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, 1998
[ ] 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 [ ]
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: 3,760,000
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Six Months Ended June 30, 1998 compared with the Six Months Ended June 30, 1997.
Revenues for the six months ended June 30, 1998 increased 56.7% to approximately
$9,887,000 from approximately $6,310,000 for the six months ended June 30, 1997.
Approximately 7.7% or $483,000 of the increase is attributable to increased
hours of service provided under existing and new contracts in the State of New
York. The remaining increase of $3,094,000 is a result of the acquisition of
seven offices in New Jersey in December 1997, February 1998 and March 1998.
Cost of professional care of patients for the six months ended June 30, 1998
increased 55.8% to approximately $6,861,000 from approximately $4,404,000 for
the six months ended June 30, 1997. The increase resulted from the hiring of
additional home health care personnel to service the increased business in New
York and the hiring of the staff of the seven offices purchased in New Jersey.
The cost of professional care of patients as a percentage of revenues remained
stable with a decrease of .4% to approximately 69.4% for the six months ended
June 30, 1998 from approximately 69.8% for six months ended June 30, 1997.
Selling, general and administrative expenses for the six months ended June 30,
1998 increased 46.8% to approximately $2,415,000 from approximately $1,645,000
for the six months ended June 30, 1997. The increase resulted primarily from the
acquisition of seven offices in New Jersey. Selling, general and administrative
expenses as a percentage of revenue decreased to 24.4% from 26.1% due to
allocation of corporate overhead over a larger revenue base.
Interest expense, net of interest income, for the six months ended June 30, 1998
increased to approximately $120,000 as compared to approximately $1,000 for the
six months ended June 30, 1997, primarily as a result of the borrowings to
finance the purchases of the New Jersey offices and, secondarliy, the need to
fund the operations of these offices as the receivables grew to normal levels.
The provision for Federal, State and Local taxes for the six months ended June
30, 1998 increased to approximately $164,000 from approximately $99,000 for the
six months ended June 30, 1997. This increase is as a result of increased income
for the period.
<PAGE>
2
In view of the foregoing, net income for the six months ended June 30, 1998
increased 90.2% to approximately $232,000 as compared to approximately $122,000
for the six months ended June 30, 1997.
Liquidity and Capital Resources
For the six months ended June 30, 1998, net cash used in operations was $566,000
as compared to $855,000 during the six months ended June 30, 1997, an decrease
of $289,000 or 51.0%. The $566,000 used in the six months ended June 30, 1998
was principally due to the approximately $1,072,000 increase in accounts
receivable and unbilled services, offset by approximately $290,000 increase in
accounts payable, including payroll, and $232,000 in net income. Significant
portions of the increased receivables and payables was from the New Jersey
offices. The $855,000 used in the first quarter of 1997 was principally due to
the approximately $1,084,000 increase in accounts receivable and unbilled
services, offset by approximately $167,000 increase in accrued payroll and
accounts payable and approximately $121,000 in net income. Net cash used in
investing activities approximates $657,000 primarily for the acquisition of the
four New Jersey offices. Net cash provided by financing activities for the six
months ended June 30, 1998 totaled $1,107,000 compared to the $14,000 used in
the six months ended June 30, 1997. Approximately $500,000 borrowed in the six
months ended June 30, 1998 was used for the acquisition of four offices in New
Jersey and approximately $600,000 to fund their operation.
As of June 30, 1998, approximately $5,789,000 (approximately 60%) of the
Company's total assets consisted of accounts receivable from clients who are
reimbursed by third-party payors, as compared to $3,657,000 (approximately 72%)
as of June 30, 1997, an increase of 82.0%. Such payors generally require
substantial documentation in order to process claims. The decrease of accounts
receivable from clients who are reimbursed by third-party payors as a percentage
of total assets is the result of an increase in total assets due to the recent
purchases of intangible assets.
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 six months ended June 30, 1998, the Company's DSO
was 109, compared to 117 days for the six months ended June 30, 1997. The
improvement of 8 days in DSO is the net effect of the following; The New Jersey
DSO's which consist primarily of medicaid billings are 38 days and New York's
DSO's are 133 days.
