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, 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 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: 3,688,230
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE>
<TABLE>
<CAPTION>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
A S S E T S
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents $ 98,310
Accounts receivable, net of allowance for uncollectible
amounts of $198,000 5,531,981
Unbilled services 351,470
Prepaid expenses 158,875
Due from affiliates 6,876
Prepaid income taxes and income tax receivable 353,347
Deferred tax asset 84,000
------------
Total current assets 6,584,859
Property and equipment, net 558,065
Intangibles, net 3,000,990
Deposits 52,751
------------
Total assets $10,196,665
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued payroll $ 1,026,191
Note payable - bank 2,950,000
Current maturities of long term debt 522,187
Accounts payable and accrued expenses 356,458
------------
Total current liabilities 4,854,836
------------
Deferred tax liability 54,000
Long-term debt, less current maturities 360,229
------------
414,229
------------
Commitments, contingencies and other comments
Shareholders' equity:
Preferred stock $.01 par value, 2,000,000 shares authorized, including
Class A Convertible Preferred Stock 480,000; authorized and issued 4,800
Common stock, $.01 par value, 12,500,000 shares authorized;
3,750,000 shares issued, 3,688,230 outstanding 37,500
Additional paid-in capital 4,659,518
Retained earnings 297,785
------------
4,999,603
Less: Treasury stock (61,770 common shares at cost) (72,003)
------------
Total shareholders' equity 4,927,600
------------
Total liabilities and shareholders' equity $10,196,665
============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------ -------------------------
1998 1999 1998 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net patient service revenue $5,311,400 $5,534,358 $9,887,266 $10,619,403
----------- ----------- ----------- ------------
Expenses:
Professional care of patients 3,639,736 3,984,693 6,861,397 7,630,315
General and administrative 1,308,841 1,599,977 2,414,907 3,079,637
Bad debts expense 15,000 43,824 15,000 58,824
Depreciation and amortization 56,658 74,118 94,200 136,667
----------- ----------- ----------- ------------
Total operating expenses 5,020,235 5,702,612 9,385,504 10,905,443
----------- ----------- ----------- ------------
Income (loss) from operations 291,165 (168,254) 501,762 (286,040)
----------- ----------- ----------- ------------
Nonoperating income (expenses):
Interest income 12,216 31,770
Other income 5,090 14,090
Interest expense (96,330) (79,579) (151,437) (162,011)
----------- ----------- ----------- ------------
Nonoperating income
(expenses), net (79,024) (79,579) (105,577) (162,011)
----------- ----------- ----------- ------------
Income (loss) before provision
(credit) for income taxes 212,141 (247,833) 396,185 (448,051)
----------- ----------- ----------- ------------
Provision (credit) for income taxes:
Current 93,200 (109,000) 164,000 (200,000)
Deferred (2,000) 3,000
----------- ----------- ----------- ------------
93,200 (111,000) 164,000 (197,000)
----------- ----------- ----------- ------------
Net income (loss) 118,941 (136,833) 232,185 (251,051)
Dividends declared on preferred stock 13,500
----------- ----------- ----------- ------------
Net income (loss) applicable to
common stock $ 118,941 $ (136,833) $ 232,185 $ (264,551)
=========== =========== =========== ============
Basic and diluted earnings (loss)
per share $ .03 $ (.04) $ .06 $ (.07)
=========== =========== =========== ============
Weighted average shares outstanding 3,753,104 3,688,230 3,751,177 3,690,235
=========== =========== =========== ============
Diluted weighted average shares
outstanding 3,757,489 3,688,230 3,753,380 3,690,235
=========== =========== =========== ============
Dividends declared per share of
preferred stock $ .03
============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
Preferred Treasury
Common Stock Stock Additional Stock
--------------------- --------------------- Paid-In ----------------- 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 ($1.06 average per
share) 19,800 (21,079) (21,079)
Dividends paid on
preferred stock ($.03 per
share) (13,500) (13,500)
Net loss (251,051) (251,051)
---------- --------- --------- ---------- ---------- ------ --------- ---------- -----------
Balance at June 30, 1999 3,750,000 $ 37,500 480,000 $ 4,800 $4,659,518 61,770 $(72,003) $ 297,785 $4,927,600
========== ========= ========= ========== ========== ====== ========= ========== ===========
</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 Six Months Ended
June 30,
------------------------
1998 1999
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 232,185 $(251,051)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 94,200 136,667
