UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934
For the quarterly period ended June 30, 1999
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
---
For the transition period from ________ to ________
COMMISSIONS FILE NUMBER: 000-24807
CORECARE SYSTEMS, INC.
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(Name of small business issuer as specified in its charter)
Delaware 23-2840367
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(State of jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Kirkbride Center, 111 North 49th St., Phila., PA 19139
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(Address of principal executive offices)
(215) 471-2600
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(Issuer's Telephone Number)
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 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
---
As of July 1, 1999 the issuer had issued and outstanding
15,765,232 shares, $.001 par value, of Common Stock
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CORECARE SYSTEMS, INC.
FORM 10-QSB/A
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
PAGE
Item 1: Financial Statements 2
Item 2: Management's Discussion
and Analysis of Financial Condition
and Results of Operations 2-4
Item 3: Quantitative and Qualitative
Disclosures About Market Risk 4
PART II - OTHER INFORMATION
PAGE
Item 1: Legal Proceedings 4
Item 2: Changes in Securities and Use of Proceeds 4
Item 3: Default and Senior Securities 4
Item 4: Submission of Matters to a Vote of Security Holders 5
Item 5: Other Information 5
Item 6: Exhibits and Reports on Form 8-K 5
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Consolidated Balance Sheet
Three months ended
June 30, 1999 and
Fiscal Year Ended
December 31, 1998 8-9
Consolidated Statement of Operations
Three months and Six Months ended
June 30, 1999 and 1998 10
Consolidated Statement of Cash Flows 11
For the Quarter and Year to Date ending
June 30, 1999
1
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ITEM 1. FINANCIAL STATEMENTS
The financial statements can be found at the end of this report beginning
on pages 7 through 11.
ITEM 2. Management's Discussion and Analysis
ITEM 1. FINANCIAL STATEMENTS
CoreCare Systems, Inc. (the "Company")OTC-Bulletin Board: CRCS) is a
regional behavioral health carenetwork operating in Eastern Pennsylvania, which
performs behavioral therapy services and associated clinical research in central
nervous system drugs. The Company's headquarters are located at c/o Kirkbride
Center, 111 North 49th Street, Philadelphia, PA 19139. Its telephone number at
its is (215) 471-2600. The executive office suite can be reached at (215)
471-2358.
Management's discussion and analysis is based upon the unaudited
consolidated financial statements of the Company for the three month periods
ended March 31, 1999 and 1998, and include the accounts of the Company and its
subsidiaries after elimination of any inter-company balances and transactions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Revenue - Revenues for the three-months and six months ending June 30,
1999, were $6,818,623 and $13,082,641, respectively, representing increases of
approximately 37% and 41% over total revenue for the comparable periods in 1998.
The material increases in total revenue compared with the prior year period, are
attributable to a number of factors, including the following:
Net Patient Revenue -Net patient revenues of $5,525,032 and $11,617,398 for
the three month and six month periods, respectively, increased 35% and 54%
versus the same periods in 1998. These increases were primarily due to the
following developments:
(a) Drug and alcohol unit (licensed for 63 beds) was opened for six
months of operation at Kirkbride Center during 1999 and was not operational
during the first quarter 1998;
(b) Substantial increases in patient days at the Kirkbride Center and
Westmeade at Warwick in 1999 versus 1998;
2
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(c) New programs at the Kirkbride Center including the geriatric
partial hospitalization;
(d) Dual diagnosis program at the Kirkbride Center expanded during
1998.
Management Services Revenue -Management services revenue declined in both
the three months and six months periods in 1999 compared to 1998 due to the
expiration of a hospital management contract on June 30, 1998.
Other revenues of $431,690 for the quarter and $851,560 for the six months
included revenue from the Company's subsidiary Quantum Clinical Service Group in
1999 from clinical research drug trials on behalf of pharmaceutical companies
which did not occur in the comparable periods in 1998. Additionally, rental
income from tenant revenue rose in 1999 versus 1998.
Operating Expenses - Operating expenses of $6,402,435 for the quarter and
$13,090,450 six months ended June 30, 1999 increased 11% and 21% over the
comparable periods in 1998. Operating expenses increased at a rate much lower
than the 37% and 41% increases in revenue for the quarter and six month periods.
