SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
AMENDMENT No. 1
(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, 1999
[ ] 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
incorporation or organization) Identification No.)
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: 3,668,730
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
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<CAPTION>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
A S S E T S
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 251,499
Accounts receivable, net of allowance for uncollectible
amounts of $248,300 . . . . . . . . . . . . . . . . . . . . . . . . . 5,865,332
Unbilled services . . . . . . . . . . . . . . . . . . . . . . . . . . . 296,301
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,703
Due from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 6,875
Prepaid income taxes and income taxes receivable. . . . . . . . . . . . 196,726
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . 6,780,436
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 526,383
Intangibles, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,968,191
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,751
------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,327,761
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,187,323
Note payable - bank . . . . . . . . . . . . . . . . . . . . . . . . . . 2,850,000
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . 446,129
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . 520,255
------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 5,003,707
------------
Deferred tax liability. . . . . . . . . . . . . . . . . . . . . . . . . . 22,000
Long-term debt, less current maturities . . . . . . . . . . . . . . . . . 256,148
------------
278,148
------------
Commitments, contingencies and other comments
Shareholders' equity:
Preferred stock $.01 par value, 2,000,000 shares authorized, including
Class A Convertible Preferred Stock; 590,375 issued and outstanding . 5,904
Common stock, $.01 par value, 12,500,000 shares authorized;
3,750,000 shares issued, 3,678,730 outstanding. . . . . . . . . . . . 37,500
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . 4,758,414
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,294
------------
5,127,112
Less: Treasury stock (71,270 common shares at cost) . . . . . . . . . . (81,206)
------------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . 5,045,906
------------
Total liabilities and shareholders' equity. . . . . . . . . . . . . $10,327,761
============
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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<CAPTION>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
1998 1999 1998 1999
----------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net patient service revenue . . . . . $5,067,945 $ 6,277,828 $14,955,211 $16,897,231
----------- -------------- ------------ ------------
Expenses:
Professional care of patients . . . 3,442,066 4,516,031 10,303,463 12,146,346
General and administrative. . . . . 1,278,215 1,513,949 3,693,122 4,593,586
Bad debts expense . . . . . . . . . 15,000 50,000 30,000 108,824
Depreciation and amortization . . . 55,949 72,465 150,149 209,132
----------- -------------- ------------ ------------
Total operating expenses. . . . . 4,791,230 6,152,445 14,176,734 17,057,888
----------- -------------- ------------ ------------
Income (loss) from operations . . . . 276,715 125,383 778,477 (160,657)
----------- -------------- ------------ ------------
Non-operating income (expenses):
Interest income . . . . . . . . . . 13,000 - 44,770 -
Other income. . . . . . . . . . . . 165 - 14,255 -
Interest expense. . . . . . . . . . (86,971) (84,760) (238,408) (246,771)
----------- -------------- ------------ ------------
Non-operating income
(expense), net . . . . . . . . (73,806) (84,760) (179,383) (246,771)
----------- -------------- ------------ ------------
Income (loss) before provision
(credit) for income taxes . . . . . 202,909 40,623 599,094 (407,428)
----------- -------------- ------------ ------------
Provision (credit) for income taxes:
Current . . . . . . . . . . . . . . 83,000 71,114 247,000 (128,886)
Deferred. . . . . . . . . . . . . . - (58,000) - (55,000)
----------- -------------- ------------ ------------
83,000 13,114 247,000 (183,886)
----------- -------------- ------------ ------------
Net income (loss) . . . . . . . . . . 119,909 27,509 352,094 (223,542)
Dividends paid on preferred stock --- --- --- 13,500
Net income (loss) applicable
----------- -------------- ------------ ------------
to common stock. . . . . . . . . . $ 119,909 $ 27,509 $ 352,094 $ (237,042)
=========== ============== ============ ============
Basic and diluted earnings (loss)
per share . . . . . . . . . . . . . $ .03 $ .01 $ .09 $ (.06)
=========== ============== ============ ============
Weighted average shares
outstanding . . . . . . . . . . . . 3,739,504 3,686,784 3,747,539 3,689,072
=========== ============== ============ ============
Diluted weighted average shares
outstanding . . . . . . . . . . . . 3,739,504 3,686,784 3,749,047 3,689,072
=========== ============== ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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<CAPTION>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
Preferred Additional Treasury
Common Stock Stock Paid-In Stock Retained
------------------ ------------- ---------------
Shares Amount Shares Amount Capital Shares Amount Earnings Total
--------- ------- ------- ------- ---------- ------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 . . . . . 3,750,000 $37,500 480,000 $ 4,800 $4,659,518 41,970 $(50,924) $ 562,336 $5,213,230
Treasury stock purchased during
January through June ($1.06
average per share) 19,800 (21,079) (21,079)
Treasury stock purchased during
July through September ($0.97
average per share) 9,500 (9,203) (9,203)
Dividends paid on preferred stock
($.03 per share) (13,500) (13,500)
Issuance of preferred stock on
July 29, 1999 in exchange for
promissory note ($0.91 per share) 110,375 1,104 98,896 100,000
Net loss (223,542) (223,542)
--------- ------- ------- ------- ---------- ------ --------- ---------- -----------
Balance at September 30, 1999. . . . 3,750,000 $37,500 590,375 $ 5,904 $4,758,414 71,270 $(81,206) $ 325,294 $5,045,906
========= ======= ======= ======= ========== ====== ========= ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended
September 30,
--------------------------
1998 1999
------------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 352,094 $(223,542)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 150,149 209,132
Bad debts expense . . . . . . . . . . . . . . . . . . . . . . . 30,000 108,824
Deferred tax credit . . . . . . . . . . . . . . . . . . . . . . - (55,000)
Deferred revenue (36,000) ---
Changes in operating assets and liabilities:
Increase in accounts receivable and unbilled services . . . . (1,171,466) (254,174)
Increase in due from affiliates . . . . . . . . . . . . . . . (6,475) (400)
(Increase) decrease in prepaid expenses . . . . . . . . . . . (68,728) 77,244
Increase in deposits. . . . . . . . . . . . . . . . . . . . . (9,602) (6,899)
Decrease in accounts receivable due after one year 180,604 ---
Increase in accrued payroll . . . . . . . . . . . . . . . . . 290,410 622,366
(Decrease) increase in accounts payable and accrued expenses. (14,566) 140,571
Decrease (increase) in income taxes receivable. . . . . . . . 2,967 (231,941)
------------- ----------
Net cash (used in) provided by operating activities . . . . (300,613) 386,181
------------- ----------
Cash flows from investing activities:
Acquisition of fixed assets . . . . . . . . . . . . . . . . . . . . (113,714) (144,967)
Payments for purchase acquisitions and associated costs . . . . . . (572,295) (49,524)
------------- ----------
Net cash used in investing activities . . . . . . . . . . . (686,009) (194,491)
------------- ----------
Cash flows from financing activities:
Borrowings under notes payable. . . . . . . . . . . . . . . . . . . 1,250,000 250,000
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . (267,500) (339,084)
Net charges from issuance of common stock 16,250 ---
Preferred stock dividend paid --- (13,500)
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . (43,954) (30,282)
------------- ----------
Net cash provided by (used in) financing activities . . . . 954,796 (132,866)
------------- ----------
Net (decrease) increase in cash and cash equivalents. . . . . . . . . (31,826) 58,824
Cash and cash equivalents at beginning of period. . . . . . . . . . . 171,859 192,675
------------- ----------
Cash and cash equivalents at end of period. . . . . . . . . . . . . . $ 140,033 $ 251,499
============= ==========
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 238,408 $ 246,771
============= ==========
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 301,665 $ 184,195
============= ==========
Supplemental schedule of noncash investing and financing activities:
The Company purchased customer lists, furniture and fixtures and
other intangibles, partially acquired through the issuance
of promissory notes. $ 1,730,000 $ ---
============= ==========
The Company converted long-term debt to 480,000 and 110,375
shares, respectively, of preferred stock . . . . . . . . . . . . . $ 600,000 $ 100,000
============= ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED 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, 1998 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 nine months ended September 30, 1999 are not necessarily
indicative of the results to be expected for the full year.