Deferred revenue (36,000)
Bad debt expense 15,000 58,824
Deferred tax (7,000)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable and
unbilled services (1,252,989) 74,008
Increase in due from affiliates (6,475) (401)
Increase in prepaid taxes and income tax receivable (353,347)
Increase in prepaid expenses (45,297) (17,928)
Increase in deposits (6,667) (6,899)
Decrease in accounts receivable due after one year 180,604
Increase in accrued payroll 234,669 461,234
Increase (decrease) in accounts payable and
accrued expenses 55,874 (23,226)
Decrease in income taxes payable (34,013) (35,215)
------------ ----------
Net cash (used in) provided by operating activities (568,909) 35,666
------------ ----------
Cash flows from investing activities:
Acquisition of fixed assets (92,378) (140,807)
Payments for the purchase acquisitions and associated costs (581,008) (45,700)
Costs incurred for future acquisitions 19,406
------------ ----------
Net cash used in investing activities (653,980) (186,507)
------------ ----------
Cash flows from financing activities:
Borrowings under notes payable 1,550,000 350,000
Repayment of long-term debt (446,250) (258,945)
Net charges from issuance of common stock 16,250
Purchase of treasury stock (12,638) (21,079)
Preferred stock dividends paid (13,500)
------------ ----------
Net cash provided by financing activities 1,107,362 56,476
------------ ----------
Net decrease in cash and cash equivalents (115,527) (94,365)
Cash and cash equivalents at beginning of period 171,859 192,675
------------ ----------
Cash and cash equivalents at end of period $ 56,332 $ 98,310
============ ==========
</TABLE>
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, 1998 of New York Health
Care 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, 1999 are not necessarily indicative
of the results to be expected for the full year.
NOTE 2 - EARNINGS/LOSS PER SHARE:
Basic earnings or loss 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. The
Convertible Preferred Stock is not included in the computation of diluted
earnings per share because the effect is anti-dilutive.
NOTE 3 - 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 customers 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 customers lists and other intangibles.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - TREASURY STOCK:
In January 1999, the Corporation purchased 18,800 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. The treasury stock is shown at cost.
NOTE 5 - PREFERRED STOCK:
On March 31, 1999, the Corporation declared a dividend (amounting to $13,500) to
holders of preferred stock which was paid in April 1999.
NOTE 6 - 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
June 30, 1999, the Corporation was overadvanced on this line of credit based on
the formula. The line is collateralized by all property and assets of the
Corporation. The Corporation has also guaranteed the line of credit. At June 30,
1999, $2,950,000 was outstanding. Borrowings under the agreement bear interest
at 1/2% above the prime rate per annum (8.25% at June 30, 1999).
NOTE 7 - LONG-TERM DEBT - RELATED PARTY:
Included in long-term debt and current maturities of long-term debt are $166,666
and $191,667, respectively, due to a related party.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - SUPPLEMENTAL CASH FLOW DISCLOSURES:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1998 1999
---------- --------
<S> <C> <C>
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest $ 131,436 $163,570
========== ========
Income taxes $ 217,513 $184,195
========== ========
Supplemental schedule of noncash investing and
financing activities:
The Company purchased customer lists,
furniture and fixtures and other intangibles which
were partially acquired by the issuance of
promissory notes. $1,730,000
==========
</TABLE>
NOTE 9 - SUBSEQUENT EVENTS
Long-Term Debt - Related Party:
The Company failed to make a princial and interest payment to a related party
(see Note 7) due July 1, 1999.
Preferred Stock:
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.
<PAGE>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On July 29, 1999, Heart to Heart Health Care Services, Inc. ("Heart to Heart"),
which is the holder of the Corporation's promissory note (see Note 7) in the
face amount of $550,000, bearing interest at the rate of 9% per annum at June
30, 1999, converted $100,000 of the principal amount of the promissory note into
110,375 shares of the Corporation's Class A Convertible Preferred 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. Heart to
Heart is owned by Jerry Braun, Jacob Rosenberg, Samson Soroka, Hirsch Chitrik
and Sid Borenstein. Messrs. Braun, Rosenberg, Chitrik, and Borenstein are also
officers or directors of the Corporation and together with Mr. Soroka, are all
shareholders.
