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: June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from:
Commission File No. 1-12451
NEW YORK HEALTH CARE, INC.
(Name of small business issuer in its charter)
New York 11-2636089
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1850 McDonald Avenue, Brooklyn, New York 11223
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (718) 375-6700
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS)
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities under
a plan confirmed by a court.
Yes [ ] No [ ]
<PAGE>
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,750,000
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
1
<PAGE>
PART I
Item 1. FINANCIAL STATEMENTS.
NEW YORK HEALTH CARE, INC.
BALANCE SHEET
JUNE 30, 1997
A S S E T S
(Unaudited)
Current assets:
Cash and cash equivalents $ 234,851
Accounts receivable, net of allowance
for uncollectible amounts of $120,000 3,930,953
Unbilled services 231,066
Prepaid expenses 118,459
Prepaid income taxes 5,292
Deferred income taxes 8,960
----------
Total current assets 4,529,581
Property and equipment, net 244,052
Acquisition costs, net 34,993
Deposits and other assets 27,331
----------
Total assets $4,835,957
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued payroll $ 397,413
Accounts payable and accrued expenses 172,199
Current maturities of long term debt 5,153
----------
Total current liabilities 574,765
----------
Shareholders' equity:
Preferred stock $.01 par value, 2,000,000
shares authorized; no shares issued
or outstanding
Common stock, $.01 par value, 12,500,000
shares authorized; 3,750,000 shares
issued and outstanding 37,500
Additional paid-in capital 4,064,807
Retained earnings 158,885
----------
Total shareholders' equity 4,261,192
----------
Total liabilities and shareholders' equity $4,835,957
==========
See accompanying notes to financial statements
<PAGE>
NEW YORK HEALTH CARE, INC.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months For the Six Months Ended
Ended June 30, June 30,
-------------------------- --------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net patient service revenue $ 3,160,228 $ 3,224,041 $ 6,147,293 $ 6,310,075
----------- ----------- ----------- -----------
Expenses:
Professional care of patients 2,122,259 2,263,031 4,184,742 4,404,139
General and administrative 656,939 833,096 1,310,368 1,644,706
Bad debts expense 25,105 5,000 55,464 20,000
Depreciation 6,886 12,081 13,772 23,452
----------- ----------- ----------- -----------
Total operating expenses 2,811,189 3,113,208 5,564,346 6,092,297
----------- ----------- ----------- -----------
Income from operations 349,039 110,833 582,947 217,778
----------- ----------- ----------- -----------
Nonoperating income (expenses):
Interest income 2,901 4,039 5,974 12,218
Other income 2,734 876 7,500 3,563
Interest expense (32,809) (64,206) (12,995)
----------- ----------- ----------- -----------
Nonoperating income
(expenses), net (27,174) 4,915 (50,732) 2,786
----------- ----------- ----------- -----------
Income before provision for
income taxes 321,865 115,748 532,215 220,564
----------- ----------- ----------- -----------
Provision (credit) for income taxes:
Current 44,000 59,000 56,000 108,000
Deferred 16,000 (2,000) (34,000) (9,000)
----------- ----------- ----------- -----------
60,000 57,000 22,000 99,000
----------- ----------- ----------- -----------
Net income $ 261,865 $ 58,748 $ 510,215 $ 121,564
=========== =========== =========== ===========
Pro forma (unaudited):
Historical income before provision
for income taxes $ 321,865 $ 532,215
Pro forma provision for income
taxes 139,000 230,000
----------- -----------
Pro forma net income $ 182,865 $ 302,215
=========== ===========
Pro forma net income per common share
and common share equivalents
(pro forma for June 30, 1996) $ .06 $ .02 $ .09 $ .03
=========== =========== =========== ===========
Weighted average number of common
shares and common share
equivalents 3,219,271 3,773,437 3,219,271 3,773,437
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
NEW YORK HEALTH CARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
For The Six Months Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-In Retained
Shares Amount Capital Earnings Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 3,750,000 $ 37,500 $ 4,076,783 $ 37,321 $ 4,151,604
Net income 121,564 121,564
Additional costs of initial public
offering of common shares (11,976) (11,976)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1997 3,750,000 $ 37,500 $ 4,064,807 $ 158,885 $ 4,261,192
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NEW YORK HEALTH CARE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 510,215 $ 121,564
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 20,736 30,416
Bad debts expense 55,464 20,000
Deferred tax credit (34,000) (8,960)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable and unbilled services 491,007 (1,084,198)
Decrease in due from shareholders 145,000
Increase in prepaid income taxes (5,292)
(Increase) decrease in prepaid expenses (13,532) 63,578
Increase in deposits (1,642)
Increase in deferred registration costs (162,597)
Increase in accrued payroll 13,210 142,510
Increase in accounts payable and accrued expenses 65,228 24,980
Increase (decrease) in income taxes payable 11,504 (157,570)
----------- -----------
Net cash provided by (used in) operating activities 1,102,235 (854,614)
----------- -----------
Cash flows from investing activities:
Acquisition of fixed assets (11,633) (59,856)
Cost incurred for future acquisitions (25,128)
----------- -----------
Net cash used in investing activities (11,633) (84,984)
----------- -----------
Cash flows from financing activities:
Net borrowings under note payable 25,000
Repayment of long-term debt (3,847) (2,025)
Net charges from issuance of common stock (11,976)
Distributions (1,025,431)
----------- -----------
Net cash used in financing activities (1,004,278) (14,001)
----------- -----------
Net increase (decrease) in cash and cash equivalents 86,324 (953,599)
Cash and cash equivalents at beginning of period 177,688 1,188,450
----------- -----------
Cash and cash equivalents at end of period $ 264,012 $ 234,851
=========== ===========
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest $ 64,205 $ 12,995
=========== ===========
Income taxes $ 12,262 $ 215,062
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
NEW YORK HEALTH CARE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited financial statements, which are for an interim
period, do not include all disclosures provided in the annual financial
statements. These unaudited financial statements should be read in conjunction
with the financial statements and the footnotes thereto contained in the Annual
Report on Form 10-KSB for the year ended December 31, 1996 of New York
Health Care, Inc. (the "Company"), as filed with the Securities and Exchange
Commission.
