<PAGE> 1
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 September 30, 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 0-28456
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 November, 14, 1997
------------------------------ ------------------------------------
Common Stock, par value $0.001 5,465,867
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METROPOLITAN HEALTH NETWORKS, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet-
September 30, 1997 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
September 30, 1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
September, 1997 5-6
Notes to Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
SIGNATURES 9
<PAGE> 3
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30,
1997
------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 467,683
Marketable securities 237,144
Accounts receivable, net 5,080,401
Other current assets 215,373
------------
Total current assets 6,000,601
PROPERTY AND EQUIPMENT, net 4,302,814
INTANGILBLE ASSETS, net 3,226,478
DEFERRED ACQUISITION COSTS 128,922
OTHER ASSETS 397,786
------------
TOTAL $ 14,056,601
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,224,488
Line of credit facility 585,076
Current maturities of capital lease obligations 632,152
Current maturities of long-term debt 630,942
------------
Total current liabilities 3,072,658
LONG TERM DEBT 242,325
CAPITAL LEASE OBLIGATIONS 2,647,794
Total liabilities 5,962,777
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.001 per share:
40,000,000 shares authorized;
5,444,479 shares issued and outstanding 5,444
Preferred Stock, par value $ .001 per share,
Stated value $100 per share
10,000,000 shares authorized
5,000 issued and outstanding 500,000
Additional paid-in capital 9,845,462
Retained earnings (deficit) (2,257,082)
------------
Total stockholders' equity 8,093,824
------------
TOTAL $ 14,056,601
============
</TABLE>
See notes to condensed consolidated financial statements--unaudited
<PAGE> 4
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
---------------------------
1997 1996
------------ ------------
(Note 2)
<S> <C> <C>
REVENUES:
Net patient revenues $ 2,932,261 $ 2,978,293
------------ ------------
EXPENSES:
Salaries and benefits 1,527,049 1,484,199
Depreciation and amortization 316,723 257,934
General and administrative 1,496,960 1,435,810
------------- ------------
Total Expenses 3,340,732 3,177,943
------------- ------------
INCOME (LOSS) FROM OPERATIONS (408,471) (199,650)
------------- -------------
OTHER INCOME (EXPENSE):
Gain on sale of asset ---- 91,384
Interest expense (115,907) (88,952)
Other income 15,290 19,517
------------- ------------
Total Other Income (Expense) (100,617) 21,949
------------- ------------
NET INCOME (LOSS) $ (509,088) $ (177,701)
============ ============
NET LOSS PER COMMON SHARE $ 0.09 $ 0.03
====== ======
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE> 5
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended
September 30, 1997
------------------
<S> <C>
Increase (Decrease) in Cash and equivalents from:
OPERATING ACTIVITIES:
Net Loss $ (509,088)
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 316,723
Provision for bad debts 266,448
Stock issued in lieu of cash 37,500
Changes in assets and liabilities:
Accounts receivable, net (471,940)
Trading securities 112,658
Other current assets (67,147)
Other assets (147,550)
Accounts payable and accrued expenses 201,501
-----------
Net cash used in operating activities (260,895)
-----------
INVESTING ACTIVITIES:
Capital expenditures (233,972)
Deferred acquisition costs 7,584
Cash consideration paid for Company acquired (300,000)
Cash balance of Company acquired 44,188
Net cash used in investing activities (482,200)
-----------
FINANCING ACTIVITIES:
Repayments on lines-of-credit (43,425)
Repayment of notes to redeemed partners (442,500)
Repayments of capital lease obligations (413,684)
Issuance of preferred stock 442,500
-----------
Net cash provided by financing activities (457,109)
-----------
NET DECREASE IN CASH 1,200,204
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 1,667,887
-----------
CASH AND EQUIVALENTS AT END OF PERIOD $ 467,683
===========
Supplemental Disclosures:
Interest paid $ 130,410
===========
Income taxes paid $ --
===========
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE> 6
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Effective July 1, 1997 Metropolitan Health Networks, Inc. acquired 100% of
Martin Harrison MD, PA (D/B/A General Medical Associates). A summary of the
acquisition is as follows:
Consideration:
Fair value of stock issued $1,189,000
Issuance of notes payable 400,000
Assumption of liabilities 32,000
----------
Total consideration $1,621,000
==========
<PAGE> 7
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 September 30,
1997, the related condensed consolidated statements of operations for the three
months ended September 30, 1997 and 1996 and the condensed consolidated
statements of cash flows for the three months ended September 30, 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 three months ended September 30, 1997 are not necessarily indicative of
the results which may be expected for the entire year. These statements should
be read in conjunction with the audited consolidated financial statements and
notes thereto for the year ended June 30, 1997 included in the Company's form
10-KSB filed with the Securities and Exchange Commission.