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,
1999.
Proforma Adjustments:
(a) To record the conversion of $100,000 of debt into 110,375 shares of
Class A Convertible Preferred Stock at a price of $.91:
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
ASSETS
Proforma
Historical Adjustments Proforma
----------- ------------ --------
<S> <C> <C> <C>
Current assets:
Cash $ 98,310 $ 98,310
Accounts receivable 5,531,981 5,531,981
Other current assets 954,568 954,568
----------- ------------
Total current assets 6,584,859 6,584,859
Property and equipment, net 558,065 558,065
Intangibles 3,000,990 3,000,990
Deposits 52,751 52,751
----------- ------------
Total assets $10,196,665 $ 10,196,665
=========== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW YORK HEALTH CARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
Proforma
Historical Adjustments Proforma
------------ ------------- -------------
<S> <C> <C> <C>
Current liabilities $ 4,854,836 $ 4,854,836
------------ -------------
Deferred tax liability 54,000 54,000
------------ -------------
Long-term debt, less current maturities 360,229 $ (100,000) 260,229
------------ -------------
Shareholders' equity:
Preferred stock 4,800 1,104 5,904
Common stock 37,500 37,500
Additional paid-in capital 4,659,518 98,896 4,758,414
Retained earnings 297,785 297,785
------------ -------------
4,999,603 5,099,603
Less treasury stock (72,003) (72,003)
------------ -------------
Total shareholders' equity 4,927,600 5,027,600
------------ -------------
Total liabilities and stockholders'
equity $10,196,665 $ 10,196,665
============ =============
</TABLE>
The conversion transaction is on substantially the same terms as that which the
Corporation and Heart to Heart agreed to on August 6, 1998 in which $600,000 of
the promissory note was converted into 480,000 shares of the Class A Convertible
Preferred Stock. The Corporation had obtained an independent opinion that the
consideration received by the Corporation in that transaction was, under the
circumstances, fair to the Corporation.
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998.
RESULTS OF OPERATIONS
Revenues for the six months ended June 30, 1999 increased 7.4% to approximately
$10,620,000 from approximately $9,887,000 for the six months ended June 30,
1998. The increase is primarily the result of a gain in revenue of
approximately $1,516,000 from the new New York City HRA contract. Revenues from
offices located in New Jersey increased 6.6% or $233,000 as a result of the
offices purchased in the first quarter of 1998 becoming fully operational in
1999 and acquisition of two Staff Builders' offices, in Shrewsbury and
Hackensack, in 1999. Revenues from the New York operations, excluding the HRA
contract, decreased 15.0% or approximately $1,016,000. 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 provided to
various other contracts.
Cost of professional care of patients for the six months ended June 30, 1999
increased 11.2% to approximately $7,630,000 from approximately $6,861,000 for
the six months ended June 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 revenue. The cost of professional care of patients as a
percentage of revenues increased 2.4% to approximately 71.8% for the six months
ended June 30, 1999 from approximately 69.4% for six months ended June 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.
Selling, general and administrative expenses for the six months ended June 30,
1999 increased 27.5% to approximately $3,080,000 from approximately $2,415,000
for the six months ended June 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 4.6% to 29.0% from
24.4% as a result of increased wages for marketing and business development and
decreased revenue from existing contracts in New York. The Company is presently
reorganizing its operations at the branch level and combining the
responsibilities of certain positions in order to reduce overhead.
<PAGE>
Interest expense for the six months ended June 30, 1999 increased to
approximately $162,000 as compared to approximately $151,000 for the six months
ended June 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 of $197,000 for the six months
ended June 30, 1999 is the result of the loss for the period as compared to a
provision for taxes of approximately $164,000 for the six months ended June 30,
1998, which is a result of income for the period.
In view of the foregoing, net loss for the six months ended June 30, 1999
amounted to approximately $251,000 as compared to approximately $232,000 of net
income for the six months ended June 30, 1998.