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
<PAGE>
3
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 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>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30,1998
A S S E T S
(Unaudited)
Current assets:
Cash and cash equivalents $ 56,332
Accounts receivable, net of allowance for
uncollectible amounts of $164,770 5,744,279
Unbilled services 289,710
Prepaid expenses 170,291
Due from affiliates 6,475
Deferred tax asset 45,000
-----------
Total current assets 6,312,087
Property and equipment, net 308,372
Intangibles 3,080,146
Deposits 33,466
-----------
Total assets $ 9,734,071
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued payroll $ 592,143
Note payable - bank 2,400,000
Current maturities of long term debt 438,548
Accounts payable and accrued expenses 328,405
Income taxes payable 69,020
-----------
Total current liabilities 3,828,116
-----------
Long-term debt, less current maturities 1,346,667
-----------
Commitments, contingencies and other comments
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; 3,760,000 shares issued 37,600
Additional paid-in capital 4,080,957
Retained earnings 453,369
-----------
4,571,926
Less: Treasury stock (7,500 common shares at cost) (12,638)
-----------
Total shareholders' equity 4,559,288
-----------
Total liabilities and shareholders' equity $ 9,734,071
===========
See accompanying notes to financial statements
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net patient service revenue $3,224,041 $5,311,400 $6,310,075 $9,887,266
---------- ----------- ----------- -----------
Expenses:
Professional care of patients 2,263,031 3,639,736 4,404,139 6,861,397
General and administrative 833,096 1,308,841 1,644,706 2,414,907
Bad debts expense 5,000 15,000 20,000 15,000
Depreciation and amortization 12,081 56,658 23,452 94,200
----------- ----------- ----------- -----------
Total operating expenses 3,113,208 5,020,235 6,092,297 9,385,504
----------- ----------- ----------- -----------
Income from operations 110,833 291,165 217,778 501,762
----------- ----------- ----------- -----------
Nonoperating income (expenses):
Interest income 4,039 12,216 12,218 31,770
Other income 876 5,090 3,563 14,090
Interest expense (96,330) (12,995) (151,437)
----------- ----------- ----------- -----------
Nonoperating income
(expenses), net 4,915 (79,024) 2,786 (105,577)
----------- ----------- ----------- -----------
Income before provision for
income taxes 115,748 212,141 220,564 396,185
----------- ----------- ----------- -----------
Provision (credit) for income taxes:
Current 59,000 93,200 108,000 164,000
Deferred (2,000) (9,000)
----------- ----------- ----------- -----------
57,000 93,200 99,000 164,000
----------- ----------- ----------- -----------
Net income $ 58,748 $ 118,941 $ 121,564 $ 232,185
=========== =========== =========== ===========
Basic and diluted earnings per share $ .02 $ .03 $ .03 $ .06
=========== =========== =========== ===========
Weighted average shares
outstanding 3,750,000 3,753,104 3,750,000 3,751,177
=========== =========== =========== ===========
Diluted weighted average shares
outstanding 3,750,000 3,757,489 3,750,000 3,753,380
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Treasury
Common Stock Additional Stock
--------------------- Paid-In ----------------- Retained
Shares Amount Capital Shares Amount Earnings Total
------ ------ ------- ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 3,750,000 $37,500 $4,064,807 $221,184 $4,323,491
Exercise of stock warrants
on June 2, 1998 10,000 100 16,150 16,250
Treasury stock purchased
($1.68 per share) 7,500 $(12,638) (12,638)
Net income 232,185 232,185
--------- ------- --------- ----- -------- -------- ----------
Balance at June 30, 1998 3,760,000 $37,600 $4,080,957 7,500 $(12,638) $453,369 $4,559,288
========= ======= ========== ===== ======== ======== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
June 30,
------------------------
1997 1998
---- ----
Cash flows from operating activities:
Net income $ 121,564 $ 232,185
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 30,416 97,102
Bad debts expense 20,000 15,000
Deferred tax credit (8,960)
Deferred revenue (36,000)
Changes in operating assets and
liabilities:
Increase in accounts receivable
and unbilled services (1,084,198) (1,252,989)
Increase in due from affiliates (6,475)
Decrease in (increase) prepaid expenses 58,286 (45,297)
Increase in deposits (1,642) (6,667)
Decrease in accounts receivable
due after one year 180,604
Increase in accrued payroll 142,510 234,669
Increase in accounts payable
and accrued expenses 24,980 55,874
Decrease in income taxes payable (157,570) (34,013)
----------- -----------
Net cash used in operating
activities (854,614) (566,007)
----------- -----------
Cash flows from investing activities:
Acquisition of fixed assets (59,856) (95,280)
Payments for purchase acquisitions
and associated costs (581,008)
Costs incurred for future acquisitions (25,128) 19,406
----------- -----------
Net cash used in investing activities (84,984) (657,182)
----------- -----------
Cash flows from financing activities:
Borrowings under notes payable 1,550,000
Repayment of long-term debt (2,025) (446,250)
Net charges from issuance of common stock (11,976) 16,250
Net charges from purchase of treasury stock (12,638)
----------- -----------
Net cash (used in) financing activities (14,001) 1,107,362
----------- -----------
Net decrease in cash and cash equivalents (953,599) (115,527)
Cash and cash equivalents at beginning of year 1,188,450 171,859
----------- -----------
Cash and cash equivalents at end of year $ 234,851 $ 56,332
=========== ===========
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest $ 12,995 $ 131,436
=========== ===========
Income taxes $ 215,062 $ 217,513
=========== ===========
Supplemental schedule of noncash investing and financing activities:
The Company purchased customer lists, furniture and fixtures and other
intangibles which were partially acquired through the issuance of promissory
notes.
See accompanying notes to financial statements
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
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, 1997 of New York
Healthcare, Inc. and Subsidiary (the "Corporation"), as filed with the
Securities and Exchange Commission.
In the opinion of the Corporation, 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, 1998 are not necessarily indicative
of the results to be expected for the full year.
NOTE 2 - EARNINGS PER SHARE:
Basis earnings per share excludes dilution and is computed by dividing earnings
available to common shareholders by the weighted average number of common shares
outstanding for the period.
Diluted earnings per share is computed by dividing earnings available to common
shareholders by the weighted average number of common shares outstanding for the
period, adjusted to reflect potentially dilutive securities. The warrant issued
on June 2, 1998 and not exercised and certain stock options are included in the
diluted earnings per share because the exercise price is below the average
market price. Certain other options and warrants were not included in the
computation of diluted earnings per share because the exercise price was greater
than the average market price of the stock.
NOTE 3 - STOCK OPTIONS:
On June 2, 1998, the Corporation granted 262,000 stock options pursuant to the
Corporation's performance incentive plan to key employees at the exercise price
of $1.625 per share. The stock options have an expiration date of 5-10 years. On
June 25, 1998, the Corporation amended its Performance Incentive Plan,
authorizing the reservation of an additional 210,000 shares of $.01 par value
common stock, for each of two additional years, for a total of 420,000
additional shares.
On June 2, 1998, the Corporation granted two of its board members a warrant to
purchase up to 10,000 shares of common stock at a price of $1.625 per share at
any time until June 1, 2008. On June 2, 1998, one of the board members exercised
his warrant and purchased 10,000 shares of common stock at a price of $16,250.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - TREASURY STOCK:
Treasury stock is shown at cost and consists of 7,500 shares of common stock.