NOTE 2 - EARNINGS/(LOSS) PER SHARE:
Basic 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 or loss 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. Options
and warrants were not included in the computation of diluted earnings per share
because the exercise price was greater than the market price of the stock.
Convertible Preferred Stock is not included in the computation of diluted
earnings (loss) per share because the effect is anti-dilutive.
NOTE 3 - TREASURY STOCK:
In January 1999 the Corporation purchased 17,800 shares of common stock for the
treasury at a cost of $18,875, and in February purchased an additional 2,000
shares of common stock for $2,204.
In September 1999, the Corporation purchased 9,500 shares of common stock for
the treasury at a cost of $9,203. Treasury stock is shown at cost.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - PREFERRED STOCK:
On August 6, 1998, Heart to Heart Health Care Services, Inc. ("Heart to Heart"),
which was the holder of the Corporation's promissory note in the face amount of
$1,150,000, and bearing interest at the rate of prime plus 1% (9%), converted
$600,000 of the principal amount of that promissory note into 480,000 shares of
Class A Stock. The Class A may be converted at a conversion price of $1.25 per
share, into one share of the Corporation's $.01 par value common stock at any
time. 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 therefore obtained an
independent opinion that the terms and conditions of the transaction were, under
the circumstances, fair to the Corporation.
On March 31, 1999, the corporation declared a dividend (amounting to $13,500),
to holders of preferred stock, which was paid in April 1999.
On July 29,1999, the Board of Directors authorized an increase in the number of
shares of Class A Convertible Preferred Stock from 480,000 to 590,375 shares.
The holders of the Preferred Stock shall be entitled to a dividend equal to 9%
of the purchase price for the Preferred Stock before any dividend is paid on
Common Stock. Dividends may be declared quarterly at the discretion of the Board
of Directors and are not cumulative. The holders of Preferred Stock receive no
preference on liquidation and such shares may be converted into one share of
Common Stock at any time.
On July 29, 1999, Heart to Heart, which was still owed approximately $360,000
under the terms of the promissory note, converted $100,000 of principal amount
into 110,375 shares of the Corporation's Class A Stock at a conversion price of
$.91 per share, each share of which is convertible at any time into shares of
the Corporation's $.01 par value common stock. The remaining balance under the
promissory note is payable, with interest at prime plus 1% (9 1/4% at September
30, 1999), in quarterly installments until January 2001 (see Note 8).
NOTE 5 - LINE OF CREDIT:
The Corporation has 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. At
September 30, 1999, the Corporation was overadvanced on this line of credit
based on the formula. All property and assets of the Corporation collateralize
the line and the Corporation has also guaranteed the line of credit. At
September 30, 1999, $2,850,000 was outstanding. Borrowings under the agreement
bear interest at prime plus 1/2% (8.75% at September 30, 1999). The line of
credit expired on June 30, 1999, and the bank has extended the line to
give the Corporation time to obtain replacement financing.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - ACQUISITIONS:
On February 22, 1999, the Corporation purchased customer lists and other
intangible assets from Staff Builders Services, Inc. (Shrewsbury office) for
$65,000. The purchase price has been allocated to furniture and fixtures for
$25,000 and the remaining $40,000 to customer lists and other intangibles.
On June 11, 1999, the Corporation purchased customer lists and other intangible
assets from Staff Builders Services, Inc. (Hackensack office) for $25,700. The
purchase price has been allocated to furniture and fixtures for $20,000 and the
remaining $5,700 to customer lists and other intangibles.
NOTE 7 - EARNINGS PER SHARE:
Earnings per share are computed as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------- -----------------------
1998 1999 1998 1999
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Basic and diluted earnings (loss) per share:
Earnings:
Net income (loss) applicable
to common stock . . . . . . . . . . . . . $ 119,909 $ 27,509 $ 352,094 $ (237,042)
---------- ---------- ---------- -----------
Shares:
Weighted average number of
common shares outstanding . . . . . . . . 3,739,504 3,686,784 3,747,539 3,689,072
Incremental shares relating to
stock options and warrants --- --- 1,508 ---
---------- ---------- ---------- -----------
Diluted weighted average shares
outstanding. . . . . . . . . . . . . . . . 3,739,504 3,686,784 3,749,047 3,689,072
========== ========== ========== ===========
Basic earnings (loss)
per share. . . . . . . . . . . . . . . . . $ .03 $ .01 $ .09 $ (.06)
========== ========== ========== ===========
Diluted earnings (loss)
per share. . . . . . . . . . . . . . . . . $ .03 $ .01 $ .09 $ (.06)
========== ========== ========== ===========
</TABLE>
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SUBSEQUENT EVENTS:
On October 23, 1999, the Corporation purchased customer lists and other
intangible assets from Staff Builders Services, Inc. Manhattan office for
$30,000. The purchase price has been allocated to furniture and fixtures for
$25,000 and the remaining $5,000 to customer lists and other intangibles.
On October 26, 1999, the Corporation purchased 10,000 shares of common stock for
the treasury at a cost of $9,090.
The Corporation failed to make the principal and interest payment to a related
party (see Note 4) due October 1, 1999. The July 1, 1999 payment was made on
October 20, 1999.
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1998.
RESULTS OF OPERATIONS
Revenues for the nine months ended September 30, 1999 increased 13.0% to
approximately $16,897,000 from approximately $14,955,000 for the nine months
ended September 30, 1998. The increase is primarily the result of a gain in
revenue of approximately $3,289,000 from the new New York City HRA contract.
Revenues from offices located in New Jersey also increased 3.8%, or $184,000, as
the offices purchased in the first quarter of 1998 became fully operational in
1999, and as a result of the acquisition of two Staff Builders' offices, in
Shrewsbury and Hackensack, in 1999. Revenues from the New York operations,
excluding the HRA contract, decreased 15.2% or approximately $1,531,000. The
decreased revenue is the result of one contract closing its home care program,
another having regulatory issues that have since been resolved, and decreased
hours required by a number of other contracts.
Cost of professional care of patients for the nine months ended September 30,
1999 increased 17.9% to approximately $12,146,000 from approximately $10,303,000
for the nine months ended September 30, 1998. The increase resulted from hiring
additional home health care personnel to service the increased business in New
Jersey and the HRA contract, offset by lower staffing needs in New York caused
by the decrease in hours from other contracts. The cost of professional care of
patients as a percentage of revenues increased to approximately 71.9% for the
nine months ended September 30, 1999 from approximately 68.9% for nine months
ended September 30, 1998. The increase was primarily caused by increased wage
rates to home health aides, outsourcing of skilled nurses and therapists, and
the effect of the HRA contract, which provides a gross profit margin that is
significantly lower than other contacts. In order to contain the growth of
direct costs as a percentage of revenue, the Company began reducing hourly pay
rates in July to home health aides in areas where there is a surplus of
available aides, which has partially mitigated the impact of the above items.
Selling, general and administrative expenses for the nine months ended September
30, 1999 increased 24.4% to approximately $4,594,000 from approximately
$3,693,000 for the nine months ended September 30, 1998. The increase resulted
from New York Home Attendant Agency, a new branch office established at
previously sublet space adjacent to the Company's corporate headquarters to
service the HRA contract, and the New Jersey offices purchased in 1998 that
became fully operational during the first quarter of 1999. Selling, general and
administrative expenses as a percentage of revenue increased to 27.2% from 24.7%
as a result of increased wages for marketing and business development and
decreased revenue from existing contracts in New York. The Company is
continuing its efforts to reorganize its operations at the branch level and to
combine the responsibilities of certain positions in order to reduce overhead,
which efforts were successfully initiated in the second quarter of 1999.
