 10-KSB).
The following Notes to the Unaudited Consolidated Financial Statements
highlight the significant changes to those Notes included in the 1999
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 Consolidated 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
On June 17, 1999, the Company entered into a Master Factoring
Agreement (the "Agreement") with Oxford Commercial Funding LLC.
("Oxford"). Under the terms of the Agreement, Oxford will advance 80%
of the Net Diluted Value of eligible accounts receivable, as defined
in the agreement, without recourse. The purchasers fee is .375% of
the face value of each invoice every five days for a maximum of 90
days. The purchasers fee is subject to adjustment if certain minimum
terms, as defined in the agreement, are not maintained. The proceeds
of the initial advance under the Agreement were received on July 1,
1999 and were used to satisfy the Company's secured bank debt with
Harris Bank.
The Company entered into a revised Master Factoring Agreement, dated
August 25, 1999 with Oxford. Under the terms of the revised agreement,
the purchaser's fee was replaced by an interest rate of prime + 3.5%.
The Agreement is for a one-year term.
Note 3: Commitments and Contingencies
Litigation. The Company has been named in several 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.
<PAGE>
Termination and Benefits Agreements. As of October, 1997 the
Company's Compensation Committee established a termination and
benefits policy with respect to key executive employees which provides
for payment of severance and benefits to promote adherence to the
Company's non-competition policies in the event of involuntary
termination without cause and/or a change in control. As of March 1,
1998 the Company entered into an employment agreement with the Chief
Operating Officer. In the event of a change in control the maximum
aggregate salary commitment for this employee would be approximately
$390,000.
As of December 5, 1997 the Compensation Committee also approved a
revised ten-year contract for the Chief Executive Officer which
provides for severance and a one-time change of control payment in the
event of involuntary termination without cause or termination arising
from a change in the ownership and/or management of the Company.
Assuming an effective date of December 1, 1998, the maximum aggregate
severance commitment pursuant to this contract provision is
approximately $2.5 Million. The change of control payment is defined
as an amount equal to 10% of excess market capitalization of the
Company on the 30th day following the change in control. Excess market
capitalization is defined as an amount equal to the Company's
outstanding capital stock multiplied by the closing per share price on
the 30th day following the change less $6 Million.
Note 4: 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.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW:
Help at Home, Inc. (The "Company") provides general homemaker and
respite 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. Help at Home operates 28
locations in Illinois, Missouri, Indiana, Alabama, Arkansas and
Mississippi. The Company derives a significant portion of its revenues
from 28 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's Board of Directors elected to discontinue Medicare home
health operations and adopted a disposition plan as of June 30, 1998
which calls for the sale or closure of the Company's Medicare home
health agencies (Homemakers of Montgomery, Inc., Lakeside Home Health
Agency, Inc. [IL], Lakeside Home Health Agency, Inc. [MO], and Rosewood
Home Health, Inc. In connection with the Company's decision to
discontinue Medicare home health services, Lakeside Home Health Agency,
Inc. (IL) ceased operations as of August 31, 1998. Certain assets of
Homemakers of Montgomery, Inc. were sold as of October 9, 1998 and that
entity's patients were simultaneously transferred to a non-affiliated
provider. Rosewood Home Health, Inc. was closed as of October 30, 1998
and its patients transferred to another non-affiliated provider.
Lakeside Home Health Agency, Inc. (MO) was closed on December 12, 1998
and its patients transferred to another non-affiliated provider.
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 2000 fiscal year which will end on June 30, 2000. References
herein to the first quarter of 2000 are specifically intended to relate
to the quarter ended September 30, 1999, while references to the first
quarter of 1999 are specifically intended to relate to the quarter
ended September 30, 1998.