NOTE 5 - LINE OF CREDIT:
On January 26, 1998, the Corporation entered into a $6,000,000 line of credit
with a bank. The availability of the line of credit is based on a formula of
eligible accounts receivable. The line is collateralized by all property and
assets of the Corporation. The Corporation has also guaranteed the line of
credit. At June 30, 1998, $2,400,000 was outstanding. Borrowings under the
agreement are due between July and September 1998 and bear interest between 8.1%
and 8.2%.
NOTE 6 - ACQUISITIONS:
On February 8, 1998, the Corporation purchased the customer lists and other
intangible assets of an additional three offices in the State of New Jersey from
Metro Healthcare Services, Inc. for $500,000 cash and a promissory note in the
amount of $580,000. The acquisition was accounted for as a purchase and,
accordingly, the assets acquired have been recorded at their estimated fair
values at the date of acquisition. The excess of cost over fair values of the
purchased business has been allocated to goodwill, customer lists and other
intangible assets and is being amortized over 25 and 10 years, respectively.
Operating results of the business have been included in the consolidated
financial statements of the Corporation since the date of acquisition.
The purchase price of $1,080,000 plus costs incurred in making the acquisition
($73,000), aggregating $1,153,000, exceeded the fair value of the net assets
acquired at the date of acquisition by $1,123,000. The purchase price has been
allocated to furniture and fixtures for $30,000, $79,000 was assigned to
contract value and employee lists and $1,044,000 was assigned to goodwill.
On March 26, 1998, the Corporation purchased the customer lists and other
intangible assets of another entity. The entity is related to the Corporation
through common ownership and management. The aggregate purchase price is
$1,150,000. This amount was paid through issuance of a promissory note. The
acquisition was accounted for as a purchase and, accordingly, the assets
acquired have been recorded at their estimated fair values at the date of
acquisition. The excess of cost over fair values of the purchased business has
been allocated to goodwill, customer lists and other intangible assets and is
being amortized over 25 and 10 years, respectively. Operating results of the
business have been included in the consolidated financial statements of the
Corporation since the date of acquisition.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The purchase price of $1,150,000 plus costs incurred in making the acquisition
($35,000), aggregating $1,185,000, exceeded the fair value of the net assets
acquired at the date of acquisition by $1,175,000. The purchase price has been
allocated to furniture and fixtures for $10,000, $55,000 was assigned to
contract value and employee lists and $1,120,000 was assigned to goodwill.
NOTE 7 - EARNINGS PER SHARE:
Earnings per share are computed as follows:
For The Three For The Six
Months Ended Months Ended
June 30, June 30,
--------------- ----------------
1997 1998 1997 1998
---- ---- ---- ----
Basic and diluted earnings per share
Earnings:
Net income applicable to commmon
stock $58,748 $118,941 $121,564 $232,185
--------- --------- --------- ---------
Shares:
Weighted average number of common
shares outstanding - basic 3,750,000 3,753,104 3,750,000 3,751,177
Incremental shares relating to
stock options and warrants 4,385 2,203
--------- --------- --------- ---------
Diluted weight average shares
outstanding 3,750,000 3,757,489 3,750,000 3,753,380
========= ========= ========= =========
Basic earnings per share $.02 $.03 $.03 $.06
==== ==== ==== ====
Diluted earnings per share $.02 $.03 $.03 $.06
==== ==== ==== ====
NOTE 8 - START UP COSTS:
During the six month period ending June 30, 1998, the Corporation adopted
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities."
Start-up activities which include (i) one-time activities relating to the
introduction of a new product or service, conducting business in a new
territory, conducting business with a new class of customer or commencing a new
operation and (ii) organization costs, are expensed as incurred. The Company
believes that there is no cummulative effect on the amount of retained earnings
at December 31, 1998 resulting from the adoption of Sup 98-5. During the six
months ended June 30, 1998, there were no start-up costs.
NOTE 9 - SUBSEQUENT EVENTS:
Issuance of Preferred Stock
On August 6, 1998, the Board of Directors created a series of Preferred Shares
of this Corporation to consist initially of 480,000 shares of Class A
Convertible Preferred Stock. The holders of the Class A Convertible Preferred
Stock shall be entitled to a dividend equal to 9% of the purchase price for
shares of the Class A Convertible Preferred Stock before any dividend is paid on
Common Stock. Dividends shall be payable quarterly. The holders of Class A
Convertible Preferred Stock receive no preference on liquidation.
On August 6, 1998, Heart to Heart Health Care Services, Inc. ("Heart to Heart"),
which is the holder of the Corporation's promissory note in the face amount of
$1,150,000 currently bearing interest at the rate of 9% per annum, converted
$600,000 of the principal amount of that promissory note into 480,000 shares of
the Corporation's newly authorized Class A Convertible Preferred Stock at a
conversion price of $1.25 per share, each share of which is convertible at any
time into shares of the Corporation's $.01 par value common stock. Heart to
Heart is owned by Jerry Braun, Jacob Rosenberg, Samson Soroka, Hirsch Chitrik
and Sid Borenstein. Messrs. Braun, Rosenberg, Chitrik, and Borenstein are
officers or directors of the Corporation and together with Mr. Soroka, are all
principal shareholders. The Corporation has therefore obtained an independent
opinion that the terms and conditions of the transaction are, under the
circumstances, fair to the Corporation.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited proforma condensed balance sheet gives effect to the
conversion of the debt to equity as if such transaction occurred on June 30,
1998.