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 Series A Convertible
Preferred Stock. This conversion will have a positive effect on future cash
flows and increases the Company's tangible net worth to $2,026,610.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1999, net cash provided by operations was
$36,000 as compared to net cash used of $569,000 during the six months ended
June 30, 1998, an increase of $605,000. The $36,000 provided in the six months
ended June 30, 1999 was principally due to the $461,000 increase in accrued
payroll, $74,000 increase in accounts receivable and $137,000 in depreciation
and amortization offset by a $353,000 increase in income tax receivables and a
$251,000 net loss for the period. Cash used in the six months ended June 30,
1998 was principally due to an approximately $1,072,000 increase in accounts
receivable and unbilled services, offset by an approximately $290,000 increase
in accounts payable, including payroll, and approximately $232,000 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 six months ended June 30, 1999 was
approximately $187,000 primarily for the acquisition of Staff Builders' offices
in Shrewsbury and Hackensack, New Jersey and computer equipment for the
Company's new network. Net cash provided by financing activities for the six
months ended June 30, 1999 totaled $56,000 compared to the $1,107,000 provided
in the six months ended June 30, 1998.
The $350,000 borrowed in the six months ended June 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 six months
ended June 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 June 30, 1999, the Company has borrowings under its line of credit which
exceed its availability formula by approximately $428,000. The Company's
management is currently working with the lender to restructure the availability
formula. The Company failed to make a July 1, 1999 payment on a note payable to
a related party. In order to accelerate cash flow, the Company is entering into
an agreement with a third party to sell certain receivables at a discount and
receive payment in 120 days.
<PAGE>
As of June 30, 1999, approximately $5,418,000 (approximately 53%) of the
Company's total assets consisted of accounts receivable from clients who are
reimbursed by third-party payors, as compared to $5,624,000 (approximately 58%)
as of June 30, 1998, a decrease of 5%. 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. For the six months ended June 30, 1999, the Company's DSO
was 99, compared to 109 days for the six months ended June 30, 1998. The
improvement of 10 days in DSO is the net effect of combining the New Jersey
DSO's of 47 days and the New York DSO's of 130 days and the HRA contract's DSO's
which are currently 69 days. Once the HRA contract has completed its ramp-up
period, its DSO's are expected to improve to approximately 45 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 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 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.
<PAGE>
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 by the end of
the third quarter of 1999. The 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, are already Year 2000 compliant.
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, the Company's
available line of credit will be adequate to sustain operations in the event
significant payors are temporarily unable to make timely payment of their
obligations to the Company.
<PAGE>
At the present time, the Company has a Year 2000 remediation budget of
approximately $50,000; $25,000 of which is for the replacement of non-compliant
hardware, $15,000 for consulting services and $10,000 for software and
contingencies. As of June 30, 1999 the Company has used approximately $35,000
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:
(a) The Registrant has made the following recent sale of unregistered
securities:
On July 29, 1999, the Registrant's Board of Directors authorized an
increase in the authorized shares of the Registrant's Class A Convertible
Preferred Stock (the "Class A Preferred") from 480,000 shares to 590,375 shares.
Immediately following that authorization, the Company entered an agreement with
Heart to Heart Health Care Services, Inc. ("Heart to Heart"), which is the
holder of the Registrant's promissory note (the "Note") in the current face
amount of $550,000 currently bearing interest at the rate of 9% per annum, for
the conversion of $100,000 of the principal amount of that Note into 110,375
shares of the Registrant's Class A Convertible Preferred Stock at a conversion
price of $.906 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 shareholders. The conversion transaction is on substantially
the same terms as that which the Registrant and Heart To Heart agreed-to on
August 6, 1998 in which $600,000 of the Note was converted into 480,000 shares
of the Class A Preferred. The Registrant had obtained an independent opinion
that the consideration received by the Company in that transaction was, 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 Class A Preferred 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 Class A Preferred bears an appropriate restrictive
legend, and "stop transfer" orders are maintained on the Registrant's stock
transfer records against each holder named above. The transaction did not
involve 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.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NUMBER OF EXHIBIT
- ------- ----------------------------------------------------------------------------------------
<S> <C>
2.1 Purchase and Sale Agreement dated December 7, 1997 among NYHC Newco Paxxon,
Inc. and Metro Healthcare Services, Inc.**
<PAGE>
2.2 Purchase and Sale Agreement dated February 8, 1998 among NYHC Newco Paxxon,
Inc. and Metro Healthcare Services, Inc.***
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.*
<PAGE>
10.5 Agreement between Jerry Braun, Jacob Rosenberg, Samson Soroka, Hirsch Chitrik, Sid
Borenstein and the Company dated September 30, 1988.*
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.*
<PAGE>
10.15 Personal Care Aide Agreement by and between the Company and Nassau County
Department of Social Services dated October 18, 1995.*
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.*
<PAGE>
10.27 Home Health Agency Agreement by and between the Company and the Mount Sinai
Hospital Home Health Agency dated April 1, 1996.*
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****
<PAGE>
10.41 Agreement between the Company and Heart To Heart Health Care Services, Inc. dated
August 6, 1998.*****
10.42 Agreement between the Company and Heart To Heart Health Care Services, Inc. dated
July 29, 1999.