<PAGE>
Interest expense for the nine months ended September 30, 1999 increased to
approximately $246,800 as compared to approximately $238,000 for the nine
months ended September 30, 1998, primarily as a result of increased borrowing to
fund the newly generated receivables of New York Home Attendant Agency.
The credit for federal, state and local taxes for the nine months ended
September 30, 1999 of $183,900 is the result of the loss for the period, as
compared to a provision for taxes of approximately $247,000 for the nine months
ended September 30, 1998.
Net loss for the nine months ended September 30, 1999 amounted to approximately
$223,500 as compared to approximately $352,100 of net income for the nine months
ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1999, net cash provided by operations
was approximately $386,000 as compared to net cash used of $301,000 during the
nine months ended September 30, 1998, a net improvement of $687,000. The
$386,000 provided in the nine months ended September 30, 1999 was primarily the
result of a $622,000 increase in accrued payroll, a $141,000 increase in
payables, a decrease of $77,000 in prepaid expenses, and $318,000 of
depreciation and amortization, offset by the impact of a $254,000 increase in
accounts receivable, a $232,000 decrease in income tax receivables and a
$223,000 net loss for the period. Cash used in the nine months ended September
30, 1998 was principally due to an approximately $1,171,000 increase in accounts
receivable and unbilled services, offset by an approximately $471,000 increase
in accounts payable and accrued payroll, and approximately $352,000 in net
income. The increase in accounts receivable in 1998 was primarily the result of
the acquisition of the New Jersey offices.
Net cash used in investing activities for the nine months ended September 30,
1999 was approximately $194,000 primarily for the acquisition of Staff Builders'
offices in Shrewsbury and Hackensack, New Jersey and computer equipment for the
Company's new network.
<PAGE>
Net cash used by financing activities for the nine months ended September 30,
1999 totaled $133,000 compared to the $955,000 provided in the nine months ended
September 30, 1998. Cash was used to pay current maturities of long-term debt
and capital leases of approximatley $339,000, purchase common stock for treasury
of approximately $30,000, and to pay a dividend of $13,500 to preferred
shareholders, partially offset by borrowings of $250,000 under the Company's
line of credit.
The $250,000 borrowed in the nine months ended September 30, 1999 was primarily
used to fund the start up of the New York Home Attendant Agency that began
servicing patients on January 6, 1999. Approximately $500,000 borrowed in the
nine months ended September 30, 1998 was used for the acquisition of the New
Jersey offices and an additional $600,000 was used to fund their newly generated
receivables. As of September 30, 1999, the Company has borrowings under its line
of credit which exceed its availability formula by approximately $60,000, a
reduction from approximately $428,000 at June 30, 1999. This is the result of
the Company's increased efforts to improve its liquidity and collections. The
line of credit expired on June 30, 1999, and the bank has extended the line to
give the Company time to obtain replacement financing. The Company failed to
make an October 1, 1999 payment on a note payable to a related party, and paid
the July 1, 1999 payment in October 1999. In order to accelerate cash flow, in
August 1999, the Company entered into an agreement with a third party to sell
certain receivables and receive payment in 120 days.
As of September 30, 1999, approximately $5,623,000 (approximately 54%) of the
Company's total assets consisted of accounts receivable from clients who are
reimbursed by third-party payors, as compared to $5,185,000 (approximately 53%)
as of September 30, 1998. Such payors generally require substantial
documentation in order to process claims.
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. At September 30, 1999, the Company's consolidated DSO was
99 days compared to 104 days at September 30, 1998. The improvement of 5 days
in DSO is the result of a lower DSO for New Jersey (52 days) and the HRA
contract (59 days) than New York (142 days), with an increased percentage of the
Company's revenues and accounts receivable being attributable to New Jersey and
the HRA contract.
On July 29, 1999 the Company converted $100,000 of its note payable to Heart To
Heart Health Care Services, Inc. into 110,375 shares of its Class A Convertible
Preferred Stock.
On October 23, 1999 the Company completed the acquisition of Staff Builders
Services, Inc. Manhattan office for $30,000.
On October 26, 1999 the Corporation purchased 10,000 shares of common stock for
the treasury at a cost of $9,090.
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.
<PAGE>
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 news reports 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.
YEAR 2000 ISSUES
The "Year 2000" Issue is the result of computer systems and programs using two
digits rather than four digits to define the applicable year. Computer systems
and programs that have date-sensitive applications may recognize a date using
"00" as the year 1900 rather than the Year 2000. This can result in system
failures or miscalculations causing disruption of operations including, but not
limited to, complete system failures, erroneous results and inability to process
transactions, send invoices, make payments or otherwise conduct normal business
activities.
The Company has initiated a "Year 2000" compliance program in which it has
identified the following areas of significant risk; computer hardware, computer
software and cash flow.
The Company presently operates two independent computer networks; a Unix-based
system for payroll and billing functions and a Windows NT-based system for other
accounting, word processing and database functions. The Company's billing system
has been modified by the software vendor and is expected to be Year 2000
compliant. The Company expects to complete testing of the software during the
fourth quarter of 1999. Although the Company believes its Windows NT-based
system for the Company's general ledger and accounting software, as well as its
Microsoft Office software package for word processing and database functions, is
substantially Year 2000 compliant, the Company continues to monitor the
manufacturer's ongoing efforts in this area.
<PAGE>
The Company obtained the services of an outside consultant to make an inventory
of all of its computer hardware and software in all of its offices and to design
and implement a communications network that links all of the Company's
facilities and computer systems. The principal focus of that assessment was on
the Company's hardware and operating systems for its computer network and
telephone system, which have the most significant effect on the Company's
ability to conduct business in a normal manner. The new network became fully
operational in the third quarter of 1999. All of the Company's computers have
been replaced or upgraded and all hardware and software is believed to be Year
2000 compliant. The Company will continue to reassess and test its
communications network and make all necessary changes through the remainder of
1999.
The Company has been communicating with its significant payors and vendors to
determine the extent to which the Company may be vulnerable to those third
parties' failures to remediate their own Year 2000 issues. The Company's
management believes that the failure of such vendors to remediate their Year
2000 issues in a timely manner will not have a material adverse effect upon the
Company. However, there can be no assurance that the computer systems of such
third parties will be remedied in a timely manner or that failures or
incompatibility issues arising out of the remediation methods of such third
parties will not have a material adverse effect on the Company. Management
believes that, so long as the Company's ability to provide its services and
process its payroll and billing is unaffected by Year 2000 issues, and the
Company's is able to obtain a replacement line of credit, it will be able to
sustain operations in the event significant payors are temporarily unable to
make timely payment of their obligations to the Company.
At the present time, the Company has a Year 2000 remediation budget of
approximately $150,000; $90,000 of which is for the replacement of non-compliant
hardware, $20,000 for consulting services and $40,000 for software and
contingencies. As of September 30, 1999 the Company has used approximately
$131,000 of its Year 2000 budget.
The Company's assessment of its Year 2000 issues is based upon management's best
estimates, which have been derived utilizing assumptions of future events,
including the availability of certain resources, third-party modification plans
and other factors, and there can be no assurance that management's assessment of
the Company's Year 2000 issues will not have to be revised as a result of Year
2000 compliance problems which may be revealed in the future and which could
have a material adverse effect on the Company.
<PAGE>
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:
Certain Relationships and Related Transactions
- --------------------------------------------------
On November 10, 1999, the Company entered into new employment agreements
with Jerry Braun and Jacob Rosenberg, each of which is for a term beginning
December 27, 1999 and ending December 26, 2004.
Mr. Braun's agreement provides that he will serve as President and Chief
Executive Officer in consideration of (i) annual base compensation of $232,925;
(ii) reimbursement of authorized business expenses incurred in connection with
the conduct of the Company's business; (iii) participation in the Company's
Bonus Plan, 401 (k) Plan and stock option plan; (iv) an automobile reimbursement
allowance of $750 per month toward automobile leasing costs and payment or
reimbursement of automobile insurance and maintenance costs; (v) an allowance of
$5,000 per year towards the cost of life insurance and disability insurance;
(vi) four weeks paid vacation and eighteen sick or personal leave days; and
(vii) an annual increase in salary of 10% for each year.
