UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to________
Commission file number 333-5884-A
METROPOLITAN HEALTH NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0635748
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5100 Town Center Circle, Boca Raton, Florida 33486
(Address of principal executive office) (Zip Code)
(561) 416-9484
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of May 14, 1997
----- ------------------------------
Common Stock, par value $0.001 1,385,729
<PAGE>
METROPOLITAN HEALTH NETWORKS, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet-
March 31, 1997 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
March 31, 1997 and December 31, 1996 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
March 31, 1997 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
March 31, 1997 6-7
Notes to Condensed Consolidated
Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
EXHIBIT INDEX 12
2
<PAGE>
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,
1997
----
ASSETS
CURRENT ASSETS:
Cash 2,549,626
Accounts receivable, net 2,985,495
Deferred acquisition costs 120,329
Other current assets 395,546
------------
Total current assets 6,050,996
PROPERTY AND EQUIPMENT, net 4,185,643
NOTE RECEIVABLE, net 245,807
GOODWILL, net 2,477,974
OTHER ASSETS 365,146
------------
TOTAL $ 13,325,566
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,242,060
Line of credit facility 469,706
Current maturities of capital lease obligations 1,095,867
Notes payable 1,239,148
------------
Total current liabilities 4,046,781
LONG TERM NOTES PAYABLE 59,006
CAPITAL LEASE OBLIGATIONS 2,220,835
MINORITY INTEREST 4,406
------------
Total liabilities 6,331,028
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.001 per share:
40,000,000 shares authorized;
5,103,000 shares issued and outstanding 5,103
Additional paid-in capital 7,597,991
Retained earnings (deficit) (608,556)
------------
Total stockholders' equity 6,994,538
------------
TOTAL $ 13,325,566
============
See notes to condensed consolidated financial statements--unaudited.
3
<PAGE>
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
---------------------------
March 31, December 31,
1997 1996
---- ----
REVENUES:
Net patient revenues $ 2,574,182 $ 2,517,533
------------ ------------
Total 2,574,182 2,517,533
------------ ------------
EXPENSES:
Salaries and benefits 1,142,168 1,291,872
Depreciation and amortization 173,062 170,700
General and administrative 1,244,607 1,361,757
------------ ------------
Total 2,559,837 2,824,329
------------ ------------
INCOME (LOSS) FROM OPERATIONS 14,345 (306,796)
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (93,181) (23,123)
Other income 18,341 6,958
------------ ------------
Total (74,840) (16,165)
------------ ------------
NET LOSS $ 60,495 $ 322,961
============ ============
NET LOSS PER COMMON SHARE $ 0.01 $ 0.08
====== ======
See notes to condensed consolidated financial statements--unaudited.
4
<PAGE>
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended
---------------------------
March 31,
1997
----
REVENUES:
Net patient revenues $ 5,603,941
------------
Total 5,603,941
------------
EXPENSES:
Salaries and benefits 2,692,223
Provision for bad debts 172,043
Depreciation and amortization 389,511
General and administrative 2,799,566
------------
Total 6,053,343
------------
LOSS FROM OPERATIONS 449,402
------------
OTHER INCOME (EXPENSE):
Gain on sale of assets 90,000
Interest expense (148,760)
Other income 28,115
------------
Total (30,645)
------------
NET LOSS $ 480,047
============
NET LOSS PER COMMON SHARE $ 0.09
======
See notes to condensed consolidated financial statements--unaudited.
5
<PAGE>
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
---------------------------
March 31,
1997
----
Increase (Decrease) in Cash and equivalents from:
OPERATING ACTIVITIES:
Net Loss $ (480,047)
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 389,511
Provision for bad debts 72,043
Provision for uncollectible note receivable 100,000
Management fees (145,433)
Net amortization of discount 7,744
Changes in assets and liabilities:
Accounts receivable, net (733,420)
Other current assets 417,688
Other assets (64,312)
Accounts payable and accrued expenses 110,930
------------
Net cash used in operating activities (325,296)
------------
INVESTING ACTIVITIES:
Capital expenditures (103,238)
Deferred acquisition costs (17,064)
Collections on note receivable 3,415
Acquisition of note receivable (15,000)
Cash balance of Companies acquired 170,098
------------
Net cash used in investing activities 38,211
------------
FINANCING ACTIVITIES:
Borrowing on bank lines-of-credit (208,369)
Deferred offering costs 33,645
Repayments of capital lease obligations (172,403)
Proceeds from issuance of common stock 2,885,023
------------
Net cash provided by financing activities 2,537,896
------------
NET DECREASE IN CASH 2,250,811
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 298,815
------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 2,549,626
============
Supplemental Disclosures:
Interest paid $ 148,760
============
Income taxes paid $ ---
============
See notes to condensed consolidated financial statements--unaudited.
