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
[ ] 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
SEPTEMBER 30, 1997
A S S E T S
(Unaudited)
Current assets:
Cash and cash equivalents $ 138,567
Accounts receivable,
net of allowance for uncollectible amounts of $143,770 4,184,760
Unbilled services 201,477
Prepaid expenses 93,236
Deferred income taxes 19,500
----------
Total current assets 4,637,540
Property and equipment, net 237,257
Acquisition costs, net 101,664
Deposits and other assets 26,932
----------
Total assets $5,003,393
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued payroll $ 358,501
Accounts payable and accrued expenses 245,177
Corporate tax accrual 84,855
Current maturities of long term debt 3,309
----------
Total current liabilities 691,842
----------
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 209,244
----------
Total shareholders' equity 4,311,551
----------
Total liabilities and shareholders' equity $5,003,393
==========
See accompanying notes to financial statements
<PAGE>
NEW YORK HEALTH CARE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------- --------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net patient service revenue $2,852,189 $3,450,423 $8,999,482 $9,760,498
----------- ----------- ----------- -----------
Expenses:
Professional care of patients 1,982,412 2,463,792 6,167,154 6,867,931
General and administrative 646,924 810,670 1,957,292 2,455,376
Bad debts expens 14,300 25,000 69,764 45,000
Depreciation 6,886 13,424 20,658 36,876
----------- ----------- ----------- -----------
Total operating expenses 2,650,522 3,312,886 8,214,868 9,405,183
----------- ----------- ----------- -----------
Income from operations 201,667 137,537 784,614 355,315
----------- ----------- ----------- -----------
Nonoperating income (expenses):
Interest income 1,505 7,479 12,218
Other income 3,750 9,185 11,250 12,748
Loss on accounts receivable (217,070) (217,070)
Interest expense (42,475) (106,681) (12,995)
Acquisition costs (17,163) (17,163)
----------- ----------- ----------- -----------
Nonoperating income
(expenses), net (254,290) (7,978) (305,022) (5,192)
----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes (52,623) 129,559 479,592 350,123
----------- ----------- ----------- -----------
Provision (credit) for income taxes:
Current 76,700 89,700 132,700 197,700
Deferred 44,000 10,500 (78,000) (19,500
----------- ----------- ----------- -----------
32,700 79,200 54,700 178,200
----------- ----------- ----------- -----------
Net income (loss) $ (85,323) $ 50,359 $ 424,892 $ 171,923
=========== =========== =========== ===========
Pro forma (unaudited):
Historical income (loss) before
provision for income taxes $ (52,623) $ 479,592
Pro forma provision for income taxes (24,000) 206,000
----------- -----------
Pro forma net income (loss) $ (28,623) $ 273,592
=========== ===========
Net income (loss) per common share and
common share equivalents (pro forma
for periods ended September 30, 1996) $ (.01) $ .01 $ .08 $ .05
=========== =========== =========== ===========
Weighted average number of common
shares and common share equivalents 3,436,215 3,773,437 3,436,215 3,773,437
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
NEW YORK HEALTH CARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
For The Nine Months Ended September 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 171,923 171,923
Additional costs of initial public
offering of common shares (11,976) (11,976)
--------- ----------- ----------- ----------- -----------
Balance at September 30, 1997 3,750,000 $ 37,500 $ 4,064,807 $ 209,244 $ 4,311,551
========= =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NEW YORK HEALTH CARE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
--------------------------
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 424,892 $ 171,923
Adjustments to reconcile net income to net cash
(used in) operating
activities:
Depreciation and amortization 31,104 46,720
Bad debts expense 78,834 45,000
Deferred tax (credit) (78,000) (19,500)
Loss on sale of accounts receivable 217,070
Changes in operating assets and liabilities:
Increase in accounts receivable and unbilled services (1,503,094) (1,333,416)
Decrease in due from shareholders 145,000
(Increase) decrease in prepaid expenses (68,171) 88,801
Increase in deposits and other assets (65) (1,243)
Increase in accrued payroll 2,393 103,598
(Decrease) increase in accounts payable and accrued expenses (16,328) 97,958
Increase in due to affiliates 32,657
Increase (decrease) in income taxes payable 102,963 (72,715)
----------- -----------
Net cash used in operating activities (630,745) (872,874)
----------- -----------
Cash flows from investing activities:
Acquisition of fixed assets (16,603) (65,884)
Proceeds from sale of accounts receivable 3,150,000
Cost incurred for future acquisitions (95,280)
Increase in note receivable - shareholder 125,000
----------- -----------
Net cash provided by (used in) investing activities 3,258,397 (161,164)
----------- -----------
Cash flows from financing activities:
Net borrowings under note payable 775,000
Increase in deferred registration costs (190,274)
Repayment of long-term debt (5,383) (3,869)
Net charges from issuance of common stock (11,976)
Distributions (3,225,431)
----------- -----------
Net cash used in financing activities (2,646,088) (15,845)
----------- -----------
Net (decrease) in cash and cash equivalents (18,436) (1,049,883)
Cash and cash equivalents at beginning of period 177,688 1,188,450
----------- -----------
Cash and cash equivalents at end of period $ 159,252 $ 138,567
=========== ===========
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest $ 112,654 $ 12,995
=========== ===========
Income taxes $ 12,262 $ 228,457
=========== ===========
</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
Healthcare, 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
nine months ended September 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 three months
and nine months periods ended September 30, 1997 is based on the weighted
average number of shares and common share equivalents outstanding during the
periods.