Mr. Rosenberg's agreement has the same general terms and conditions as Mr.
Braun's, except that he will serve as Vice President, Secretary and Chief
Operating Officer, and the annual base compensation is $186,340.
These new executive employment agreements also provide additional benefits
in the event there is a "change of control" of the Company, which is generally
defined as a merger or consolidation of the Company with another corporation, or
the sale of all or substantially all of its assets, or the acquisition of either
a majority of the Company's assets or its voting equity stock, or the power to
designate a majority of the Company's Board of Directors by persons other than
the present shareholders of the Company. In the event of such a "change of
control," the executives' unexercised stock options will become immediately
vested and exercisable in full, they will each receive a lump-sum payment equal
to 2.99 times the average of their annual base salary and bonus for the previous
five years and the Company will pay the cost to either maintain the lease or
transfer the ownership of the automobile for which the Company has paid the
leasing costs for the executive. The Company has also agreed that, to the
extent that any payments received by an executive from the Company subjects the
executive to an excise tax under Section 499 of the Internal Revenue Code, the
Company will make an additional payment to the executive so that net after-tax
compensation is not reduced by the excise tax. All "change of control"
compensation is limited, to the extent it may qualify as a "parachute payment"
under Section 280G of the Internal Revenue Code, to the maximum amount that may
be paid to that executive without any part of that compensation being deemed to
be an "excess parachute payment." That maximum amount is generally determined
by multiplying the average of the executive's annual base salary and bonus for
the previous five years by a factor of three.
All of the "change of control" provisions of the new employment contracts
of Messrs. Braun and Rosenberg are subject to approval by the Company's
shareholders at their next meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by item 601 of Regulation S-B.
EXHIBIT DESCRIPTION
NUMBER OF EXHIBIT
- ------- -----------------------------------------------------------------------
10.43 Employment Agreement by and between the Company and Jerry Braun dated
November 10, 1999.
10.44 Employment Agreement by and between the Company and Jacob Rosenberg
dated November 10, 1999.
(b) Reports on Form 8-K. The Company did not file any reports on Form
--------------------
8-K/A during the quarter ended September 30, 1999.
<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 15, 1999
NEW YORK HEALTH CARE, INC.
By: /s/ Jacob Rosenberg
--------------------
Jacob Rosenberg
Chief Financial and Accounting Officer
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Agreement made and entered into this 10th day of November, 1999, by and
between New York Health Care, Inc., a New York corporation, with its principal
place of business at 1850 McDonald Avenue, Brooklyn, New York 11223 (hereinafter
"Employer" or the "Company"), and Jerry Braun, an individual whose residential
address is at 929 East 28th Street, Brooklyn, New York 11210 (hereinafter
"Employee" or "Executive").
WITNESSETH:
WHEREAS, Employer is engaged in the business of home health care;
WHEREAS, Employee possesses skills, knowledge, abilities and experience which
Employer wishes to continue to avail itself of; and
WHEREAS, Employer wishes to continue the employment of Employee;
NOW, THEREFORE, in consideration of the mutual covenants as set forth herein;
THE PARTIES HERETO AGREE AS FOLLOWS:
1. EMPLOYMENT. Employer hereby shall employ Employee as the President and
Chief Executive Officer of the Company and to perform such additional
duties and services as may be assigned to him pursuant to Paragraph 3
hereof. Employee hereby accepts such employment, upon the terms and
conditions hereinafter set forth.
2. TERM. The term of employment of Employee shall be for five years commencing
as of December 27, 1999, and ending at the close of business December 26,
2004.
3. DUTIES.
(A) Employee's duties shall include assisting the overseeing and directing
of the Company, locating and developing new projects and other
business opportunities for it and generally promoting and facilitating
the Company's business objectives. For purposes of this paragraph,
Employer's subsidiaries, if any, are also encompassed in the term
"Company".
(B) During the term of this Agreement, Employee shall perform such
additional services as shall from time to time be assigned to him by
the Board of Directors and which are consistent with the duties
reasonably assigned to the President and Chief Executive Officer of
the type and size of the Company.
(C) Employee shall devote his business time and attention, energy and
skill to the business of Employer.
4. COMPENSATION.
(A) Employer shall pay Employee an annual salary of $232,925 (the "Annual Base
Compensation") with an annual increase in Annual Base compensation,
commencing on the first anniversary date of this Agreement (the
"Anniversary Date") and continuing on the Anniversary Date in each year
thereafter during the term of this Agreement, equal to 10% of the prior
year's Annual Base Compensation, payable in accordance with the Company's
normal policies.
(B) Employee shall be granted participation in the Company's 401(k) Plan,
Performance Incentive plan, stock options, insurance or other plans of the
Corporation which are currently in effect as well as all other benefits
available to any other employee of the Company during the term hereof,
(C) On an annual basis employee shall receive a portion of the 10% pretax Bonus
Plan that the Company has in place for it's executives. Such amount shall
be decided by the Compensation Committee.
(D) Employer shall obtain and thereafter maintain in effect at Employer's
expense the insurance coverage for the benefit of the employee and family
which include, but not be limited to, medical and dental insurance.
Employee shall also receive an annual allowance of $5,000 towards the
payment of premiums of life insurance, and disability insurance, which
insurance may be payable to such beneficiaries as the Employee may direct.
(E) Employer will reimburse Employee or cause him to be reimbursed for all
ordinary and necessary business expenses incurred by him for or on behalf
of Employer in the performance of his duties hereunder. For such purposes
Employee shall submit to Employer periodic reports of such expenses at
least once in each calendar quarter. Employee shall also receive a monthly
allowance of $750 towards the lease cost of an Automobile, and the Company
shall also pay for all maintenance, repairs, insurance and all other costs
and expenses thereof.
(F) Employee shall receive annual vacation of four (4) weeks, holidays, twelve
(12) days sick leave, and six (6) days personal leave in each year without
reduction of his compensation or other benefits hereunder. If Employee does
not use all of such paid vacation during such 12 month period, Employee
shall be entitled to receive payment at such time for any unused vacation
days for such period. The Company shall pay Employee at the rate of his
then current basic salary for any unused vacation at the termination of
this Agreement. Employee shall also be entitled to additional personal days
for all Jewish holidays on which work is prohibited in the Orthodox
tradition.
5. CHANGE IN CONTROL
(A) In the event of a "change of control" of the Company. The Company will
provide the following benefits to the employee:
(i) all outstanding options granted to the Executive under the Stock
Option Plan will automatically become immediately vested and
exercisable in full;
(ii) the executive will receive a lump-sum payment equal to 2.99 times
the average of that Executive's base salary and bonus for the
previous five years;
(iii)the Company will pay the cost to transfer ownership to the
Executive of any automobile provided to the Executive by the
Company or for which the Company pays or reimburses the costs of
leasing or other form of ownership; and
(iv) to the extent that any such payments (alone or with other
compensation payable to the Executive, are subject to an excise
tax under Section 4999 of the Internal Revenue Code, or any
successor provision, the Company will make an additional cash
payment to the Executive such that the executive's net after-tax
compensation is not reduced by such excise tax. Any compensation
payable to Executive contingent on a change of control, and which
qualifies as a "parachute payment" Under Section 280G of the
Internal Revenue Code shall be limited to the maximum amount that
may be paid to Executive without any part of such compensation
being deemed an "excess parachute payment" under that section.
(B) For purposes of this paragraph "change in control" shall mean the
following:
(i) the Executive of a transaction or series of transactions in which
persons or entities other than the present shareholders of the
Company acquire a majority in book value of the assets currently
owned by the Company; or a majority of the shares of the
Company's voting equity stock; or the power to designate a
majority of the Company's Board of Directors; or otherwise
acquire the ability, whether by contract, stock ownership or
otherwise, to control the management and policies of the Company;
(ii) the signing of any agreement for the merger or consolidation of
the Company with another corporation or for the sale of all or
substantially all of the assets of the Company; followed by
termination of the Executive within twelve months.