Proforma Adjustments:
(a) To record the conversion of $600,000 of debt into 480,000 shares of Class A
Convertible Preferred Stock as a price of $1.25
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1998
(Unaudited)
ASSETS
Proforma
Historical Adjustments Proforma
---------- ----------- --------
Current assets:
Cash $ 56,332 $ 56,332
Accounts receivable 5,744,279 5,744,279
Other current assets 511,476 511,476
---------- ----------
Total current assets 6,312,087 6,312,087
Property and equipment, net 308,372 308,372
Intangibles 3,080,146 3,080,146
Deposits 33,466 33,466
---------- ----------
Total assets $9,734,071 $9,734,071
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilites $3,828,116 $3,828,116
---------- ----------
Long-term debt, less
current maturities 1,346,667 $(600,000) (a) 746,667
---------- ----------
Shareholders' equity:
Preferred stock 4,800 (b) 4,800
Common stock 37,6000 37,600
Additional paid-in capital 4,080,957 595,200 (a) 4,676,157
Retained earnings 453,369 453,369
---------- ----------
4,571,926 5,171,926
Less treasury stock (12,638) (12,638)
---------- ----------
Total shareholders' equity 4,559,288 5,159,288
---------- ----------
Total liabilities and
shareholders' equity $9,734,071 $9,734,071
========== ==========
<PAGE>
Item 4: Submission of Matters to a Vote of Security Holders
The following matters have been submitted to a vote of the Registrant's
security holders during the period covered by this report through the
solicitation of proxies or otherwise:
(a) The Registrant's annual meeting of shareholders was held on June 25,
1998.
(b) Proxies for the annual meeting of shareholders were solicited pursuant
to Regulation 14A under the Securities Exchange Act of 1934, there was no
solicitation in opposition to management's nominees as listed in the proxy
statement and all of those nominees were elected.
(c) The following is a brief description of each matter voted upon at the
annual meeting of shareholders together with the number of votes cast for,
against, withheld, abstained or broker non- votes as to each such matter:
(i) The following named persons received the number of votes set forth
opposite their respective names, the same being a plurality of the votes cast by
holders of shares entitled to vote thereon, for the directors of the Registrant
for the ensuing year:
Names Votes For Abstained Broker Non-Votes
- ----- --------- --------- ----------------
Jerry Braun 2,418,209 2,600 11,204
Jacob Rosenberg 2,418,209 2,600 11,204
Hirsch Chitrik 2,418,209 2,600 11,204
Sid Borenstein 2,418,209 2,600 11,204
H. Gene Berger 2,418,209 2,600 11,204
Charles J. Pendola 2,418,209 2,600 11,204
(ii) A resolution submitted to the shareholders ratifying an amendment to
the Registrant's Performance Incentive Plan authorizing the reservation of an
additional 210,000 shares of the Registrant's $.01 par value common stock for
issuance under that plan for each of two additional years, a total of an
additional 420,000 shares, was adopted by the following vote:
For the resolution 1,515,761 votes; Against 514,401 votes; Abstained
9,875; Broker Non-Votes 860,727.
(iii) A resolution submitted to the shareholders ratifying the selection
M.R. Weiser & Co. LLP as the Registrant's independent auditors for the fiscal
year ending December 31, 1998 was adopted by the following vote:
For the resolution 2,872,760 votes; Against 10,200; Abstained 8,100;
Broker Non- Votes 9,704.
<PAGE>
(iv) A resolution submitted to the shareholders ratifying the adoption of
an amendment to Article III, Section 1 of the Registrant's by-laws to eliminate
the requirement that all directors be shareholders of the Registrant was adopted
by the following vote:
For the resolution 1,996,410 votes; Against 35,217 votes; Abstained 8,500;
Broker Non-Votes 860,637.
(v) A resolution submitted to the shareholders ratifying the adoption of
an amendment to Article III, Section 2 of the Registrant's by-laws to provide
that the minimum number of directors of the Registrant will be three and the
maximum number will be seven was adopted by the following vote:
For the resolution 2,876,460 votes; Against 5,100 votes; Abstained 7,000;
Broker Non- Votes 12,204.
(vi) A resolution submitted to the shareholders ratifying the adoption of
an amendment to Article III, Section 11 of the Registrant's by-laws to provide
that meetings of the Board of Directors may be called by the Secretary of the
Registrant at the direction and upon the request of the President or any two
members of the Board of Directors, and to provide that notice of each such
meeting be given to each member of the Board of Directors at his last known
business or residence address at least 24 hours before the meeting either orally
or in writing, delivered personally or by telephone or fax or mail or express
delivery was adopted by the following vote:
For the resolution 1,991,762 votes; Against 13,850 votes; Abstained
22,225; Broker Non-Votes 872,927.
Item 5. Other Information.
The following information relates to the period covered by this report and
has not previously been reported on Form 8-K:
(a) Set forth below is information reporting the Registrant's use of
proceeds of its initial public offering as of June 30, 1998.
(i) The effective date of the registration statement for which this
information is provided (SEC File No. 333-8155) is December 20, 1996.
(ii) The first six digits of the Registrant's CUSIP number are
649487.
(iii) The Registrant's initial public offering commenced on December
20, 1996 with H.J. Meyers & Co., Inc. as the underwriter and resulted in
the sale of a total of 1,250,000 shares of the Registrant's $.01 par value
common stock for an aggregate offering price of $5,000,000. The
overallotment option of the underwriter for an additional 187,500 shares
was not exercised.
<PAGE>
(iv) The amount of expenses incurred for the Registrant's account in
connection with the issuance and distribution of the securities of its
initial public offering consisted of the following, none of which involved
either direct or indirect payments to affiliates of the Registrant:
Underwriting discounts and commissions $500,000
Expenses paid to or for underwriters* 150,000
Other expenses 510,966
----------
Total expenses $1,160,966
The total net offering proceeds to the Registrant after the total
expenses set forth above was $3,839,034.
(v) The following is the amount of net offering proceeds which have
been used for each of the purposes listed below as of June 30, 1998. None
of these uses involve direct or indirect payments to affiliates of the
Registrant.