Operating expenses as a percentage of revenue declined to 93.9% from 115.1% for
the same quarter a year ago. The company was able to achieve the benefits of
operating leverage and i mproved operating efficiency.
Salaries and Employees Benefits- Salaries and Employee Benefits increased
approximately $890,000 or 26% during the second quarter 1999 as compared to the
second quarter 1998. This increase is attributable to the increase in services
being offered at the Kirkbride Center. During 1999 the number of acute patients
was greater than 1998, the drug and alcohol unit was operational, and the
outpatient programs have increased. These additional services required an
increase in staffing costs along with start-up costs associated with the
clinical drug research and res tructuring costs associated with the company's
re-engineering activities.
3
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Bad Debt Expense - Bad debt expense of $377,664 declined as a percentage of
revenue to 5.5% for the quarter as compared with 10.6% in 1998.
Income from Operations of $416,186 in the second quarter represented an
increase of $1,171,000 compared to the loss of ($755,643). Year to date Income
from Operations was approximately breakeven as losses from the first quarter
offset the income from the second quarter, yet Income from Operations was $1.5
million greater compared to the first half of 1998.
Interest Expense - Interest expense increased due to higher outstanding
debt at June 30, 1999 versus 1998.
Depreciation and Amortization expense - Depreciation and amortization
expense declined by 53% for the quarter and 42% year to date compared to 1998
due to reduction in the amortization expense associated with the mortgage costs.
Net Loss for the quarter declined to $(767,803) from $(2,247,619) in 1998.
Year to date Net Loss of $(2,2428,054) declined 47% compared to 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES AND MARKET RISK
Not Applicable
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
4
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS
(a) Exhibits.
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SEC
Exhibit Reference
No. No.
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27 Financial Data Schedule
(b) Reports on Form 8-K.
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No new reports on Form 8-K were filed in the quarter ended
June 30, 1999.
5
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SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: January 14, 2000
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CORECARE SYSTEMS, INC.
BY: /S/ THOMAS T. FLEMING
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THOMAS T. FLEMING
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
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Notes to Financial Statements
1. Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999. The unaudited financial statements should be read in conjunction with the
financial statements and footnote thereto included in the Company's report on
Form 10K-SB for the year ended December 31, 1998.
2. The Business:
Corecare Systems, Inc. through its eight operating subsidiaries, provides
management services to behavioral health service providers; provides, owns, and
operates outpatient and inpatient behavioral health services; provides clinical
trial services to the pharmaceutical industry; and develops billing software for
the health industry.
3. Summary of significant accounting policies:
Principles of consolidation:
The June 30, 1999 and December 31, 1998 financial statements of the Company
include accounts of Corecare Systems, Inc. and its wholly owned subsidiaries.
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<TABLE>
<CAPTION>
CORECARE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, DECEMBER 31,
1999 1998
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<S> <C> <C>
Current assets:
Cash & cash equivalents 419,209 115,242
Accounts receivable 4,379,955 4,411,418
Prepaid expenses 354,685 175,659
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Total current assets 5,153,849 4,702,319
Contract rights 1,288,919 1,288,919
Less acc. amortization 1,117,645 1,023,619
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171,274 265,300
Property & equipment,net 13,998,441 14,151,787
Goodwill, net 1,681,950 1,705,231
Deferred finance costs,net 142,659 443,172
Long-term investments:
Real estate held for sale 1,073,847 1,100,000
Other Assets:
Deposits 26,999 10,467
Other 404,531 816,651
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Total Other Assets 431,520 827,118
Total Assets 22,653,550 23,194,927
=========== ==========
</TABLE>
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<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
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<S> <C> <C>
Current liabilities:
Accounts payable 4,048,327 3,748,882
Payrolls & related taxes 3,099,456 3,048,183
Accrued expenses 3,267,326 1,851,026
Due to Medicare 2,441,461 1,692,389
HCFP Funding 3,900,630 4,308,703
Notes Pay. incl.