(iv) upon the occurrence of any other event or series of any other
event or series of events which, in the opinion of the Board of
Directors of the Company, will, or is likely to, if carried out,
result in a change of control of the Company.
6. TERMINATION; RIGHTS OF TERMINATION.
This Agreement may be terminated only as provided in this paragraph 6
(A) (i) A notice of resignation by Executive presented to the Company
other than as contemplated in paragraph 6(A) (iii).
(ii) A notice by the Company to Executive of termination for cause
("Cause"), which means:
(a) Executive's willful and continued failure to perform
substantially his duties (other than any such failure
resulting from Executive's Disability as hereinafter
defined) or any such failure resulting form Executive's
termination for Good Reason (as defined below), after a
written demand for substantial performance is delivered to
Executive by the Board of Directors of the Company which
specifically identifies the manner in which the Board of
Directors believes that Executive has not performed his
duties and the failure of Executive to reasonably comply
with such demand within thirty (30) days of notice to
Executive, or (b) Executive's willful engagement in gross
misconduct materially and demonstrably injurious to the
Company which is not cured by Executive within thirty (30)
days of notice to Executive. For purposes of this
subsection, no act or failure to act on Executive's part
shall be considered "willful" unless it was not in the best
interest of and without a good faith belief that his action
or omission would be in the best interest of the Company.
Executive shall not be terminated for Cause unless and until
there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote or not less
than two-thirds of the entire membership of the Board of
Directors of the Company finding that in the good faith
opinion of the Board of Directors Executive was guilty of
conduct set forth in clauses (a) or
(b) of this subparagraph 6(A) (ii) and specifying the
particulars thereof in detail;
(iii)(a) a notice by the Company to Executive of termination without
cause, (b) termination as a result of Executive's death, (c) a
notice of termination due to Disability given by the Company to
Executive or (d) a notice of termination by Executive to the
Company (i) for Good Reason, or (ii) due to the Company's
material breach of this Agreement that continues during the
thirty (30) days after Executive gives written notice to the
Company of such breach, which notice specifically identifies the
manner in which Executive believes that the Company breached this
Agreement,
(iv) If this Agreement is terminated pursuant to paragraph 6(A) (iii),
the Company shall be obligated to pay to Executive a severance
payment equal to three times the sum of the Executive's annual
Base Salary in effect at the time of termination plus the highest
annual cash bonus (if any) paid by the Company to Executive
during the three-year period preceding the date of termination.
Such severance payment shall be payable in a lump sum payment
within fifteen (15) days of the termination of Executive's
employment. In addition, for the five-year period following
Executive's termination, the Company shall be obligated to
continue to provide Executive with life, health, disability and
accident insurance benefits and all other executive benefits
(including, without limitation, retirement benefits and
automobile and expense allowances) comparable to those provided
to Executive prior to his termination. To the extent Executive is
no longer lawfully eligible for any aforementioned Benefit
because he is no longer employed by the Company, the Company
shall pay to Executive a lump sum cash payment equal to the
present value of the benefits that would have been provided to
Executive had his employment continued for such five-year period.
(v) For purposes of this Agreement, the term "Disability" shall mean
Executive's inability to perform his material duties under this
Agreement because of any illness or physical or mental disability
or other incapacity as evidenced by a written statement of a
physician licensed to practice medicine in any state in the
United States mutually agreed upon by the Company and Executive
which disability or other incapacity continues for a period in
excess of six (6) consecutive months in any consecutive
twelve-month period.
(vi)Upon termination of this Agreement for any reason whatsoever, in
addition to any other rights which Executive may have hereunder,
Executive shall be entitled to receive all of his Base Salary and
a pro-rated portion of his minimum annul bonus under this
Agreement to the date of termination and any unused paid vacation
earned as determined pursuant to paragraph 4(e).
(vii)In the event of termination of this Agreement for any reason
whatsoever, all rights and obligation of the Company and
Executive under this Agreement shall cease immediately, except
for those which by terms specifically apply to periods following
the termination of this Agreement as arise by reason of such
termination, and thereafter Executive shall have no right to
receive any compensation hereunder except, under appropriate
circumstances, as set forth in paragraph 6(A) (iii) and 6(vi)
hereof.)
(C) For the purpose of this paragraph 6, "Good Reason" means any of the
following events unless it occurs with the Executive's express prior
written consent: (i) the assignment to Executive of any duties
inconsistent with, or a diminution of, Executive's position, duties,
titles, offices, responsibilities and status with the Company, or any
removal of Executive or any failure to re-elect Executive to any of
such positions, (ii) a reduction in Executive's Base Salary as in
effect, form time to time, or a failure to increase Executive's Base
Salary as provided in this Agreement; (iii) except with respect to
changes required to maintain its tax-qualified status or changes
generally applicable to all employees of the Company, any failure by
the Company by the Company to continue in effect or make any provision
for any benefit, stock option, annual bonus or contingent loans
arrangements, or other incentive plan or arrangement of any type in
which Executive is participating from time to time, the taking of
which action would adversely affect Executive's participation in or
materially reduce Executive's benefits under any such benefit plan or
arrangement or deprive Executive of any material fringe benefit
enjoyed be Executive from time to time, or the failure to provide
Executive with the number of paid vacation days to which he is
entitled; (v) a relocation of the Company's principal executive
offices or Executive's relocation to any place more than one hundred
(100) miles from the location at which Executive performed his duties
as of the date hereof; or (vi) any failure by the Company to obtain
the assumption of this Agreement by any successor to or assignee or
the Company.
(C) The Company will also transfer ownership of exiting life insurance
policy and beneficiary as per employee's instructions. In addition the
deferred compensation insurance trust will become fully vested, if
applicable, for the Benefit of Employee.
7. CONFIDENTIALITY:
(A) Employee understands and acknowledges that as a result of Employee's
employment with Employer and involvement with the business of
Employer, he shall necessarily become informed of and have access to,
confidential information of Employer including, without limitation,
inventions, trade secrets, technical information, know-how, plans,
specifications, identity of customers and identity of suppliers, and
that such information, even though it may have been or may be
developed or otherwise acquired by Employee, is the exclusive property
of the Employer to be held by Employee in trust and solely for
Employer's benefit and Employee shall not at any time, either during
or subsequent to his employment hereunder, reveal, report, publish,
transfer or otherwise disclose to any person, corporation or other
entity or use any of Employer's confidential information, without its
written consent of the Board of Directors, except for use on behalf of
the Company in connection with its business, and except for such
information which legally and legitimately is or becomes of general
public knowledge from authorized sources other than Employer.
(B) Upon the termination of his employment with Employer for any reason,
Employee shall promptly deliver to it all drawings, manuals, letters,
notes, notebooks, reports and copies thereof and all other materials,
including, without limitation, those of a secret or confidential
nature, relating to Employer's business which are in Employee's
possession or control. Employer shall reimburse employee for any
packing or moving costs reasonably incurred by him in connection with
the foregoing delivery.
8. NON-COMPETITION; RESTRICTIVE COVENANTS AND CONFIDENTIALITY; INJUNCTIVE
RELIEF:
(A) During the term of his employment with Employer pursuant to his
Agreement, or any renewal thereof, Employee shall not, directly or
indirectly whether as principal, agent, shareholder, employee,
officer, director, consultant, joint- venturer, partner or otherwise,
own, manage, operate, join, control or participate in the ownership,
management, operation of, render any services to or be connected in
any manner with any business which is in direct competition with or is
if the type or character of any business engaged in by Employer or
which offers, sells or markets products, projects or services that
directly compete with products or services offered by Employer or any
of its subsidiaries or affiliates, irrespective of whether Employee's
involvement shall be as an office, owner, employee, partner,
joint-venturer, consultant, agent or other participant provided and
from making an investment in any company the securities of which are
listed on a national securities exchange or actively traded in the
over-the-counter market, so long as such investment does not equal or
exceed five percent (5%) of the total number of outstanding shares of
common stock of such company.