Acquisition of other businesses $1,492,708
Repayment of indebtedness** $1,375,000
Funding of Infusion Therapy Division $ 30,000
Sales and Marketing $ 37,000
Establishment of new principal office $ 106,283
Upgrade of facilities and computer systems $ 113,132
Working capital $ 611,580
The uses and proceeds described above do not represent a material change
in the uses of proceeds described in the Registrant's December 20, 1996
prospectus.
The Registrant's current bank credit lines have increased from $3,500,000
to $6,000,000 (after the repayment noted above) of which $2,400,000 has been
utilized as of June 30, 1998. The Registrant will draw down from its bank credit
lines, as disclosed in the prospectus, to fund the additional uses of proceeds
which remain unfunded.
- -----------
* Expenses paid to or for underwriters does not include a $72,000 payment
made to H.J. Meyers & Co., Inc. for the two-year financial consulting
services fee as disclosed in the Underwriting section in the first
paragraph on page 41 of the Registrant's December 20, 1996 prospectus.
** Repayment of indebtedness relates to the repayment of bank credit lines.
Although not a line item in the Use of Proceeds table on page 12 of the
Registrant's December 20, 1996 prospectus, the last four lines of the
penultimate paragraph in that section notes the following:
"Depending upon the timing of the proposed expenditures for the
purposes described in the table set forth above, the Company may use a
substantial portion of the proceeds to reduce or repay in full its
current bank credit lines. In such event, borrowings under the bank
credit lines would then be used to finance the expenditures described
in the table set forth above."
<PAGE>
(b) The Registrant has made the following recent sales of unregistered
securities:
(i) On June 2, 1998, the Registrant issued warrants pursuant to
warrant agreements with each of H. Gene Berger and Charles J. Pendola, who
are directors of the Registrant. Each warrant provided that the holder
could purchase up to an aggregate of 10,000 shares of the Registrant's
$.01 par value common stock at an exercise price of $1.625 per share at
any time up until June 1, 2008. On June 10, 1998, Mr. Pendola exercised
his warrant and purchased 10,000 shares of the $.01 par value common stock
of the Registrant for an aggregate purchase price of $16,250.
(ii) On August 6, 1998, Heart to Heart Health Care Services, Inc.
("Heart to Heart"), which is the holder of the Registrant's promissory
note in the face amount of $1,150,000 currently bearing interest at the
rate of 9% per annum, converted $600,000 of the principal amount of that
promissory note into 480,000 shares of the Registrant's newly authorized
Class A Convertible Preferred Stock at a conversion price of $1.25 per
share, each share of which is convertible at any time into shares of the
Registrant's $.01 par value common stock. Heart to Heart is owned by Jerry
Braun, Jacob Rosenberg, Samson Soroka, Hirsch Chitrik and Sid Borenstein
(the "Affiliated Shareholders"). Messers. Braun, Rosenberg, Chitrik and
Bornstein are officers or directors of the Registrant and, together with
Mr. Soroka, are all principal shareholders. The Registrant has obtained an
independent opinion that the consideration received by the Company in the
transaction is, under the circumstances, fair from a financial point of
view to the Registrant, not including the Affiliated Shareholders.
Exemption from registration under the Securities Act of 1933 (the "Act")
is claimed by the Registrant for the issuance of the warrants and the sales of
the common stock and preferred stock referred to above in reliance upon the
exemption offered by Section 4(2) of the Act for transactions not involving a
public offering. Each certificate evidencing such warrants and shares of common
stock and preferred stock bears an appropriate restrictive legend, and "stop
transfer" orders are maintained on the Registrant's stock transfer records
against each holder named above. None of these transactions involved
participation by any underwriter or a broker-dealer.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by item 601 of Regulation S-B.
Exhibit
Number Description of Exhibit
------ ----------------------
2.1 Purchase and Sale Agreement dated December 7, 1997 among NYHC
Newco Paxxon, Inc. and Metro Healthcare Services, Inc.**
2.2 Purchase and Sale Agreement dated February 8, 1998 among NYHC
Newco Paxxon, Inc. and Metro Healthcare Services, Inc.***
<PAGE>
2.3 Purchase and Sale Agreement dated February 25, 1998 among NYHC
Newco Paxxon, Inc. and Heart to Heart Healthcare Services, Inc.***
3.1 Certificate of Incorporation of the Company.*
3.2 Restated Certificate of Incorporation of the Company.*
3.3 Certificate of Correction of Restated Certificate of Incorporation
of New York Health Care, Inc.*
3.4 Amendment to the Certificate of Incorporation filed
October 17, 1996.*
3.5 By-laws of the Company.*
3.6 Amendment to the Certificate of Incorporation of the Company filed
December 4, 1996.*
3.7 Certificate of Designations, Rights and Preferences of New York
Health Care, Inc. Class A Convertible Preferred Stock.
