<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------------
For Quarter Ended June 30, 1999 Commission file number 0-11656
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
A Delaware Corporation I.R.S. No. 22-1807533
Two Nationwide Plaza, Suite 760, Columbus, Ohio 43215
Registrant's Telephone No. (614) 221-6000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
EACH OF THE FOLLOWING CLASSES ARE REGISTERED ON THE AMERICAN STOCK EXCHANGE.
<TABLE>
<CAPTION>
Class Outstanding at July 31, 1999
----- ----------------------------
<S> <C>
Common Stock, par value 6,037,029
$.01 per share
Common Stock Purchase Warrants - (1)
(1) All warrants expired on May 1, 1999.
</TABLE>
<PAGE> 2
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
I N D E X
<TABLE>
<CAPTION>
Part I Page No.
- ------ --------
Financial Statements:
<S> <C>
Consolidated Balance Sheets - June 30, 1999 (Unaudited) and 3-4
December 31, 1998
Consolidated Statements of Operations (Unaudited) Three and Six 5
Months Ended June 30, 1999 and 1998
Consolidated Statements of Comprehensive Income (Unaudited) Three 6
and Six Months Ended June 30, 1999 and 1998
Consolidated Statements of Cash Flow (Unaudited) Six Months Ended 7-8
June 30, 1999 and 1998
Notes to Consolidated Financial Statements 9-14
Management's Discussion and Analysis of Financial Condition and
Results of Operations 15-19
Part II
- -------
Other Information 20
Signatures 21
Exhibits:
Exhibit 27 EDGAR Financial Data Schedule 22
</TABLE>
2
<PAGE> 3
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 1999 AND DECEMBER 31, 1998
ASSETS
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
---------- ----------
(Unaudited)
Current assets:
<S> <C> <C>
Cash $ 240,903 $ 577,317
---------- ----------
Restricted cash 131,671 230,347
---------- ----------
Receivables:
Trade, net of allowance for doubtful accounts
of $215,000 (June) and $227,000 (December) 1,654,978 1,009,486
Notes receivable -- 236,353
Miscellaneous 977,291 1,196,056
---------- ----------
2,632,269 2,441,895
---------- ----------
Inventories 16,014 22,816
Prepaid expenses and other 150,608 143,516
---------- ----------
Total current assets 3,171,465 3,415,891
---------- ----------
Property, plant and equipment, at cost 15,255,891 10,680,870
Less: Accumulated depreciation and
amortization (2,234,591) (1,864,752)
---------- ----------
13,021,300 8,816,118
---------- ----------
Investments and other assets:
Securities available for sale, at market -- 52,500
Notes and other receivables, net of current portion 159,681 149,201
Notes receivable from officers, employees and
related parties, net of amounts payable 883,807 1,013,658
Life insurance premiums receivable 718,144 1,095,135
Investment and related advances, net 3,920,127 4,663,780
Excess of cost over assets of businesses
and subsidiaries acquired, less amortization 339,543 340,895
Deferred charges 914,072 599,249
Deferred income taxes 261,600 --
Other assets 70,836 71,807
---------- ----------
Total investments and other assets 7,267,810 7,986,225
---------- ----------
$ 23,460,575 $ 20,218,234
========== ==========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
AS AT JUNE 30, 1999 AND DECEMBER 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
------------ ------------
(Unaudited)
Current liabilities:
<S> <C> <C>
Accounts payable $ 1,855,018 $ 1,768,848
Accrued expenses and other liabilities:
Salaries and wages 261,132 142,862
Taxes, other than federal income taxes 587,087 248,041
Interest 127,505 120,921
Other 336,976 171,937
Long-term obligations classified as current 904,225 487,535
------------ ------------
Total current liabilities 4,071,943 2,940,144
------------ ------------
Long-term obligations, less amounts classified
as current 14,115,554 11,014,477
------------ ------------
Deferred income taxes -- 132,300
------------ ------------
Total liabilities 18,187,497 14,086,921
------------ ------------
Minority interests 545,414 611,390
------------ ------------
Stockholders' equity:
Preferred stock: $10 ,stated value
authorized: 500,000 shares
issued: none (Note 10) -- --
Common stock: $.01 par;
authorized: 12,000,000 shares
issued: 8,248,480 shares 82,485 82,485
Capital in excess of par 10,261,371 10,260,927
Net unrealized gains (losses)