(B) For a period of one year after the expiration or termination of his
employment with Employer for any reason, Employee shall not, directly
or indirectly, whether as principal, agent, shareholder, employee,
officer, director, joint-venturer, partner, consultant or otherwise,
render any services to or with any company, firm or individual which
competes in any way with Employer in a business actually engaged in or
being actively developed by it. Under this Agreement, Employer will
have deemed to have been actively developing a business if, with
regard to such proposed business activity, there has been extensive
discussion at Board of Director meetings, formal Board resolutions,
corporate expenditures in excess of $25,000, preparation of marketing
studies or comparable actions related thereto.
(C) For a period of two years following the expiration or termination of
his employment with Employer for any reason, Employee shall not,
directly or indirectly, whether as principal, agent, shareholder,
employee officer, director joint-venturer, partner, consultant or
otherwise, solicit, raid, entice or induce any person who is, or was
at the time of such termination, an Employee of Employer to terminate
his or her employment with the Employer or become employed by any
other person, firm or corporation, and he will not approach any such
employee for such purpose or authorize or knowingly approve the taking
of such action by other persons to become employed in a business who
or which are actively engage in a competitive business.
9. ASSIGNABILITY AND BINDING EFFECT. The rights and obligations arising under
the Agreement shall inure to the benefit of and shall be binding upon the
executors, administrators, successors and legal representatives of Employee
and shall inure to the benefit of and be binding upon Employer, upon its
successors and assigns, but neither this Agreement nor the right or
obligations of Employee hereunder may be assigned, pledged, hypothecated or
otherwise transferred by Employee in whole or in part to another person,
firm or corporation nor may the obligations of Employee hereunder be
delegated.
10. NOTICES. All notices, requests, demands and other communications hereunder
shall be in writing and shall be delivered personally or sent by registered
or certified mail, prepaid and return receipt requested, to the other party
hereto at his or its mailing address as set forth at the beginning of this
Agreement, and in the case of Employer with copies to William J. Davis,
Esq., Scheichet & Davis, P.C., 505 Park Avenue, New York, New York 10022.
Either party may change the address to which such communications hereunder
shall be sent by sending notice of such change to the other party as herein
provided.
11. REPRESENTATIONS BY EMPLOYER AND EMPLOYEE. Employee hereby represents and
warrants that he is not a party to any other agreement, contract or
understanding, whether of employment or otherwise, which would in any way
restrict or prohibit him form undertaking or performing employment with
Employer in accordance with the terms and conditions of this Agreement.
Employer hereby represents and warrants that this Agreement has been
properly authorized by all necessary corporate action and, when and if,
fully executed, will be binding and enforceable upon the Company in
accordance with its terms except for the application of the laws of
Insolvency and bankruptcy as they may otherwise affect such Agreement.
Employer further represents and warrants that no other contract, agreement,
provision of its certificate of incorporation or bylaws, debt obligations,
law, regulation court or administrative order prevents it form entering
into, or conflicts with, this Agreement.
12. WAIVER. The waiver by either party of any breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach or violation, whether singular in nature or not.
13. PRIOR AGREEMENTS; COMPLETE UNDERSTANDING; AMENDMENT. This Agreement cancels
and supersedes any and all prior agreements and understandings, in any,
between the parties hereto regarding the services of Employee to Employer
and constitutes the complete understanding between the parties with respect
to the Employment of Employee hereunder and no statement, representation,
warranty or covenant has been made be either party with respect thereto
except as expressly set forth herein. Employee acknowledges that he has
been afforded the right to review this Agreement with legal counsel prior
to the execution of this Agreement, and that he has been encouraged to do
so. This Agreement shall not be altered, modified or amended except by
written instrument signed by each of the parties hereto.
14. HEADING. The heading set forth in this Agreement are for convenience only
and shall not be considered as part of this Agreement in any respect nor
shall they. In any way affect the substance of any provisions contained in
this Agreement.
15. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall constitute but one and the same agreement.
16. GOVERNING LAW. CONSTRUCTION WITH EXISTING LAW, SEVERABILITY. This Agreement
shall be governed by, and enforced in accordance with, the internal laws of
the State of New York. It is the intention of the parties hereto that all
terms and conditions of this Agreement are in compliance with the laws and
regulations of the state of New York, and nothing in this Agreement shall
be construed to be in derogation of the laws, rules and regulations
thereof. If for any reason any provision of this Agreement or any part
hereof is invalid, unlawful or incapable of being enforced by reason of any
rule of law, equity or public policy, all conditions and provisions of the
Agreement which can be given effect without such invalid, unlawful or
unenforceable provision shall, nevertheless, remain in full force and
effect, and such invalid, unlawful or irrevocable provision shall be
carried out as nearly as possible according to its original terms and
intent, while eliminating such invalidity or non-enforceability.
IN WITNESS WHEREOF, The parties hereto have executed this Agreement
effective as of the day and year first above written.
NEW YORK HEALTH CARE, INC.
BY: _________________________ BY:__________________________
TITLE: JERRY BRAUN
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Agreement made and entered into this 10th day of November, 1999, by and
between New York Health Care, Inc., a New York corporation, with its principal
place of business at 1850 McDonald Avenue, Brooklyn, New York 11223 (hereinafter
"Employer" or the "Company"), and Jacob Rosenberg, an individual whose
residential address is at 932 East 29th Street, Brooklyn, N.Y. 11210
(hereinafter "Employee" or "Executive").
WITNESSETH:
WHEREAS, Employer is engaged in the business of home health care;
WHEREAS, Employee possesses skills, knowledge, abilities and experience which
Employer wishes to continue to avail itself of; and
WHEREAS, Employer wishes to continue the employment of Employee;
NOW, THEREFORE, in consideration of the mutual covenants as set forth herein;
THE PARTIES HERETO AGREE AS FOLLOWS:
1. EMPLOYMENT. Employer hereby shall employ Employee as the Vice President,
Secretary and Chief Operating Officer of the Company and to perform such
additional duties and services as may be assigned to him pursuant to
Paragraph 3 hereof. Employee hereby accepts such employment, upon the terms
and conditions hereinafter set forth.
2. TERM. The term of employment of Employee shall be for five years commencing
as of December 27, 1999, and ending at the close of business December 26,
2004.
3. DUTIES.
(A) Employee's duties shall include assisting the overseeing and directing
of the Company, locating and developing new projects and other
business opportunities for it and generally promoting and facilitating
the Company's business objectives. For purposes of this paragraph,
Employer's subsidiaries, if any, are also encompassed in the term
"Company".
(B) During the term of this Agreement, Employee shall perform such
additional services as shall from time to time be assigned to him by
the Board of Directors and which are consistent with the duties
reasonably assigned to the Vice President, Secretary and Chief
Operating Officer of the type and size the Company.
(C) Employee shall devote his business time and attention, energy, and
skill to the business of Employer.
4. COMPENSATION.
(A) Employer shall pay Employee an annual salary of $186,340 (the "Annual Base
Salary Compensation") with an annual increase in Annual Base compensation,
commencing on the anniversary date of this Agreement (the "Anniversary
Date") and continuing on the Anniversary Date in each year thereafter
during the term of this Agreement, equal to 10% of the prior year's Annual
Base Compensation, payable in accordance with the Company's normal
policies.
(B) Employee shall be granted participation in the Company's 401(k) Plan,
Performance Incentive plan, stock options, insurance, or other plans of the
Corporation which are currently in effect as well as all other benefits
available to any other employee of the Company during the term hereof,
(C) On an annual basis employee shall receive a portion of the 10% pretax Bonus
Plan that the Company has in place for it's executives. Such amount shall
be decided by the Compensation Committee.
(D) Employer shall obtain and thereafter maintain in effect at Employer's
expense the insurance coverage for the benefit of the employee and family
which include, but not be limited to, medical and dental insurance.