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (which are of a normal recurring nature) necessary for a
fair presentation of the financial statements. The results of operations for the
six months ended June 30, 1997 are not necessarily indicative of the results to
be expected for the full year.
Net income per common share and common share equivalents for the six months
ended June 30, 1997 is based on the weighted average number of shares and common
share equivalents outstanding during the period.
Pro forma net income per common share and common share equivalents for the six
months ended June 30, 1996 is based upon the weighted average number of shares
and common share equivalents outstanding during the period. The weighted average
shares outstanding for the period was increased by the number of shares
(700,521) whose proceeds would be necessary to pay the S-Corporation
distribution paid and declared ($3,585,736) during the twelve month period ended
June 30, 1996.
<PAGE>
Management Discussion & Analysis
Six Months Ended June 30, 1997 compared with the Six Months Ended June 30, 1996.
Revenues for the six months ended June 30, 1997 (the "first half of 1997")
increased 2.7% to approximately $6,310,000 from approximately $6,147,000 for the
six months ended June 30, 1996 (the "first half of 1996"). The increase resulted
primarily from new and additional business.
Cost of professional care of patients for the first half of 1997 increased 5.3%
to approximately $4,404,000 from approximately $4,185,000 for the first half of
1996. The increase resulted primarily from the hiring of additional home health
care personnel to service the increased additional and new business and an
increase in the amount of professional nursing services provided. The cost of
professional care of patients as a percentage of revenues increased 1.7% to
approximately 69.8% for the first half of 1997 from approximately 68.1% for the
first half of 1996.
Selling, general and administrative expenses for the first half of 1997
increased 22.4% to approximately $1,688,000 from approximately $1,379,000 for
the first half of 1996. The increase resulted primarily from the hiring of
additional office staff to support the growth in the Company's business, in
addition to staff hired in preparation for new acquisitions, in connection with
the successful completion of a public stock offering.
Interest expense, net of interest income, for the first half of 1997 decreased
98.3% to approximately $1,000 as compared to approximately $58,000 for the first
half of 1996, primarily as a result of the repayment of the bank credit line
during the fourth quarter of 1996 and the purchase of Treasury Bills from the
proceeds of the public stock offering. This decrease is deemed to be temporary
and is not indicative of any trend.
The current provision for Federal, State and Local taxes for the first half of
1997 decreased to approximately $108,000 from approximately $230,000 for the
first half of 1996 (calculated on a pro-forma basis in 1996 - see Note 2 to the
financial statements included in the Company's Form 10-KSB for the year ended
December 31, 1996). This decrease is as a result of the $311,000 (58.5%)
decrease in income before taxes from $532,000 in the first half of 1996 to
$221,000 in the first half of 1997. In addition, a deferred tax credit of $9,000
is provided for the first half of 1997, as a result of timing differences in the
deductibility of the provision for doubtful accounts. There was no tax benefit
provided for the first half of 1996 calculated on a pro-forma basis.
<PAGE>
In view of the foregoing, net income for the first half of 1997 decreased 59.6%
to approximately $122,000, as compared to approximately $302,000, as calculated
on a proforma basis, for the first half of 1996.
Liquidity and Capital Resources
For the first half of 1997, net cash used in operations was $855,000 as compared
to $1,102,000 provided by operations during the first half of 1996, a decrease
of $1,957,000, or 177.6%. The $855,000 used in the first half of 1997 was
principally due to the approximately $1,100,000 increase in accounts receivable
and unbilled services, offset by approximately $122,000 in net income. In the
first half of 1996, $1,146,000 of the $1,102,000 provided by operations was a
result of net income of $510,000 and of a decrease in accounts receivable and a
decrease in advances to shareholders of approximately $491,000 and $145,000,
respectively. The large decrease in accounts receivable during the first half of
1996 was the result of increased Medicaid cash collections attributable to a
large increase in this receivable as of December 1995, which was atypical and
not indicative of any trend. Net cash used in financing activities for the first
half of 1997 totaled $14,000 compared to the $1,004,000 used in the first half
of 1996, a decrease of 98.6%, primarily the result of payments in 1996 of S
Corporation distributions to the Company's shareholders in the amount of
$1,025,000.