6
<PAGE>
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
On September 1, 1996 Metropolitan Health Networks, Inc., (MHNI) acquired 100% of
Nuclear Magnetic Imaging, Inc. (NMI) and a constructive 971/2% interest in
Magnetic Imaging Systems, I, Ltd. (MIS). On October 1, 1996 MHNI acquired 100%
of Datascan of Florida, Inc. (Datascan). On October 15, 1996 MHNI acquired
certain assets and assumed certain liabilities from International Family
Healthcare Center, Inc. (IFHC). On March 11, 1997 MHNI acquired 100% of Paul
Wand, Inc. (Wand). A summary of the acquisitions are as follows:
Consideration: NMI/MIS DATASCAN IFHC WAND
Fair value of stock issued $ 1,755,000 $900,000 $150,000 $225,000
Issuance of notes payable 575,923 40,000 150,000 ---
Cash payments 125,000
Other costs incurred 103,366 33,185 6,845
Total consideration 2,434,289 973,185 306,845 350,000
Acquisitions:
Assets minus liabilities stated
at fair value 6,278 905,366 201,201 350,000
Minority interest (4,406) --- --- ---
Fair Value of identifiable assets,
net of liabilities 1,872 905,366 201,201 350,000
----------------------------------
Amount recorded as goodwill 2,432,417 67,819 --- ---
======================================
Amount recorded as trade name --- --- 105,644 ---
======================================
The Company incurred capital lease obligations of $790,834 on a purchase of
machinery.
See notes to condensed consolidated financial statements--unaudited.
7
<PAGE>
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
1. The accompanying condensed consolidated balance sheet of Metropolitan Health
Networks, Inc. ("Metropolitan" or the "Company") as of March 31, 1997, the
related condensed consolidated statements of operations for the three months
ended March 31, 1997 and December 31, 1996 and the nine months ended March 31,
1997 and the condensed consolidated statements of cash flows for the nine months
ended March 31, 1997 reflect all normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of such statements. The
results of operations for the nine months ended March 31, 1997 are not
necessarily indicative of the results which may be expected for the entire year.
These statements should be read in conjuction with the audited consolidated
financial statements and notes thereto for the year ended June 30, 1996 included
in the Company's Form SB-2 filed with the Securities and Exchange Commission on
February 12, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION-- The condensed consolidated financial statements
include Metropolitan Health Networks, Inc. and its subsidiaries. All material
intercompany accounts and transactions have been eliminated.
INITIAL PUBLIC OFFERING- The Company filed a registration statement concerning
the sale of up to 825,000 shares of the Company's common stock to the public at
an offering price of $6 per share and 1,650,000 warrants to purchase common
stock for $0.15 per warrant, to be exercisable at $7 per share. The proceeds
from the offering will be used to fund future acquisitions, fixed asset
additions and for working capital purposes. The registration statement became
effective February 13, 1997.
FINANCING- On March 10, the Company signed a letter of intent with Providers
Financing and Systems, Inc. for a line of credit in the amount of $10,000,000,
secured by accounts receivable at an initial interest rate of LIBOR plus 3%. The
initial term of the line is two years, which is renewable.
On March 14, the Company executed an agreement with Continental Mortgage
Associates Limited (CMAL) for a $3,500,000 line of credit to be secured by fixed
assets. The term includes an interest rate of 11.5% per year with 4.29 points
due at acceptance for an initial term of three years.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated financial condition and results of operations. The discussion
should be read in conjunction with the condensed consolidated financial
statements and notes thereto.