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.
FINANCIAL RESULTS FOR THE THREE MONTHS ENDED SEPTMEBER 30, 1996 - For
comparative purposes, the results of operations for this period were prepared on
a pro forma basis as if the subsidiaries owned by the Company included in the
results of operations for the period ended September 30, 1997 had been acquired
as of July 1,1996.
SALE OF PREFERRED STOCK --- In July, the Company sold 5,000 shares of 10%
Convertible Preferred Stock in a private placement resulting in net proceeds to
the Company of $ 442,500. The stock is convertible at 85% of the ten (10) day
moving average or $ 6.00 per share, whichever is less and is callable after two
(2) years. The agreement has demand registration rights on the anniversary of
the closing date of the agreement, and has piggy back rights on any registration
the Company completes, and if the Company does not meet a minimum of $ 30
million in run rate revenue within seven (7) months from the date of the
agreement, the investor shall have demand registration rights.
<PAGE> 8
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 September 30, 1997 Compared to three months ended September
30, 1996
Net patient revenues for the three months ended September 30, 1997 declined
approximately 1.5% to $2.92 million, as compared to $2.98 million for the
corresponding quarter of 1996. This decline was due to a reduction in diagnostic
procedures performed by one of its subsidiaries. This was partially offset by
the $140,000 generated by its billing group, which started non-related party
billing and collection in June of 1997.
Total operating expenses for the three months ended September 30, 1997 increased
5.1% to $3.34 million, as compared to $3.12 million for the corresponding
quarter of 1996. This increase was primarily attributable to the increase in
depreciation from new equipment purchased in the first half of fiscal 1997 and
the increase in personnel and related costs due to the Company's completion of
its initial public offering and expansion of its corporate services.
Total other income (expense) for the three months ended September 30, 1997
decreased to a net other expense of $101,000 as compared to a net other income
of $22,000 for the corresponding quarter of 1996. This decrease is due to a gain
recognized on sale of certain assets during the first quarter of fiscal 1997.
Liquidity and Capital Resources
While the Company has working capital of approximately $3 million at September
30, 1997, the Company's cash and cash equivalents decreased by more than $1.2
million during the last quarter. It is anticipated that the Company will
experience additional reductions in cash from operations for the next one to two
quarters. The Company utilized additional reserves to open a new primary care
facility, upgrade an existing facility and complete the acquisition of General
Medical Associates. However the demands on cash will be lessened due to a
reduction in losses and an acceleration in collections on its accounts
receivable.
A primary source of the Company's liquidity will be derived from its accounts
receivable, therefore it has selected, designed and implemented an information
system which will link the network, maximize billing, and reduce the number of
days of sales in accounts receivable. Additionally, the Company is in final
negotiations for a line of credit, which, if consummated, will be secured by
accounts receivable. The Company is also in negotiations for the sale of
additional preferred stock similar to the sale reflected in the first quarter of
fiscal 1998.
<PAGE> 9
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: November 19, 1997 /s/ Noel J. Guillama
-------------------------------------
Noel J. Guillama
Chairman, President and
Chief Executive Officer
Date: November 19, 1997 /s/ Donald B. Cohen
-------------------------------------
Donald B. Cohen
Executive Vice President, Chief
Finance Officer, Treasurer,
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF METROPOLITAN HEALTH NETWORKS, INC. FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 467,683
<SECURITIES> 237,144
<RECEIVABLES> 12,024,196
<ALLOWANCES> 6,943,795
<INVENTORY> 0
<CURRENT-ASSETS> 6,000,601
<PP&E> 5,134,439
<DEPRECIATION> 834,625
<TOTAL-ASSETS> 14,056,601
<CURRENT-LIABILITIES> 3,072,658
<BONDS> 0
0
500,000
<COMMON> 5,444
<OTHER-SE> 7,588,380
<TOTAL-LIABILITY-AND-EQUITY> 14,056,601
<SALES> 2,932,261
<TOTAL-REVENUES> 2,932,261
<CGS> 0
<TOTAL-COSTS> 3,340,732
<OTHER-EXPENSES> (15,290)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115,907
<INCOME-PRETAX> (509,088)
<INCOME-TAX> 0
<INCOME-CONTINUING> (509,088)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (509,088)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