4.1 Form of certificate evidencing shares of Common Stock.*
4.2 Underwriter's Warrant Agreement and Form of Underwriter's Warrant.*
10.1 Purchase and Sale Agreement by and between the Company, National
Medical Homecare, Inc., Jerry Braun and Sam Soroka dated March 18,
1988.*
10.2 Lease for 105 Stevens Avenue, White Plains, New York by and
between the Company and Vincent Rippa as receiver dated October 30,
1992.*
10.3 Lease for 175 Fulton Avenue, Suite 30IA, Hempstead, New York by
and between and the Company and Hempstead Associates Limited
Partnership dated July 22, 1993.*
10.4 Deed for 1667 Flatbush Avenue, Brooklyn, New York from Tiara
Realty Co. to the Company dated April 22, 1994.*
10.5 Agreement between Jerry Braun, Jacob Rosenberg, Samson Soroka,
Hirsch Chitrik, Sid Borenstein and the Company dated September 30,
1988.*
<PAGE>
10.6 Lease for 49 South Main Street, Spring Valley, New York by and
between the Company and Joffe Management dated November 1,
1994.*
10.7 Agreement for Provisions of Home Health Aide and Personal Care
Worker Services by and between the Company and Kingsbridge
Heights Health Facilities Long Term Home Health Care Program dated
November 2, 1994.*
10.8 State of New York Department of Health Office of Health Systems
Management Home Care Service Agency License for the Company
doing business in Rockland, Westchester and Bronx Counties dated
May 8, 1995.*
10.9 State of New York Department of Health Office of Health Systems
Management Home Care Service Agency License for the Company
doing business in Dutchess, Orange, Putnam, Sullivan and Ulster
Counties dated May 8, 1995.*
10.10 State of New York Department of Health Office of Health Systems
Management Home Care Service Agency License for the Company
doing business in Nassau, Suffolk and Queens Counties dated May 8,
1995.*
10.11 State of New York Department of Health Office of Health Systems
Management Home Care Service Agency License for the Company
doing business in Orange and Rockland Counties dated July 1. 1995.*
10.12 Lease Renewal for 45 Grand Street, Newburgh, New York by and
between the Company and Educational and Charitable Foundation of
Eastern Orange County, Inc. dated July 12, 1995.*
10.13 Lease for 91-31 Queens Boulevard, Elmhurst, New York by and
between the Company and Expressway Realty Company dated
September 15, 1995.*
10.14 Settlement Agreement and General Release by
and between the Company and Samson Soroka
dated September 28, 1995.*
10.15 Personal Care Aide Agreement by and between the Company and
Nassau County Department of Social Services dated October 18,
1995.*
<PAGE>
10.16 Lease for 1667 Flatbush Avenue, Brooklyn, New York by and between
the Company and 1667 Flatbush Avenue LLC dated November 1,
1995.*
10.17 State of New York Department of Health Office of Health Systems
Management Home Care Service Agency License for the Company doing
business in Bronx, Kings, New York, Queens and Richmond Counties
dated December 29, 1995.*
10.18 Home Health Agency Agreement by and between the Company and the
Center for Nursing and Rehabilitation dated January 1, 1996.*
10.19 Homemaker and Personal Care Agreements by and between the
Company and the County of Rockland Department of Social Services
dated January 1, 1996.*
10.20 Home Health Aide/ Personal Care Worker Services Agreement by and
between the Company and Beth Abraham Hospital dated January 12,
1996.*
10.21 Homemaker Services Agreement by and between the Company and the
Orange County Department of Social Services dated February 16,
1996.*
10.22 Personal Care Service Agreement by and between the Company and the
Orange County Department of Social Services dated February 16,
1996.*
10.23 Certified Home Health Agency Agreement by and between the
Company and New York Methodist Hospital dated February 28, 1996.*
10.24 Employment Agreement by and between the Company and Jacob
Rosenberg dated March 26, 1996.*
10.25 Employment Agreement by and between the Company and Jerry Braun
dated March 26, 1996.*
10.26 Stock Option Agreement by and between the Company and Jerry Braun
dated March 26, 1996.*
10.27 Home Health Agency Agreement by and between the Company and the
Mount Sinai Hospital Home Health Agency dated April 1, 1996.*
<PAGE>
10.28 Absolute, Unconditional, Irrevocable and Limited Continuing
Guaranty of Payment by and between Jacob Rosenberg and United
Mizrahi Bank and Trust Company dated May 9, 1996.*
10.29 Absolute, Unconditional, Irrevocable and Limited Continuing
Guaranty of Payment by and between Jerry Braun and United Mizrahi
Bank and Trust Company dated May 9, 1996.*
10.30 Continuing General Security Agreement by and between the Company
and United Mizrahi Bank and Trust Company dated May 9, 1996.*
10.31 Agreement for the Purchase of Accounts Receivable between the
Company and 1667 Flatbush Avenue LLC dated July 8, 1996.
10.32 401 (k) Plan for the Company.*
10.33 Performance Incentive Plan for the Company.*
10.34 Services Agreement between the Company and Heart to Heart Health
Care Services, Inc., dated January 1, 1996.
10.35 Employment Agreement by and between the Company and Gilbert
Barnett dated August 27, 1996.*
10.36 Assignment of lease dated October 8, 1996, lease dated
September 30, 1995 and sublease dated May 1995 among the Company,
as tenant, Prime Contracting Design Corp., as assignor, Bellox
Realty Corp., as landlord and Nutriplus Corp., as subtenant.*
10.37 Lease for 6 Gramatan Avenue, Mount Vernon, New York, 10550 by
and between the Company and 6 Gramatan Avenue Corp. dated
December 1, 1996.*
10.38 Form of Financial Consulting Agreement with
H.J. Meyers & Co., Inc.*
10.39 Forms of Merger & Acquisition Agreement and Indemnification.*
10.40 Consulting Agreement by and between the Company and H. Gene
Berger dated July 30, 1997****
10.41 Agreement between the Company and Heart To Heart Health Care
Services, Inc. dated August 6, 1998.
11 Computation of Earnings Per Common Share of the Company.
<PAGE>
- --------------
* Incorporated by reference to Exhibits filed as part of the Company's
Registration Statement on Form SB-2 under File No. 333-08152, which was
declared effective on December 20, 1996.
** Incorporated by reference to Exhibits filed as part of the Company's Form
8-K report with an event date of December 8, 1997.
*** Incorporated by reference to Exhibits filed as part of the Company's Form
8-K report with an event date of February 8, 1998.
**** Incorporated by reference to Exhibits filed as part of the Company's Form
10-KSB report for the year ended December 31, 1997.