on securities available for sale, net of tax -- (83,709)
Retained earnings (deficit) (2,858,339) (2,012,237)
------------ ------------
7,485,517 8,247,466
Treasury stock, at cost, 2,206,651 shares (June)
and 2,179,301 shares (December) (2,757,853) (2,727,543)
------------ ------------
Total stockholders' equity 4,727,664 5,519,923
------------ ------------
$ 23,460,575 $ 20,218,234
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30 Three Months Ended June 30
------------------------ --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ -- $ 548,432 $ $ 261,445
Service income 4,217,741 2,954,714 2,277,358 1,621,093
----------- ----------- ----------- -----------
4,217,741 3,503,146 2,277,358 1,882,538
----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales -- 415,668 236,474
Selling, general and administrative
expenses, net 4,385,547 2,827,835 2,251,115 1,302,749
Depreciation 370,257 121,000 196,392 61,423
----------- ----------- ----------- -----------
4,755,804 3,364,503 2,447,507 1,600,646
----------- ----------- ----------- -----------
Operating loss (538,063) 138,643 (170,149) 281,892
Other income (expense):
Minority interest in affiliates, net of tax 51,896 (11,745) (2,391) (8,017)
Equity in earnings (losses) of affiliates (77,828) 46,253 (30,283) 207
Interest expense (428,765) (77,011) (234,947) (57,855)
Other, net 64,745 14,749 145,183 3,989
----------- ----------- ----------- -----------
(389,952) (27,754) (122,438) (61,676)
----------- ----------- ----------- -----------
Income (loss) before income taxes (928,015) 110,889 (292,587) 220,216
Income tax benefit (expense) 316,000 (3,500) 100,000 (5,100)
----------- ----------- ----------- -----------
Income (loss) before cumulative effect of a change
in accounting principle (612,015) 107,389 (192,587) 215,116
Cumulative effect of writing off start-up costs,
net of tax (234,087) -- --
----------- ----------- ----------- -----------
Net income (loss) $ (846,102) $ 107,389 $ (192,587) $ 215,116
=========== =========== =========== ===========
Income (loss) per common share: (Note 6)
Income (loss) before cumulative effect
of a change in accounting principle $ (0.10) $ 0.02 $ (0.03) $ 0.04
Cumulative effect of writing off
start-up costs, net of tax (0.04) 0.00 0.00 0.00
----------- ----------- ----------- -----------
Net income (loss) basic $ (0.14) $ 0.02 $ (0.03) $ 0.04
=========== =========== =========== ===========
----------- ----------- ----------- -----------
Net income (loss) . . . diluted (1998 only) $ (0.14) $ 0.02 $ (0.03) $ 0.03
=========== =========== =========== ===========
Weighted average shares outstanding:
Basic 6,051,214 6,092,009 6,046,229 6,045,854
=========== =========== =========== ===========
Diluted 6,051,214 6,136,807 6,046,229 6,600,689
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30 Three Months Ended June 30
------------------------ --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income (loss) before cumulative effect of
a change in accounting principle $(612,015) $ 107,389 $(192,587) $ 215,116
Add:
Unrealized gain on securities available
for sale, net of tax 24,549 -- -- --
Reclassification adjustment for securities losses
included in net loss, net of tax 59,160 -- -- --
--------- --------- --------- ---------
Comprehensive income (loss) before cumulative
effect of a change in accounting principle (528,306) 107,389 (192,587) 215,116
Cumulative effect of writing off start-up costs,
net of tax (234,087) -- -- --
--------- --------- --------- ---------
Comprehensive income (loss) $(762,393) $ 107,389 $(192,587) $ 215,116
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30
1999 1998
---------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $(846,102) $ 107,389
Adjustments required to reconcile net income to net cash provided by
operating activities:
Amortization, depreciation and other, net 377,529 128,272
Provision for losses on notes and accounts receivable (4,555) 8,552
Provision for deferred income taxes (437,000) --
(Gain) loss on disposition of assets (60,752) 3,297
Minority interest in earnings (losses) of consolidated affiliates (51,896) 11,745
Equity in net losses (earnings) of unconsolidated affiliates 77,828 (46,253)
Changes in assets and liabilities:
Receivables (124,672) 732,351
Merchandise inventories 6,802 15,039
