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 December 31, 1996
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 March 20, 1997
----- ----------------------------------
Common Stock, par value $0.001 4,891,075
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PAGE 2
METROPOLITAN HEALTH NETWORKS, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet-
December 31, 1996 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
December 31, 1996 and September 30, 1996 4
Condensed Consolidated Statements of
Operations for the Six Months Ended
December 31, 1996 5
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
December 31, 1996 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
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PAGE 3
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, 1996
----
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable, net $ 2,912,955
Deferred offering costs 408,247
Deferred acquisition costs 147,016
Other current assets 73,133
------------
Total current assets 3,541,351
PROPERTY AND EQUIPMENT, net 4,295,847
NOTE RECEIVABLE, net 131,691
GOODWILL, net 2,676,927
OTHER ASSETS 458,194
------------
TOTAL $ 11,104,010
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash Deficit 43,441
Accounts payable and accrued expenses $ 1,344,184
Line of credit facility 612,154
Current maturities of capital lease obligations 398,137
Notes payable 1,449,671
------------
Total current liabilities 3,847,587
CAPITAL LEASE OBLIGATIONS 3,072,635
MINORITY INTEREST 4,406
------------
Total liabilities 6,924,628
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.001 per share:
40,000,000 shares authorized;
4,203,325 shares issued and outstanding 4,203
Additional paid-in capital 4,723,241
Retained earnings (deficit) (548,062)
------------
Total stockholders' equity 4,179,382
------------
TOTAL $ 11,104,010
============
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
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Page 4
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
---------------------------
December 31, September 30,
1996 1996
---- ----
<TABLE>
<S> <C> <C>
REVENUES:
Net patient revenues $ 2,517,533 $ 2,160,808
------------ ------------
Total 2,517,533 2,160,808
------------ ------------
EXPENSES:
Salaries and benefits 1,291,872 878,299
Depreciation and amortization 170,700 235,305
General and administrative 1,361,757 1,218,014
------------ ------------
Total 2,824,329 2,331,618
------------ ------------
LOSS FROM OPERATIONS 306,796 170,810
------------ ------------
OTHER INCOME (EXPENSE):
Gain on sale of asset 91,384
Interest expense (23,123) (75,952)
Other income 6,958 19,512
------------ ------------
Total (16,165) 34,944
------------ ------------
NET LOSS $ 322,961 $ 135,866
============ ============
NET LOSS PER COMMON SHARE $ 0.08 $ 0.04
====== ======
</TABLE>
For comparative purposes the three months ended September 30, 1996 have been
restated to reflect the acquisition of Datascan of Florida Inc. and Nuclear
Magnetic Imaging, Inc. as if these transactions occured July 1, 1996.
See notes to condensed consolidated financial statements--unaudited.
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Page 5
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Six Months Ended
---------------------------
December 31, 1996
----
<TABLE>
<S> <C>
REVENUES:
Net patient revenues $ 3,029,759
------------
Total 3,029,759
------------
EXPENSES:
Salaries and benefits 1,550,055
Provision for bad debts 172,043
Depreciation and amortization 216,449
General and administrative 1,554,959
------------
Total 3,493,506
------------
LOSS FROM OPERATIONS 463,747
------------
OTHER INCOME (EXPENSE):
Gain on sale of assets 90,000
Interest expense (55,579)
Other income 9,774
------------
Total 44,195
------------
NET LOSS $ 419,552
============
NET LOSS PER COMMON SHARE $ 0.12
======
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE>
Page 6
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
---------------------------
December 31, 1996
----
<TABLE>
<S> <C>
Increase (Decrease) in Cash and equivalents from:
OPERATING ACTIVITIES:
Net Loss $ (419,552)
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 216,449
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 (660,880)
Other current assets 18,831
Other assets (157,360)
Accounts payable and accrued expenses 353,793
------------
Net cash used in operating activities (614,365)
------------
INVESTING ACTIVITIES:
Capital expenditures (534,261)
Deferred acquisition costs 9,623
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 (366,125)
------------
FINANCING ACTIVITIES:
Borrowing on bank lines-of-credit (65,921)
Deferred offering costs (374,602)
Repayments of capital lease obligations (98,516)
Proceeds from issuance of common stock 1,177,273
------------
Net cash provided by financing activities 638,234
------------
NET DECREASE IN CASH (342,256)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 298,815
------------
CASH AND EQUIVALENTS AT END OF PERIOD $ (43,441)
============
Supplemental Disclosures:
Interest paid $ 55,579
Income taxes paid $ --
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE>
Page 7
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
On September 1, 1996 MHNI acquired 100% of Nuclear Magnetic Imaging, Inc.
(NMI) and a constructive 97 1/2% 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).