current portion LTD 16,014,714 16,191,983
Current portion on capital
lease obligations 73,478 38,565
Advances, officers 1,332,692 1,332,692
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Total current liabilities 34,178,084 32,212,423
Long-term liabilities:
Long-term debt,
net of current portion 2,185,635 2,192,374
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2,185,635 2,192,374
Total liabilities 36,363,719 34,404,797
Shareholders' equity
Preferred Stock, 17 17
Common Stock, 15,949 15,949
Additional paid in capital 11,014,095 11,086,340
Retained earnings (24,740,230) (22,312,176)
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Total stockholders' equity (13,710,169) (11,209,870)
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Total liabilities and
stockholders' equity 22,653,550 23,194,927
============ ============
- -
</TABLE>
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<TABLE>
<CAPTION>
CORECARE SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
PERIODS ENDING JUNE 30, 1999 AND JUNE 30, 1998
Three Months Ended Six Months Ended
------------------------- ------------------------
6/30/99 6/30/98 6/30/99 6/30/98
------------ ----------- ------------ -----------
Revenue:
<S> <C> <C> <C> <C>
Net patient service 5,525,032 4,047,883 $11,617,398 7,566,026
Management service 307,126 577,801 613,683 1,040,669
Other 431,860 334,861 851,560 694,192
------------ ----------- ------------ -----------
6,818,623 4,992,315 13,082,641 9,300,889
Operating Expenses:
Salaries and benefits 4,277,990 3,125,658 8,504,916 6,208,950
Purchased services 774,362 - 1,589,811 -
Administrative expenses 972,419 2,092,319 1,948,638 3,609,792
Bad debt expense 377,664 529,981 1,047,085 964,593
------------ ----------- ------------ -----------
Total operating expenses 6,402,435 5,747,958 13,090,450 10,783,335
Income from operations 416,188 (755,643) (7,809) (1,482,446)
Other expenses:
Interest expense 786,683 731,473 1,634,071 1,360,252
Impaired asset write down - - 369,380 -
Depreciation & Amortiz. 397,308 760,503 786,174 1,285,660
------------ ----------- ------------ -----------
Total other expenses 1,183,991 1,491,976 2,420,245 3,015,292
------------ ----------- ------------ -----------
Net income(loss) (767,803) (2,247,619) (2,428,054) (4,497,738)
=========== =========== ============ ===========
average shares outstanding 15,753,792 15,186,404 15,733,845 14,675,861
loss per share-basic (0.05) (0.15) (0.15) (0.31)
loss per share-fully diluted (0.05) (0.15) (0.15) (0.31)
</TABLE>
10
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<TABLE>
<CAPTION>
CORECARE SYSTEMS, INC.
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CONSOLIDATED CASH FLOWS
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FOR THE QUARTER ENDED JUNE 30, 1999
QUARTER ENDED YEAR-TO-DATE
JUNE 30, 1999 JUNE 30, 1999
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<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (767,803) $ (2,428,054)
Non-cash adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 397,308 786,174
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Change before C/A & C/L changes (370,495) (1,641,880)
Allowance for doubtful accounts 107,665 729,744
(Increase) decrease in operating assets:
Accounts receivable (273,994) (698,281)
Other current assets 262,156 (179,026)
Deposits 1,448 (16,532)
Other assets 22,330 412,119
Restricted cash - -
Increase (decrease) in operating liabilities:
Accounts payable 745,881 299,445
Accrued expenses 372,400 1,416,300
Payroll and related taxes (238,766) 51,273
Due to third party 440,382 749,072
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Net cash proceeds from operating activities 1,069,007 1,122,234
Cash flows from investing activities:
Increase in capitalized financing costs - -
Purchase of property and equipment (104,354) (188,854)
Disposal of assets - -
Purchase of contract rights - -
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Net cash used in investing activities (104,354) (188,854)
Cash flows from financing activities:
Proceeds from common stock issuance - -
Repayment of amounts due officers - -
Proceeds (Repayment) of notes (687,570) (592,081)
Repayment of lease obligations - 34,913
Change in additional paid in capital (25,000) (72,245)
Proceeds from short and long term debt - -
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Net cash provided by financing activities (712,570) (629,413)
Net increase (decrease) in cash 252,083 303,967
Cash, beginning of period 167,126 115,242
Cash, end of period $ 419,209 $ 419,209
=============== ===============
</TABLE>
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