Employee shall also receive an annual allowance of $5,000 towards the
payment of premiums of life insurance, and disability insurance, which
insurance may be payable to such beneficiaries as the Employee may direct.
(E) Employer will reimburse Employee or cause him to be reimbursed for all
ordinary and necessary business expenses incurred by him for or on behalf
of Employer in the performance of his duties hereunder. For such purposes
Employee shall submit to Employer periodic reports of such expenses at
least once in each calendar quarter. Employee shall also receive a monthly
allowance of $750 towards the lease cost of an automobile, and the Company
shall also pay for all maintenance, repairs, insurance and all other costs
and expenses thereof.
(F) Employee shall receive annual vacation of four (4) weeks, holidays, twelve
(12) days sick leave, and six (6) days personal leave in each year without
reduction of his compensation or other benefits hereunder. If Employee does
not use all of such paid vacation during such 12 month period, Employee
shall be entitled to receive payment at such time for any unused vacation
days for such period. The Company shall pay Employee at the rate of his
then current basic salary for any unused vacation at the termination of
this Agreement. Employee shall also be entitled to additional personal days
for all Jewish holidays on which work is prohibited in the Orthodox
tradition.
5. CHANGE IN CONTROL
(A) In the event of a "change of control" of the Company. The Company will
provide the following benefits to the employee:
(i) all outstanding options granted to the Executive under the Stock
Option Plan will automatically become immediately vested and
exercisable in full;
(ii) the Executive will receive a lump-sum payment equal to 2.99 times
the average of that executive's base salary and bonus for the
previous five years;
(iii)the Company will pay the cost to transfer ownership to the
Executive of any automobile provided to the Executive by the
Company or for which the Company pays or reimburses the costs of
leasing or other form of ownership; and
(iv) to the extent that any such payments (alone or with other
compensation payable to the Executive, are subject to an excise
tax under Section 4999 of the Internal Revenue Code, or any
successor provision, the Company will make an additional cash
payment to the Executive such that the Executive's net after-tax
compensation is not reduced by such excise tax. Any compensation
payable to Executive contingent on a change of control, and which
qualifies as a "parachute payment" Under Section 280G of the
Internal Revenue Code shall be limited to the maximum amount that
may be paid to that Executive without any part of such
compensation being deemed an "excess parachute payment" under
that section.
(B) For purposes of this paragraph "change in control" shall mean the
following:
(i) the Executive of a transaction or series of transactions in which
persons or entities other than the present shareholders of the
Company acquire a majority in book value of the assets currently
owned by the Company; or a majority of the shares of the
Company's voting equity stock; or the power to designate a
majority of the Company's Board of Directors; or otherwise
acquire the ability, whether by contract, stock ownership or
otherwise, to control the management and policies of the Company;
(ii) the signing of any agreement for the merger or consolidation of
the Company with another corporation or for the sale of all or
substantially all of the assets of the Company; followed by
termination of the Executive within twelve months.
(iv) upon the occurrence of any other event or series of any other
event or series of events which, in the opinion of the Board of
Directors of the Company, will, or is likely to, if carried out,
result in a change of control of the Company.
6. TERMINATION; RIGHTS OF TERMINATION.
This Agreement may be terminated only as provided in this paragraph 6
(A) (i) A notice of resignation by Executive presented to the Company
other than as contemplated in paragraph 6(A) (iii);
(ii) A notice by the Company to Executive of termination for cause
("Cause"), which means:
(a) Executive's willful and continued failure to perform
substantially his duties (other than any such failure
resulting from Executive's Disability (as hereinafter
defined) or any such failure resulting form Executive's
termination for Good Reason (as defined below), after a
written demand for substantial performance is delivered to
Executive by the Board of Directors of the Company which
specifically identifies the manner in which the Board of
Directors believes that Executive has not performed his
duties and the failure of Executive to reasonably comply
with such demand within thirty (30) days of notice to
Executive, or (b) Executive's willful engagement in gross
misconduct materially and demonstrably injurious to the
Company which is not cured by Executive within thirty (30)
days of notice to Executive. For purposes of this
subsection, no act or failure to act on Executive's part
shall be considered "willful" unless it was not in the best
interest of and without a good faith belief that his action
or omission would be in the best interest of the Company.
Executive shall not be terminated for Cause unless and until
there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote or not less
than two-thirds of the entire membership of the Board of
Directors of the Company finding that in the good faith
opinion of the Board of Directors Executive was guilty of
conduct set forth in clauses (a) or (b) of this subparagraph
(ii) and specifying the particulars thereof in detail;
(iii)(a) a notice by the Company to Executive of termination without
cause, (b) termination as a result of Executive's death, (c) a
notice of termination due to Disability given by the Company to
Executive or by Executive to the Company or (d) a notice of
termination by Executive to the Company (i) for Good Reason, or
(ii) due to the Company's material breach of this Agreement that
continues during the thirty (30) days after Executive gives
written notice to the Company of such breach, which notice
specifically identifies the manner which Executive believes that
the Company breached this Agreement,
(iv) If this Agreement is terminated pursuant to paragraph 6(A) (iii),
the Company shall be obligated to pay to Executive a severance
payment equal to three times the sum of the Executive's annual
Base Salary in effect at the time of termination plus the highest
annual cash bonus (if any) paid by the Company to Executive
during the three-year period preceding the date of termination.
Such severance payment shall be payable in a lump sum payment
within fifteen (15) days of the termination of Executive's
employment. In addition, for the five-year period following
Executive's termination, the Company shall be obligated to
continue to provide Executive with life, health, disability and
accident insurance benefits and all other executive benefits
(including, without limitation, retirement benefits and
automobile and expense allowances) comparable to those provided
to Executive prior to his termination. To the extent Executive is
no longer lawfully eligible for any aforementioned Benefit
because he is no longer employed by the Company, the Company
shall pay to Executive a lump sum cash payment equal to the
present value of the benefits that would have been provided to
Executive had his employment continued for such five-year period.
(v) For purposes of this Agreement, the term "Disability" shall mean
Executive's inability to perform his material duties under this
Agreement because of any illness or physical or mental disability
or other incapacity as evidenced by a written statement of a
physician licensed to practice medicine in any state in the
United States mutually agreed upon by the Company and Executive
which disability or other incapacity continues for a period in
excess of six (6) consecutive months in any consecutive
twelve-month period.
(vi) Upon termination of this Agreement for any reason whatsoever, in
addition to any other rights which Executive may have hereunder,
Executive shall be entitled to receive all of his Base Salary and
a pro-rated portion of his minimum annul bonus under this
Agreement to the date of termination and any unused paid vacation
earned as determined pursuant to paragraph 4(e).
(vii)In the event of termination of this Agreement for any reason
whatsoever, all rights and obligation of the Company and
Executive under this Agreement shall cease immediately, except
for those which by terms specifically apply to periods following
the termination of this Agreement as arise by reason of such
termination, and thereafter Executive shall have no right to
receive any compensation hereunder except, under appropriate
circumstances, as set forth in paragraph 6(A) (iii) and 6(vi)
hereof.)
(B) For the purpose of this paragraph 6, "Good Reason" means any of the
following events unless it occurs with the Executive's express prior
written consent: (i) the assignment to Executive of any duties
inconsistent with, or a diminution of, Executive's position, duties,
titles, offices, responsibilities and status with the Company, or any
removal of Executive or any failure to re-elect Executive to any of
such positions, (ii) a reduction in Executive's Base Salary as in
effect, form time to time, or a failure to increase Executive's Base
Salary as provided in this Agreement; (iii) except with respect to
changes required to maintain its tax-qualified status or changes
generally applicable to all employees of the Company, any failure by
the Company by the Company to continue in effect or make any provision
for any benefit, stock option, annual bonus or contingent loans
arrangements, or other incentive plan or arrangement of any type in
which Executive is participating from time to time, the taking of
which action would adversely affect Executive's participation in or
materially reduce Executive's benefits under any such benefit plan or
arrangement or deprive Executive of any material fringe benefit
enjoyed be Executive from time to time, or the failure to provide
Executive with the number of paid vacation days to which he is
entitled; (v) a relocation of the Company's principal executive
offices or Executive's relocation to any place more than one hundred
(100) miles from the location at which Executive performed his duties
as of the date hereof; or (vi) any failure by the Company to obtain
the assumption of this Agreement by any successor to or assignee or
the Company.