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1998:
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 geographic
areas (states). Revenues in all four segments are derived from the
provision of 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:
<TABLE>
Alabama Illinois Missouri Mississippi Total
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 629 $ 884 $5,839 $4,576 $ 362 $ 311 $1,101 $ 888 $7,931 $6,659
Direct
Costs 440 665 3,927 3,062 238 182 790 645 5,395 4,554
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross
Margin 189 219 1,912 1,514 124 129 311 243 2,536 2,105
Operating
Expenses 123 137 951 801 49 112 215 282 1,338 1,332
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Operating
income
(loss) 66 82 961 713 75 17 96 (39) 1,198 773
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Income
(loss) $ 66 $ 82 $ 961 $ 713 $ 75 $ 17 $ 96 $ (39) $1,198 $ 773
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total
Assets $1,368 $1,436 $3,283 $3,444 $1,495 $1,568 $1,254 $1,316 $7,400 $7,764
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Reconciliation of segments' operating income to the consolidated net income
(loss) is as follows:
1999 1998
----- -----
Segments' operating income $1,198 $ 773
Less:
Income tax expense 44 37
Corporate overhead expense 1,043 635
----- -----
Net income (loss) $ 111 $ 101
===== =====
Reconciliation of segments' total assets to consolidated net assets is
as follows:
Segments Total Assets $7,400 $7,764
Plus:
Corporate/support entities' total assets 915 1,128
----- -----
Total Assets $8,315 $8,892
===== =====
</TABLE>
<PAGE>
Client Service Revenue: Revenues derived from services to the Company's
clients for the three months ended September 30, 1999 grew to
approximately $7.9 Million reflecting an increase of approximately $1.3
Million or 19% over the first quarter from the same quarter last year.
Approximately $7.1 Million, or 90%, of the Company's revenues for the
first quarter of 2000 were derived from contracts pursuant to which the
Company provides custodial services to clients in their homes. For the
same quarter of fiscal 1999, contract services represented $5.8 Million
or 88% of total revenues. Approximately $793,000, or 10%, of the
Company's first quarter 2000 revenue was derived from commercial
payors, institutional staffing arrangements, and private pay
arrangements as compared to $837,000 or 12% for the same quarter of
1999.
A comparison of the first quarter of fiscal 2000 as contrasted to the
same period in fiscal 1999, by state, shows the greatest revenue growth
($1,263,000 or 27%) in Illinois, followed by Mississippi ($213,000 or
24%) and Missouri ($51,000 or 16%). Alabama revenues declined by
$255,000 or 29% from 1999 to 2000 due to the Company's decision to de-
emphasize unprofitable services.
Approximately 66% ($839,000) of the fiscal 2000 growth in revenue was
derived from services provided to clients of the Illinois Department on
Aging("IDOA"). Services to IDOA clients amounted to 64% of consolidated
revenues for the first quarter of fiscal 2000 versus 60% of
consolidated revenues for the first quarter of 1999. The Company
realized, as of July 1, 1999, a 7.8% rate increase for all services
provided to IDOA clients.
Direct Costs of Providing Services: Direct costs of providing services
to clients, comprised entirely of wages and related expenses paid to
field staff members, were $5,395,000 (68% of revenues) for the three
months ended September 30, 1999 versus $4,554,000 (68% of revenues)for
the same quarter one year earlier. The increase of $641,000 (14%) is
attributable primarily to the increase in service volume during the
quarter. A comparison of direct costs by segment shows that, as a
percentage of revenues, Illinois direct costs remained unchanged at 67%
quarter to quarter. Alabama direct costs were 70% for the fiscal year
2000 quarter compared to 75% for the corresponding quarter in fiscal
1999. The 5% improvement in performance is attributed to the Company's
exit from certain rural areas that had higher wage rates. Missouri
direct costs were 66% of revenues for the quarter ended September 30,
1999 versus 59% of revenues for the same quarter one year earlier which
was partially attributable to an increase in revenue and partially
attributable to increased wages necessitated by labor market conditions.
Mississippi direct costs were 72% of revenues for the 2000 quarter
versus 73% for the same quarter in fiscal 1999.
The gross margin on services grew by $431,000 in fiscal 2000 and
reached approximately $2.5 Million as compared to approximately $2.1
Million for the same quarter in fiscal 1999. Gross margin
contributions by state include $1,912,000 for Illinois (compared to
$1,514,00 for the same quarter last year), $189,000 for Alabama (as
compared to $219,000 for the same quarter last year), $124,000 for
Missouri (as compared to $129,000 for the same quarter last year) and
$311,000 for Mississippi (as compared to $243,000 for the same quarter
last year).
<PAGE>
Selling, General and Administrative Expense: Overall selling, general
and administrative expenses increased by $414,000 for the first quarter
of fiscal 2000 moving from $1,967,000 in fiscal 1999 to $2,381,000 in
fiscal 2000. In general, the increase is related to increases in bad
debt accruals and by additional interest expenses. Expense reductions
occured in the operating offices and were the result of a cost
containment/expense reduction campaign in the offices and consolidation
of unprofitable locations.