A summary of the acquisitions are as follows:
<TABLE>
<S> <C> <C> <C>
Consideration: NMI/MIS DATASCAN IFHC
Fair value of stock issued $1,755,000 $900,000 $150,000
Issuance of notes payable 575,923 40,000 150,000
Other costs incurred 103,366 33,185 6,845
Total Consideration $2,434,289 $973,185 $306,845
Acquisition of NMI and MIS:
Assets minus liabilities stated
at fair value 6,278 905,366 201,201
Minority interest (4,406) -- --
Fair value of identifiable
assets, net of liabilities 1,872 905,366 --
Amount recorded as goodwill $2,432,417 $ 67,819 --
Amount recorded as trade name -- -- $105,644
</TABLE>
The Company incurred capital lease obligations of $790,834 on a purchase of
machinery.
The Company issued common stock valued at $35,800 in exchange for forgiveness
of management fees due to the former stockholder of NMI.
The Company issued common stock valued at $20,000 in exchange for legal
services received.
See notes to condensed consolidated ginancial statements--unaudited.
<PAGE>
Page 8
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
1. The accompanying condensed consolidated balance sheets of Metropolitan Health
Networks, Inc. ("Metropolitan" or the "Company") as of December 31, 1996 and
September 30, 1996, the related condensed consolidated statements of operations
for the three and six months ended December 31, 1996 and September 30, 1996 and
the condensed consolidated statements of cash flows for the six months ended
December 31, 1996 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 six months ended December 31, 1996 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.
SUBSEQUENT EVENTS- 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.
In March 1996, the Company consumated the acquisition of the private practice of
Paul Wand, M.D. under agreement dated October 24, 1996. The unaudited
consolidated pro forma results of all current, continuing operations assuming
Paul Wand, M.D. had been consummated on July 1, 1996 are as follows:
<TABLE>
<S> <C> <C>
Three Months Ended Six Months Ended
December 31, 1996 December 31, 1996
Net revenue $2,724,354 $3,560,888
Loss before income taxes 327,383 437,936
Net Loss 327,383 422,336
Loss per common share 0.08 0.10
Weighted average number of shares
and share equivalents outstanding 4,019,066 3,481,619
</TABLE>
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 terms include an interest rate of 11.5% per year with 4.29 points
due at acceptance for an initial term of three years.
<PAGE>
Page 9
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 December 31, 1996 Compared to three months ended September
30, 1996, as adjusted for acquisitions
Net patient revenues for the three months ended December 31, 1996 increased
16.5% to $2.5 million, as compared to $2.2 million for the comparable prior
quarter. This increase is due to the addition of two primary care facilities and
seasonal increases in other operations.
Total operating expenses for the three months ended December 31, 1996 increased
21.1% to $2.8 million, as compared to $2.3 million for the comparable prior
quarter. This increase was primarily attributable to the increase in revenues
from seasonal increases discussed above, the addition of two primary care
facilities, the continued expansion and training of corporate staff, and the
moving and expansion of the company's headquarters.
Total other income (expense) for the three months ended December 31, 1996
decreased 53.7% from a net other expense of $16,000 as compared to a net other
income of $35,000 for the comparable prior quarter. This decrease is due to
a gain of the sale of assets of $90,000 recognized in the prior quarter.
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 the
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 healthcare provider network, enhance its
existing network, and to acquire the information systems to track patient
activity through the network, the Company will depend on the proceeds of the
initial public offering, (IPO), except as disclosed in the use of proceeds
section provided for in the registrant's SB-2 registration which became
effective on February 13, 1997.
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.
<PAGE>
Page 10
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
No reports on Form 8-K were filed on behalf of the Registrant during the quarter
ended December 31, 1996.
<PAGE>
Page 11
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: March 31, 1997 /s/ Noel J. Guillama
----------------- ----------------------------
Noel J. Guillama
Chairman, President, Chief
Executive and Operating Officer
Date: March 31, 1997 /s/ Donald B. Cohen
----------------- ----------------------------
Donald B. Cohen
Executive Vice President, Chief
Finance Officer, Treasurer,
Director
<PAGE>
Page 12
EXHIBIT INDEX
Number Description
------ -----------
(27) Financial Data Schedule
<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
DECEMBER 30, 1996 AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS AND THE SIX MONTHS ENDED DECEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001009379
<NAME> METROPOLITAN HEALTH NETWORKS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> (43,441)
<SECURITIES> 0
<RECEIVABLES> 3,044,646
<ALLOWANCES> 3,446,363
<INVENTORY> 0
<CURRENT-ASSETS> 3,541,351
<PP&E> 4,295,847
<DEPRECIATION> 216,449
<TOTAL-ASSETS> 11,104,010
<CURRENT-LIABILITIES> 3,847,587
<BONDS> 0
0
0
<COMMON> 4,203
<OTHER-SE> 4,175,179
<TOTAL-LIABILITY-AND-EQUITY> 11,104,010
<SALES> 3,029,759
<TOTAL-REVENUES> 3,029,759
<CGS> 3,493,506
<TOTAL-COSTS> 3,493,506
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,579
<INCOME-PRETAX> (419,552)
<INCOME-TAX> 0
<INCOME-CONTINUING> (419,552)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (419,552)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