Pro forma net income (loss) per common share and common share equivalents for
the three months and nine months periods ended September 30, 1996 is based upon
the weighted average number of shares and common share equivalents outstanding
during the periods. The weighted average shares outstanding for the periods was
increased by the number of shares (912,778) whose proceeds would be necessary to
pay the S-Corporation distribution paid and declared ($3,265,414) during the
twelve month period ended September 30, 1996.
<PAGE>
Management Discussion & Analysis of Financial Condition and Results of
Operations
Nine Months Ended September 30, 1997 compared with the Nine Months Ended
September 30, 1996.
Revenues for the nine months ended September 30, 1997 increased 8.5% to
approximately $9,760,000 from approximately $8,999,000 for the nine months ended
September 30, 1996. The increase resulted primarily from new and additional
business.
Cost of professional care of patients for the nine months ended September 30,
1997 increased 11.4% to approximately $6,868,000 from approximately $6,167,000
for the nine months ended September 30, 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 1.8% to approximately 70.3% for
the nine months ended September 30, 1997 from approximately 68.5% for nine
months ended September 30, 1996.
Selling, general and administrative expenses for the nine months ended September
30, 1997 increased 25.4% to approximately $2,455,000 from approximately
$1,957,000 nine months ended September 30, 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 and in connection with the successful completion of a public stock
offering in December 1996.
Interest expense, net of interest income, for the nine months ended September
30, 1997 decreased 99.2% to approximately $800 as compared to approximately
$99,000 for the nine months ended September 30, 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 provision for Federal, State and Local taxes for the nine months ended
September 30, 1997 decreased to approximately $178,200 from approximately
$206,000 for the nine months ended September 30, 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 primarily a
result of lower income before provision for income taxes , as offset by an
adjustment to the prior years estimate of income taxes payable.
In view of the foregoing, net income for the nine months ended September 30,
1997
<PAGE>
decreased 37.2% to approximately $172,000 as compared to approximately $274,000,
as calculated on a proforma basis, for the nine months ended September 30, 1997.
Liquidity and Capital Resources
For the nine months ended September 30, 1997, net cash used in operations was
$873,000 as compared to $631,000 during the nine months ended September 30,
1996, an increase of $242,000 or 38%. The $873,000 used in the nine months ended
September 30, 1997 was principally due to the approximately $1,333,000 increase
in accounts receivable and unbilled services, offset by approximately $172,000
in net income. In the nine months ended September 30, 1996, the $631,000 used
was principally due to the approximately $1,503,000 increase in accounts
receivable and unbilled services, offset by approximately $425,000 in net
income. Net cash used in financing activities for the nine months ended
September 30, 1997 totaled $16,000 compared to the $2,646,000 used in the nine
months ended September 30, 1996, a decrease of 99.4%, primarily the result of
payments in 1996 of S Corporation distributions to the Company's shareholders in
the amount of $3,225,000.
As of September 30, 1997, approximately $4,185,000 (approximately 84%) of the
Company's total assets consisted of accounts receivable from clients who are
reimbursed by third-party payors, as compared to $2,050,000 (approximately 72%)
as of September 30, 1996, an increase of 12%. Such payors generally require
substantial documentation in order to process claims. The increased percentage
is due to the 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 nine months ended September 30, 1997, the
Company's DSO was 116, compared to 62 days for the first nine months ended
September 30, 1997 . The increase of 54 days in DSO is principally the result of
the Company having received the purchase price of $3,150,000 pursuant to the
Receivable Sales Agreement during the nine months ended September 30, 1996 and
is therefore not indicative of any trend.
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 costs will vary depending upon the size and
location of each facility and, accordingly, may vary substantially from these
estimates.
The Company is actively pursuing potential acquisitions. Further expansion of
the Company's
<PAGE>
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.
November 14, 1997
NEW YORK HEALTH CARE, INC.
By: /s/ JACK MAGARETEN
---------------------------------------
Jack Magareten
Chief Financial and Accounting Officer
Exhibit 11
NEW YORK HEALTH CARE, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings:
Net income (loss) (pro forma for the three
and nine months ended September 30, 1996) $ (28,623) $ 50,359 $ 273,592 $ 171,923
=========== =========== =========== ===========
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 917,465 917,465
----------- ----------- ----------- -----------
Weighted average
number of common
shares and common
share equivalents
outstanding 3,436,215 3,773,437 3,436,215 3,773,437
=========== =========== =========== ===========
Net income (pro forma for the three and
nine months ended September 30, 1996)
per common share and common share
equivalents $(.01) $.01 $.08 $.05
===== ===== ==== ====
</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 NINE MONTHS ENDED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 138,567
<SECURITIES> 0
<RECEIVABLES> 4,328,530
<ALLOWANCES> 143,770
<INVENTORY> 0
<CURRENT-ASSETS> 4,637,540
<PP&E> 411,327
<DEPRECIATION> (171,070)
<TOTAL-ASSETS> 5,003,393
<CURRENT-LIABILITIES> 691,842
<BONDS> 0
0
0
<COMMON> 37,500
<OTHER-SE> 4,274,051
<TOTAL-LIABILITY-AND-EQUITY> 5,003,393
<SALES> 0
<TOTAL-REVENUES> 9,760,498
<CGS> 0
<TOTAL-COSTS> 6,867,931
<OTHER-EXPENSES> 2,455,376
<LOSS-PROVISION> 45,000
<INTEREST-EXPENSE> 12,995
<INCOME-PRETAX> 350,123
<INCOME-TAX> 178,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 171,923
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0
</TABLE>