Selling, general and administrative expense for the first quarter of
fiscal 2000 represented 28% of revenues as compared to 30% of revenues
for the same quarter in fiscal 1999. The improvement enabled a
pre-tax income contribution of $343,000 versus a pre-tax income
contribution of $138,000 for the same quarter last year.
Administrative salaries and benefits decreased by $11,000 for the
quarter to $972,000 versus $983,000 for the same period one year
earlier. The decrease is attributable to a reduction of administrative
personel in Alabama and Mississippi. Professional fees and insurance
expenses grew by $138,000 to $290,000 during the quarter with the
majority of the increase attributable to higher Worker's Compensation
and liability insurance premiums due to the increase in business.
Occupancy expenses decreased from 417,000 in fiscal 1999 to $271,000 in
fiscal 2000 with the majority of the decrease due to the reduction of
locations in Alabama and Mississippi. Travel and entertainment
expenses increased by approximately $5,000 during the first quarter of
2000, moving from $59,000 to 64,000. The slight increase was due to
increase travel expenses middle management as a result of expansion in
Missouri. Bad debt expenses increased by $138,000 from $100,000 to
238,000 due primarily to service volume increases which form the basis
for calculation of bad debt expense reserves.
With respect to the Company's identified segments, Illinois operations
experienced a $150,000 increase in overall operating expenses moving
from $801,000 to $951,000 quarter to quarter. The increase is due
to increased volume and an increase in the bad debt reserve Alabama
operating expenses decreased by $14,000 from 1999 to 2000 due to
the consolidation of several offices. Missouri operating expenses
decreased by $63,000 from $112,000 in the first quarter of fiscal
1999 to $49,000 in the first quarter of fiscal 2000. The decrease
was attributable to a reduction in middle level management and
consolidation of office positions. Mississippi operating expenses
decreased by $67,000. The decrease was attributed to the consolidation
of offices and reduction in administrative staff.
Earnings: Net income of $111,000 in the first quarter of 2000 compares
to net income of $101,000 for the same quarter last year. Earnings
per share of common stock were $.06 and $.05 for the quarters,
respectively. The EPS calculation is based on the computational
guidelines for earnings per share information contained in the FASB
Statement of Financial Accounting Standards No. 128, "Earning Per
Share." The Company has 1,638,750 Warrants outstanding as a result of
its initial public offering.
<PAGE>
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 fiscal 2000 on approximately $1.6 Million of new
borrowings under its existing credit facility to augment cash flow from
operations for business expansion. The Company's secured debt
obligations total approximately $198,000 as of September 30, 1999.
Total working capital deficit was at ($454,000) as of September 30,
1999 versus $1.7 million as of the same date in 1998.
Cash provided by operations in fiscal 2000 was $1,847,000 versus
369,000 for the same quarter in fiscal 1999.
The Company had approximately $634,000 of cash on hand as of September
30, 1999 as contrasted to $753,000 of cash on hand at September 30,
1998. Based on the Company's operating projections, cash flows from
established operations should be sufficient to fund existing business
locations during the remainder of the fiscal year.
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, 2000 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 trading days. The Company
could 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
precipitate exercise of the Warrants. As of the close of business
November 18, 1999, the closing price of the Common Stock on the NASDAQ
Stock Market was $1.00.
<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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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 19, 1999 /s/ Louis Goldstein
Louis Goldstein
Chairman/CEO
Date: November 19, 1999 /s/ Joel Davis
Joel Davis
Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 634
<SECURITIES> 0
<RECEIVABLES> 8,882
<ALLOWANCES> 2,001
<INVENTORY> 0
<CURRENT-ASSETS> 7,906
<PP&E> 135<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,315
<CURRENT-LIABILITIES> 8,400
<BONDS> 0
0
0
<COMMON> 37
<OTHER-SE> (122)
<TOTAL-LIABILITY-AND-EQUITY> 8,315
<SALES> 7,931
<TOTAL-REVENUES> 7,931
<CGS> 5,395
<TOTAL-COSTS> 5,395
<OTHER-EXPENSES> 2,381
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152
<INCOME-PRETAX> 155
<INCOME-TAX> 44
<INCOME-CONTINUING> 111
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111
<EPS-BASIC> .06
<EPS-DILUTED> .06
<FN>
<F1>Furniture and equipment, net
</FN>
</TABLE>