(C) The Company will also transfer ownership of exiting life insurance
policy and beneficiary as per employee's instructions. In addition the
deferred compensation insurance trust will become fully vested, if
applicable, for the Benefit of Employee.
7. CONFIDENTIALITY:
(A) Employee understands and acknowledges that as a result of Employee's
employment with Employer and involvement with the business of
Employer, he shall necessarily become informed of and have access to,
confidential information of Employer including, without limitation,
inventions, trade secrets, technical information, know-how, plans,
specifications, identity of customers and identity of suppliers, and
that such information, even though it may have been or may be
developed or otherwise acquired by Employee, is the exclusive property
of the Employer to be held by Employee in trust and solely for
Employer's benefit and Employee shall not at any time, either during
or subsequent to his employment hereunder, reveal, report, publish,
transfer or otherwise disclose to any person, corporation or other
entity or use any of Employer's confidential information, without its
written consent of the Board of Directors, except for use on behalf of
the Company in connection with its business, and except for such
information which legally and legitimately is or becomes of general
public knowledge from authorized sources other than Employer.
(B) Upon the termination of his employment with Employer for any reason,
Employee shall promptly deliver to it all drawings, manuals, letters,
notes, notebooks, reports and copies thereof and all other materials,
including, without limitation, those of a secret or confidential
nature, relating to Employer's business which are in Employee's
possession or control. Employer shall reimburse employee for any
packing or moving costs reasonably incurred by him in connection with
the foregoing delivery.
8. NON-COMPETITION; RESTRICTIVE COVENANTS AND CONFIDENTIALITY; INJUNCTIVE
RELIEF:
(A) During the term of his employment with Employer pursuant to his
Agreement, or any renewal thereof, Employee shall not, directly or
indirectly whether as principal, agent, shareholder, employee,
officer, director, consultant, joint- venturer, partner or otherwise,
own, manage, operate, join, control or participate in the ownership,
management, operation of, render any services to or be connected in
any manner with any business which is in direct competition with or is
if the type or character of any business engaged in by Employer or
which offers, sells or markets products, projects or services that
directly compete with products or services offered by Employer or any
of its subsidiaries or affiliates, irrespective of whether Employee's
involvement shall be as an office, owner, employee, partner,
joint-venturer, consultant, agent or other participant provided and
from making an investment in any company the securities of which are
listed on a national securities exchange or actively traded in the
over-the-counter market, so long as such investment does not equal or
exceed five percent (5%) of the total number of outstanding shares of
common stock of such company.
(B) For a period of one year after the expiration or termination of his
employment with Employer for any reason, Employee shall not, directly
or indirectly, whether as principal, agent, shareholder, employee,
officer, director, joint-venturer, partner, consultant or otherwise,
render any services to or with any company, firm or individual which
competes in any way with Employer in a business actually engaged in or
being actively developed by it. Under this Agreement, Employer will
have deemed to have been actively developing a business if, with
regard to such proposed business activity, there has been extensive
discussion at Board of Director meetings, formal Board resolutions,
corporate expenditures in excess of $25,000, preparation of marketing
studies or comparable actions related thereto.
(C) For a period of two years following the expiration or termination of
his employment with Employer for any reason, Employee shall not,
directly or indirectly, whether as principal, agent, shareholder,
employee officer, director joint-venturer, partner, consultant or
otherwise, solicit, raid, entice or induce any person who is, or was
at the time of such termination, an Employee of Employer to terminate
his or her employment with the Employer or become employed by any
other person, firm or corporation, and he will not approach any such
employee for such purpose or authorize or knowingly approve the taking
of such action by other persons to become employed in a business who
or which are actively engage in a competitive business.
9. ASSIGNABILITY AND BINDING EFFECT. The rights and obligations arising under
the Agreement shall inure to the benefit of and shall be binding upon the
executors, administrators, successors and legal representatives of Employee
and shall inure to the benefit of and be binding upon Employer, upon its
successors and assigns, but neither this Agreement nor the right or
obligations of Employee hereunder may be assigned, pledged, hypothecated or
otherwise transferred by Employee in whole or in part to another person,
firm or corporation nor may the obligations of Employee hereunder be
delegated.
10. NOTICES. All notices, requests, demands and other communications hereunder
shall be in writing and shall be delivered personally or sent by registered
or certified mail, prepaid and return receipt requested, to the other party
hereto at his or its mailing address as set forth at the beginning of this
Agreement, and in the case of Employer with copies to William J. Davis,
Esq., Scheichet & Davis, P.C., 505 Park Avenue, New York, New York 10022.
Either party may change the address to which such communications hereunder
shall be sent by sending notice of such change to the other party as herein
provided.
11. REPRESENTATIONS BY EMPLOYER AND EMPLOYEE. Employee hereby represents and
warrants that he is not a party to any other agreement, contract or
understanding, whether of employment or otherwise, which would in any way
restrict or prohibit him form undertaking or performing employment with
Employer in accordance with the terms and conditions of this Agreement.
Employer hereby represents and warrants that this Agreement has been
properly authorized by all necessary corporate action and, when and if,
fully executed, will be binding and enforceable upon the Company in
accordance with its terms except for the application of the laws of
Insolvency and bankruptcy as they may otherwise affect such Agreement.
Employer further represents and warrants that no other contract, agreement,
provision of its certificate of incorporation or bylaws, debt obligations,
law, regulation court or administrative order prevents it form entering
into, or conflicts with, this Agreement.
12. WAIVER. The waiver by either party of any breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach or violation, whether singular in nature or not.
13. PRIOR AGREEMENTS; COMPLETE UNDERSTANDING; AMENDMENT. This Agreement cancels
and supersedes any and all prior agreements and understandings, in any,
between the parties hereto regarding the services of Employee to Employer
and constitutes the complete understanding between the parties with respect
to the Employment of Employee hereunder and no statement, representation,
warranty or covenant has been made be either party with respect thereto
except as expressly set forth herein. Employee acknowledges that he has
been afforded the right to review this Agreement with legal counsel prior
to the execution of this Agreement, and that he has been encouraged to do
so. This Agreement shall not be altered, modified or amended except by
written instrument signed by each of the parties hereto.
14. HEADING. The heading set forth in this Agreement are for convenience only
and shall not be considered as part of this Agreement in any respect nor
shall they. In any way affect the substance of any provisions contained in
this Agreement.
15. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall constitute but one and the same agreement.
16. GOVERNING LAW. CONSTRUCTION WITH EXISTING LAW, SEVERABILITY. This Agreement
shall be governed by, and enforced in accordance with, the internal laws of
the State of New York. It is the intention of the parties hereto that all
terms and conditions of this Agreement are in compliance with the laws and
regulations of the state of New York, and nothing in this Agreement shall
be construed to be in derogation of the laws, rules and regulations
thereof. If for any reason any provision of this Agreement or any part
hereof is invalid, unlawful or incapable of being enforced by reason of any
rule of law, equity or public policy, all conditions and provisions of the
Agreement which can be given effect without such invalid, unlawful or
unenforceable provision shall, nevertheless, remain in full force and
effect, and such invalid, unlawful or irrevocable provision shall be
carried out as nearly as possible according to its original terms and
intent, while eliminating such invalidity or non-enforceability.
IN WITNESS WHEREOF, The parties hereto have executed this Agreement
effective as of the day and year first above written.
NEW YORK HEALTH CARE, INC.
BY: _________________________ BY: _______________________
TITLE: JACOB ROSENBERG
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NEW YORK
HEALTH CARE, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
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