Results of Operations
Three months ended March 31, 1997 Compared to three months ended December 31,
1996
Net patient revenues for the three months ended March 31, 1997 remained
relatively constant increasing 2.3% to $2.6 million, as compared to $2.5 million
for the comparable prior quarter.
Total operating expenses for the three months ended March 31, 1997 decreased
9.4% to $2.6 million, as compared to $2.8 million for the comparable prior
quarter. This decrease was primarily attributable to one time nonrecuring
payments to officers and other employees of acquired entities prior to
consumation of the acquisitions.
Total other income (expense) for the three months ended March 31, 1997 increased
from a net other expense of $75,000 as compared to a net other expense of
$16,000 for the comparable prior quarter. This increase is due to
misclassifications of prior quarter's interest expense stated in general and
administrative expenses.
Liquidity and Capital Resources
Since the Company's inception, it has started to acquire healthcare providers,
assemble a management team and infrastructure to support the expansion of its
healthcare provider network (network), and manage certain other healthcare
companies. This development has been funded by a private placement offering and
bridge financing. In order to fund the future development of its network,
enhance its existing network, and to acquire the information systems to track
patient activity through the network, the Company will initially depend on the
proceeds of the initial public offering, (IPO). Thereafter, the Company will
seek to utilize other sources of financiag including its own accounts
receivable, accounts receivable financing and exercise of the outstanding
warrants.
In particular, a primary source of the Company's liquidity will be derived from
its accounts receivable, therefore it has selected and designed an information
system which will link the network, maximize billing, and reduce the number of
days of sales in accounts receivable. Additionally, the Company has obtained or
executed a letter of intent to obtain lines of credit in the amount of
$13,500,000, which will be secured by accounts receivable and fixed assets.
While the Company has not executed any new acquisition agreements and while no
assurances are made as to the availability of financingdescribed above,
management believes that its sources of financing will be adequate for at least
the next twelve months.
9
<PAGE>
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-QSB:
See Exhibit Index on Page 12
(b) Reports On Form 8-K
On March 26, 1997, Form 8-K was filed reporting the acquisition of Paul Wand,
Inc. As of the date of filing of the Current Report on Form 8-K, it was
impracticable for the Registrant to provide the financial statements required.
In accordance with Item 7 (a) (4) of Form 8-K, such unaudited financial
statements shall be filed by amendment to this Form 8-K no later than 60 days
after March 26, 1997.
10
<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.
METROPOLITAN HEALTH NETWORKS, INC.
Registrant
Date: May 15, 1997 /s/ Noel J. Guillama
----------------- ----------------------------
Noel J. Guillama
Chairman, President, Chief
Executive and Operating Officer
Date: May 15, 1997 /s/ Donald B. Cohen
----------------- ----------------------------
Donald B. Cohen
Executive Vice President, Chief
Finance Officer, Treasurer,
Director
11
<PAGE>
EXHIBIT INDEX
Number Description
------ -----------
(27) Financial Data Schedule
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
METROPOLITAN HEALTH NETWORKS, INC. CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH
31, 1997 AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS AND THE NINE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001009379
<NAME> Metropolitan Health Networks, Inc.
<MULTIPLIER> 1
<CURRENCY> US Dollar
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,549,626
<SECURITIES> 0
<RECEIVABLES> 6,755,557
<ALLOWANCES> 3,770,062
<INVENTORY> 0
<CURRENT-ASSETS> 6,050,996
<PP&E> 4,185,643
<DEPRECIATION> 389,511
<TOTAL-ASSETS> 13,325,566
<CURRENT-LIABILITIES> 4,046,781
<BONDS> 0
0
0
<COMMON> 5,103
<OTHER-SE> 6,989,435
<TOTAL-LIABILITY-AND-EQUITY> 13,325,566
<SALES> 5,603,941
<TOTAL-REVENUES> 5,603,941
<CGS> 6,053,343
<TOTAL-COSTS> 6,053,343
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148,760
<INCOME-PRETAX> (480,047)
<INCOME-TAX> 0
<INCOME-CONTINUING> (480,047)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (480,047)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