Prepaid expenses and other current assets 2,551 (35,193)
Accounts payable 86,170 (71,432)
Accrued expenses and other liabilities 628,939 (924,595)
Deferred charges and other (313,853) (335,015)
---------- ----------
Total adjustments 187,091 (513,232)
---------- ----------
Net cash used in operating activities (659,011) (405,843)
---------- ----------
Cash flows from investing activities:
Proceeds from the sale of assets 386,667 --
Decrease in notes receivable 225,873 2,209,867
Investment and advances to affiliates (623,125) 1,124,837
(Increase) decrease in receivable due from related parties
and former affiliates, net 381,842 (1,076,708)
Utilization of restricted cash 98,676 29,823
Capital expenditures (540,940) (141,462)
---------- ----------
Net cash provided by (used in) investing activities (71,007) 2,146,357
---------- ----------
Cash flows from financing activities:
Treasury stock purchased (39,509) (234,490)
Purchase of common stock of subsidiary (3,000) --
Proceeds from officer loan 260,000 50,000
Principal payments of officer loan (135,000) (50,000)
Principal payments of long-term obligations (315,534) (301,666)
Proceeds from long-term obligations 626,647 288,496
---------- ----------
Net cash provided by (used in) financing activities 393,604 (247,660)
---------- ----------
Net increase (decrease) in cash (336,414) 1,492,854
Cash at beginning of period 577,317 625,109
---------- ----------
$ 240,903 $2,117,963
========== ==========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30
------------------------
1999 1998
---- ----
<S> <C> <C>
Cash paid during the six months for:
Interest, net of interest income $ 422,181 $ 70,748
Income taxes $ - $ 36,000
Supplemental disclosures of noncash investing and financing activity:
A subsidiary and a partnership, of which the subsidiary is the managing
general partner, purchased equipment which was financed by entering into
installment finance agreements.
Increase in equipment cost, net $ 3,206,654 $ 869,198
Increase in long-term obligations (3,206,654) (869,198)
A subsidiary purchased the real property utilized in the operations of two
unconsolidated affiliates.
Increase in real property cost, net $ 974,450 $ -
Decrease in investments and related advances (974,450) -
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 9
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MANAGEMENT'S REPRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
adjustments, cumulative effect of a change in accounting principle re
start-up costs and recurring accruals) necessary to present fairly The
Wendt-Bristol Health Services Corporation ("Wendt-Bristol" or
"Company") and subsidiaries consolidated financial position as at June
30, 1999 and December 31, 1998 and the consolidated results of its
operations for the three and six months ended June 30, 1999 and 1998 as
well as the cash flows for the respective six months. The results of
operations for any interim period are not necessarily indicative of
results for the full year. THESE FINANCIAL STATEMENTS SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED
IN THE WENDT-BRISTOL ANNUAL REPORT FILED AS FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1998, WHICH IS HEREBY INCORPORATED BY REFERENCE.
2. FINANCIAL STATEMENTS RESTATEMENT
The Company has changed its use of the "Consolidation Method" of
accounting related to its interest as sole General Partner of
Wendt-Bristol Diagnostics Co. L.P. and records the investment utilizing
the "equity method" of accounting. Management reviewed its accounting
policy for consolidation of the limited partnership and determined that
while Management significantly influences the partnership, it does not
meet the complete criteria for consolidation. Prior year interim
financial statements have been restated to reflect this determination.
There is no effect on the net consolidated results of operations due to
this determination. Such method does not effect the Company's
previously determined net earnings or stockholders' equity. The "equity
method", however, does change the individual components of the
Consolidated Balance Sheets, Statements of Operations, Statements of
Cash Flows and related financial information. All financial statements
included herein have been restated to conform to this change.