(b) Reports on Form 8-K. The Company filed a Form 8-K/A report report on June
8, 1998.
<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 10, 1998
NEW YORK HEALTH CARE, INC.
By: /s/ David Grossman
---------------------------------------
David Grossman
Chief Financial and Accounting Officer
9
Exhibit 3.7
CERTIFICATE OF DESIGNATION OF THE RIGHTS AND PREFERENCES
OF CLASS A CONVERTIBLE PREFERRED STOCK OF
New York Health Care, Inc.
a New York Corporation
Pursuant to authority given by the Company's Articles of Incorporation,
the Board of Directors of New York Health Care, Inc., a New York corporation
(the "Corporation" or "Company") has duly adopted the following recitals and
resolutions on August 6, 1998:
WHEREAS, the Articles of Incorporation of this Corporation provide for a
class of its authorized shares known as "Preferred Shares," comprising Two
Million (2,000,000) shares issuable from time to time in one or more series; and
WHEREAS, the Board of Directors of this Corporation is authorized to fix
the number of shares of any series of Preferred Shares, to determine the
designation of any such series and to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Shares and, within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, to increase or decrease
(but not below the number of shares of any such series then outstanding) the
number of shares of any such series subsequent to the issue of share of that
series; and
WHEREAS, this Corporation desires to issue "Series A Convertible Preferred
Stock" and it is the desire of the Board of Directors of this Corporation,
pursuant to its authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to the Series A Convertible Preferred
Stock;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issue of a series of Preferred Shares of this Corporation
consisting of Four Hundred Eighty Thousand (480,000) shares designated as
"Series A Convertible Preferred Stock" and does hereby fix the rights,
preferences, restrictions and other matters relating to said Series A
Convertible Preferred Stock as follows:
(a) Dividends.
The holders of outstanding Series A Convertible Preferred Stock shall be
entitled to receive out of funds at the time legally available therefor a
dividend equal to 9% of the purchase price for shares of Series A Convertible
Preferred Stock before any dividend is paid on Common Shares. Such dividends
shall be payable quarterly on the first day of each calendar quarter commencing
with
<PAGE>
the first calendar quarter of 1999, when and as declared by the Board of
Directors. After dividends on the Series A Convertible Preferred Stock shall
have been declared and paid or set apart, then, if the Board of Directors shall
elect to declare and pay additional dividends out of funds legally available
therefor, such additional dividends shall be declared and paid in equal amounts
per share to the holders of Common Shares.
(b) No Preference on Liquidation.
(1) In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Series A Convertible Preferred Stock then
outstanding shall be entitled to be paid out of the assets of this Corporation
available for distribution to its stockholders pari passu with all other series
or shares of Preferred and Common Shares, whether from capital, surplus or
earnings.
(2) A reorganization, consolidation or merger of this Corporation with or
into any other corporation or corporations, or a sale of all or substantially
all of the assets of this Corporation, shall not be deemed to be a liquidation,
dissolution or winding up of this Corporation as those terms are used in this
subdivision (b) and, in the event of any such reorganization, consolidation,
merger of sale of assets, the Series A Convertible Preferred Stock shall be
entitled only to the rights provided in the plan or reorganization.
(c) No Voting Rights.
The holders of the Series A Convertible Preferred Stock issued and
outstanding shall have no voting rights or powers to vote upon the election of
directors or upon any other matter, except that such holders shall have the
right to notice of meetings and voting rights and powers to vote upon any matter
regarding the Series A Convertible Preferred Stock its rights and preferences.
(d) Conversion of Series A Convertible Preferred Stock Into Common Stock.
(1) Subject to the provisions of this subdivision (d), the holder of
record of any share of shares of Series A Convertible Preferred Stock shall have
the right, at his option, at any time after the date of issuance of said shares
to convert each said share of Series A Convertible Preferred Stock into one (1)
fully paid and nonassessable shares of this Corporation's $.01 par value common
stock (the "Common Stock") of the Company.
(2) Any holder of a share or shares of Series A Convertible Preferred
Stock desiring to convert such Series A Convertible Preferred Stock into Common
Stock shall surrender the certificate or certificates representing the share or
shares of Series A Convertible Preferred Stock so to be converted, duly endorsed
to the Company, or in blank, at the principal office of the Company and shall
give written notice to the Company at said office that he elects to convert the
same, and setting forth the name of names (with the address or addresses) in
which the shares of Common Stock are to be issued.
<PAGE>
(3) Conversion of Series A Convertible Preferred Stock shall be subject to
the following additional terms and provisions:
(A) As promptly as practicable after the surrender for conversion of
any Series A Convertible Preferred Stock, the Company shall deliver or
cause to be delivered at the principal office of the Company (or such
other place as may be designated by the Company), to or upon the written
order of the holder of such Series A Convertible Preferred Stock,
certificates representing the shares of Common Stock issuable upon such
conversion, issued in such name or names as such holder may direct. Shares
of the Series A Convertible Preferred Stock shall be deemed to have been
converted as of the close of business on the date of the surrender of the
Series A Convertible Preferred Stock for conversion, as provided above,
and the rights of the holders of such Series A Convertible Preferred Stock
shall cease at such time, and the person or persons in whose name or names
the certificates for such shares are to be issued shall be treated for all
purposes as having become the record holder or holders of such Common
Stock at such time; provided, however, that any such surrender on any date
when the stock transfer books of the Company shall be closed shall
constitute the person or persons in whose name or names the certificates
for such shares are to be issued as the record holder or holders thereof
for all purposes at the close of business on the next succeeding day on
which such stock transfer books are open.