As of June 30, 1997, approximately $3,657,000 (approximately 76%) of the
Company's total assets consisted of accounts receivable from clients who are
reimbursed by third-party payors, as compared to $3,166,000 (approximately 72%)
as of June 30, 1996, an increase of 4%. Such payors generally require
substantial documentation in order to process claims. The increased percentage
is due to an increase in total assets as a result of the Company's public stock
offering in December 1996, off-set by the $491,000 increase in receivables from
clients reimbursed by third party payors.
Days Sales Outstanding ("DSO") is a measure of the average number of days taken
by the Company to collect its accounts receivable, calculated from the date
services are billed. For the first half of 1997, the Company's DSO was 114,
compared to 106 days for the first half of 1996, an increase of 7.6%.
The Company's liquidity and long-term capital requirements depend upon a number
of factors, including the lag time to realize collections of amounts billed to
clients for services provided and the rate at which new offices and facilities
are established and acquisitions, if any, are completed. The Company believes
that the development and start-up costs for a new branch office aggregate
approximately $100,000, including leasehold improvements, lease deposits, office
equipment, marketing, recruiting, labor and operating costs during the
pre-opening and start-up phase, and also the provision of working capital to
fund accounts receivable. Such
<PAGE>
costs will vary depending upon the size and location of each facility and,
accordingly, may vary substantially from these estimates.
The Company presently has a credit facility with Safra National Bank of New York
(formerly UMB Bank and Trust Company) in the amount of $3,500,000 which is
secured by substantially all of the Company's assets. Repayment of outstanding
amounts under such facility is guaranteed by all of the Company's directors.
This credit facility provides for interest at the prime rate published in the
Wall Street Journal, plus .75%, payable monthly. At June 30, 1997, there was no
outstanding balance due under this credit line.
The Company is actively pursuing potential acquisitions. Further expansion of
the Company's business may require the Company to incur additional debt or offer
additional equity if internally generated funds, cash on hand and amounts
available under its bank credit facilities are inadequate to meet such needs.
There can be no assurance that such additional debt or equity will be available
to the Company, or, if available, will be on terms acceptable to the Company.
Potential Regulatory Changes
There have been recent news reports concerning federal budget negotiations
regarding potential changes in the way the Government will reimburse home health
care companies in the future, including the possibility of capitation. While the
Company is not currently a Medicare-Certified Home Health Agency subject to
these changes, most of the Company's referral sources are and they may be
negatively impacted by future legislation which may be adopted to control home
health care costs. While it is still premature to discern what impact, if any,
the potential changes may have on the Company's operations, there can be no
assurance that future legislation will not result in reduced reimbursement rates
from referral sources.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
August 14, 1997
NEW YORK HEALTH CARE, INC.
By: /s/ GILBERT BARNETT
---------------------------------------
Gilbert Barnett
Chief Accounting and Financial Officer
Exhibit 11
NEW YORK HEALTH CARE, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months For The Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earnings:
Net income (pro forma for the three
and six months ended June 30, 1996) $ 182,865 $ 58,748 $ 302,215 $ 121,564
========== ========== ========== ==========
Shares:
Weighted average number of shares
outstanding 2,500,000 3,750,000 2,500,000 3,750,000
Additional shares assuming exercise
of options 18,750 23,437 18,750 23,437
Additional shares whose proceeds
would be necessary to pay
S-Corporation dividend 700,521 700,521
---------- ---------- ---------- ----------
Weighted average number of common
shares and common share equivalents
outstanding 3,219,271 3,773,437 3,219,271 3,773,437
========== ========== ========== ==========
Net income (pro forma for the three and
six months ended June 30, 1996) per
common share and common share
equivalents $ .06 $ .02 $ .09 $ .03
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NEW YORK
HEALTH CARE, INC. FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 234,851
<SECURITIES> 0
<RECEIVABLES> 4,050,953
<ALLOWANCES> (120,000)
<INVENTORY> 0
<CURRENT-ASSETS> 4,529,581
<PP&E> 405,299
<DEPRECIATION> (161,247)
<TOTAL-ASSETS> 4,835,957
<CURRENT-LIABILITIES> 574,765
<BONDS> 0
0
0
<COMMON> 37,500
<OTHER-SE> 4,223,692
<TOTAL-LIABILITY-AND-EQUITY> 4,835,957
<SALES> 0
<TOTAL-REVENUES> 6,310,075
<CGS> 0
<TOTAL-COSTS> 4,404,139
<OTHER-EXPENSES> 1,668,158
<LOSS-PROVISION> 20,000
<INTEREST-EXPENSE> 12,995
<INCOME-PRETAX> 220,564
<INCOME-TAX> 99,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,564
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0
</TABLE>