11 Computation of Earnings Per Common Share of the Company.
<FN>
* 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.
***** Incorporated by reference to Exhibits filed as part of the Company's Form 10-QSB report for
the quarter ended June 30, 1998.
</TABLE>
(b) Reports on Form 8-K. The Company did not file any reports on Form
--------------------
8-K/A during the quarter ended June 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.
August 13, 1999
NEW YORK HEALTH CARE, INC.
By: /s/ David Grossman
--------------------
David Grossman
Chief Financial and Accounting Officer
<PAGE>
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 July 29, 1999:
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 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, the Board of Directors on August 6, 1998 authorized an issue of
480,000 shares of "Series A Convertible Preferred Stock" and, pursuant to its
authority as aforesaid, fixed the rights, preferences, restrictions and other
matters relating to the Series A Convertible Preferred Stock; and
WHEREAS, the Board of Directors desires to increase the number of shares of
its Series A Convertible Preferred Stock from 480,000 shares to 590,375 shares,
pursuant to its authority as aforesaid, and to otherwise continue 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 that the issue of Preferred Shares of this Corporation authorized on
August 6, 1998 designated as "Series A Convertible Preferred Stock" is hereby
increased to Five Hundred Ninety Thousand Three Hundred Seventy Five (590,375)
shares and does hereby continue the rights, preferences, restrictions and other
matters relating to said Series A Convertible Preferred Stock as follows:
(A) DIVIDENDS.
<PAGE>
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 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.
(E) Such adjustments shall be made successively if more than one event
listed in a subdivision (d)(3)(B), (C) and (D) hereof shall occur.
<PAGE>
(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
<PAGE>
HEART TO HEART HEALTH CARE SERVICES, INC.
7 GLENWOOD AVENUE
EAST ORANGE, NJ 07017
July 29, 1999
New York Health Care, Inc.
1850 McDonald Avenue
Brooklyn, NY 11223
RE: CONVERSION OF $100,000 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 $100,000 of its March 29, 1998 promissory note made by NYHC to the order of
Heart to Heart in the current face amount of $550,000 bearing interest at the
current rate of 9% per annum payable quarterly, into 110,375 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: /s/
-------------------------------
Authorized Officer
ACCEPTED AND AGREED:
NEW YORK HEALTH CARE, INC.
By: /s/
-------------------------------
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, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 98310
<SECURITIES> 0
<RECEIVABLES> 5531981
<ALLOWANCES> (198000)
<INVENTORY> 0
<CURRENT-ASSETS> 6584859
<PP&E> 897291
<DEPRECIATION> (339226)
<TOTAL-ASSETS> 10196665
<CURRENT-LIABILITIES> 4854836
<BONDS> 0
<COMMON> 37500
0
4800
<OTHER-SE> 4927600
<TOTAL-LIABILITY-AND-EQUITY> 10196665
<SALES> 0
<TOTAL-REVENUES> 10619403
<CGS> 0
<TOTAL-COSTS> 7630315
<OTHER-EXPENSES> 3216304
<LOSS-PROVISION> 58824
<INTEREST-EXPENSE> 162011
<INCOME-PRETAX> (448051)
<INCOME-TAX> (197000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (251051)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