(B) In the event that the Company shall at any time subdivide or
combine in a greater or lesser number of shares the outstanding shares of
Common Stock, the number of shares of Common Stock issuable upon
conversion of the Series A Convertible Preferred Stock shall be
proportionately increased in the case of subdivision or decreased in the
case of a combination, effective in either case at the close of business
on the date when such subdivision or combination shall become effective.
(C) In the event that the Company shall be recapitalized,
consolidated with or merged into any other corporation, or shall sell or
convey to any other corporation all or substantially all of its property
as entirely, provision shall be made as part of the terms of such
recapitalization, consolidation, merger, sale or conveyance so that any
holder of Series A Convertible Preferred Stock may thereafter receive in
lieu of the Common Stock otherwise issuable to him upon conversion of his
Series A Convertible Preferred Stock, but at the conversion ration stated
in this subdivision (d), the same kind and amount or securities or assets
as may be distributable upon such recapitalization, consolidation, merger,
sale or conveyance, with respect to the Common Stock of the Company.
(D) In the event that the Company shall at any time pay to the
holders of Common Stock a dividend payable in Common Stock, the number of
shares of Common Stock issuable upon conversion of the Series A
Convertible Preferred Stock shall be proportionately increased, effective
at the close of business on the record date for determination of the
holders of Common Stock entitled to such dividend.
<PAGE>
(E) Such adjustments shall be made successively if more than one
event listed in asubdivision (d)(3)(B), (C) and (D) hereof shall occur.
(F) No adjustment of the conversion ratio shall be made by reason
of:
(i) the purchase, acquisition, redemption or retirement by the
Company or any shares of the Common Stock or any other class of the
capital stock of the Company, except as provided in subdivision
(d)(3)(B); or
(ii) the issuance, other than as provided in subdivisions
(d)(3)(B) and (D), of any shares of Common Stock of the Company, or
of any securities convertible into shares of Common Stock or other
securities of the Company, or of any rights, warrants or options to
subscribe for or purchase shares of the Common Stock or other
securities of the Company, or of any other securities of the
Company, provided that in the event the Company offers any of its
securities or any rights, warrants or options to subscribe for or
purchase any of its securities to the holders of its Common Stock
pursuant to any preemptive or preferential rights granted to holders
of Common Stock by the Certificate of Incorporation of the Company,
or pursuant to any similar rights that may be granted to such
holders of Common Stock by the Board of Directors of the Company, at
least 20 days prior to the expiration of any such offer the Company
shall mail written notice of such offer to the holders of the Series
A Convertible Preferred Stock then of record; or
(iii) any offer by the Company to redeem or acquire shares of
its Common Stock by paying or exchanging therefor stock of another
corporation or the carrying out by the Company of the transactions
contemplated by such offer, provided that at least 20 days prior to
the expiration of any such offer the Company shall mail written
notice of such offer to the holders of the Series A Convertible
Preferred Stock then of record.
(G) The Company shall at all times reserve and keep available solely
for the purpose of issue upon conversion of such Series A Convertible
Preferred Stock, as herein provided, such number of shares of Common Stock
shall be issuable upon the conversion of all outstanding Series A
Convertible Preferred Stock.
(4) The issuance of certificates for shares of Common Stock upon
conversion of the Series A Convertible Preferred Stock shall be made without
charge for any tax in respect of such issuance. However, if any certificate is
to be issued in a name other than that of the holder of record of the Series A
Convertible Preferred Stock so converted, the person or persons requesting the
issuance thereof shall pay to the Company the amount of any tax which may be
payable in respect of any transfer involved in such issuance, or shall establish
to the satisfaction of the Company that such tax has been paid or is not due and
payable.
By Order of the Board of Directors
Exhibit 10.41
HEART TO HEART HEALTH CARE SERVICES, INC.
7 Glenwood Avenue
East Orange, NJ 07017
August 6, 1998
New York Health Care, Inc.
1850 McDonald Avenue
Brooklyn, NY 11223
Re: Conversion of $600,000 of Debt into Equity
Gentlemen:
This letter will serve to confirm the mutual agreement between Heart to
Heart Health Care Services, Inc. ("Heart to Heart") and New York Health Care,
Inc. ("NYHC"), that as a result of recent discussions between Heart to Heart and
New York Health Care, Heart to Heart will convert an aggregate principal amount
of $600,000 of its March 29, 1998 promissory note made by NYHC to the order of
Heart to Heart in the face amount of $1,150,000 bearing interest at the current
rate of 9% per annum payable quarterly into 480,000 shares of the Class A
Convertible Preferred Stock of NYHC.
Please confirm your agreement to the foregoing by signing acknowledgment
below.
Thank you for your kind attention.
Very truly yours,
HEART TO HEART HEALTH
CARE SERVICES, INC.
By:___________________________
Authorized Officer
ACCEPTED AND AGREED:
NEW YORK HEALTH CARE, INC.
By: ____________________________
Jerry Braun, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NEW YORK
HEALTH CARE, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 56,332
<SECURITIES> 0
<RECEIVABLES> 5,744,279
<ALLOWANCES> (164,770)
<INVENTORY> 0
<CURRENT-ASSETS> 6,312,087
<PP&E> 545,822
<DEPRECIATION> (237,540)
<TOTAL-ASSETS> 9,734,071
<CURRENT-LIABILITIES> 3,828,116
<BONDS> 0
0
0
<COMMON> 37,600
<OTHER-SE> 4,521,688
<TOTAL-LIABILITY-AND-EQUITY> 9,734,071
<SALES> 0
<TOTAL-REVENUES> 9,887,266
<CGS> 0
<TOTAL-COSTS> 6,861,397
<OTHER-EXPENSES> 2,509,107
<LOSS-PROVISION> 15,000
<INTEREST-EXPENSE> 151,437
<INCOME-PRETAX> 396,185
<INCOME-TAX> 164,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 232,185
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