3. WRITE-OFF OF START-UP COSTS
On April 3, 1998 the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-up
Activities" which states that the costs of start-up activities,
including organization costs, should be expensed as incurred.
Implementation of SOP 98-5 is required for financial statements issued
for fiscal years beginning after December 15, 1998 with the initial
application of this SOP being reported as a cumulative effect of a
change in accounting principle. The Company adopted the provisions of
the SOP in its financial statements as of January 1, 1999. The
cumulative effect of the adoption of SOP 98-5 was a charge to earnings
of $355,087 net of taxes of $121,000 for the six months ended June 30,
1999 and the quarter ended March 31, 1999.
(Continued)
9
<PAGE> 10
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
4. INCOME TAXES
<TABLE>
<CAPTION>
Federal, state and local taxes are summarized as follows:
Six months ended June 30, Three months ended June 30,
------------------------- ---------------------------
1999 1998 1999 1998
---- ---- ---- ----
Federal taxes:
<S> <C> <C> <C> <C>
Current expense (benefit) $ -- $ (3,000) $ -- $ --
Deferred expense (benefit) (316,000) -- (100,000) --
State and local taxes:
Current expense -- 6,500 -- 5,100
--------- --------- --------- ---------
Total expense (benefit) $(316,000) $ 3,500 $(100,000) $ 5,100
========= ========= ========= =========
</TABLE>
5. STOCKHOLDERS' EQUITY
At June 30, 1999, there were no common stock purchase warrants
outstanding. Previously at March 31, 1999 there were 414,538 Common
Stock purchase warrants outstanding, exercisable at $3.75 per warrant.
Each warrant, upon exercise, provided two and three quarters (2 3/4)
shares of the Company's common stock and a Series II warrant
exercisable for two shares at $3.00/share. The Warrants' expiration
dates, as amended by the Board of Directors in April 1998, were May 1,
1999 for the initial Warrant and May 1, 2000 for the Series II
Warrants. The Board of Directors elected to allow the warrants to
expire on May 1, 1999 and the Series II warrants to expire on May 1,
2000. There were no warrants exercised in 1999.
6. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standard Board issued
statement of Financial Accounting Standards No. 128, "Earnings per
Share," which changed the method used to calculate earnings per share.
Basic earnings per share has been calculated as income available to
common stockholders divided by the weighted average number of common
shares outstanding. Diluted earnings per share has been calculated as
diluted income available to common stockholders divided by the diluted
weighted average number of common shares. Diluted weighted average
number of common shares has been calculated using the treasury stock
method for Common Stock equivalents, which includes Common Stock
issuable pursuant to stock options and Common Stock warrants. The
following is provided to reconcile the earnings per share calculations:
(Continued)
10
<PAGE> 11
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
6. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------- ------------------
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income (loss) before cumulative effect
of a change in accounting principle $ (612,015) $ 107,389 $(192,587) $ 215,116
Cumulative effect of writing off
start-up costs, net of tax (234,087) -- -- --
Effect of dilutive 5.5% convertible
bond, net of tax -- -- -- 9,075
---------- ---------- ---------- ----------
Income (loss) available to common stockholders
and assumed conversions $ (846,102) $ 107,389 $(192,587) $ 224,191
========== ========== ========== ==========
Shares:
Weighted average shares (basic)(D) 6,056,255 6,092,009 6,056,255 6,045,854
Effect of dilutive securities
Options -- (A) 44,798 -- (A) 49,540
Warrants -- (B) -- -- 5,295
Convertible Debt -- (C) -- -- 500,000
---------- ---------- ---------- ----------
Diluted weighted average shares 6,056,255 6,136,807 6,056,255 6,600,689
========== ========== ========== ==========
Income (loss) per common share:
Basic
-----
Income (loss) before cumulative effect of
a change in accounting principle $ (.10) $ .02 $ (.03) $ .04
Cumulative effect of writing off start-up
costs, net of tax $ (04) $ - - -
--------- --------- --------- ---------
Net income (loss) $ (.14) $ .02 $ (.03) $ .04
========= ========= ========= =========
Diluted (D) $ (.14) $ .02 $ (.03) $ .03
------- ========= ======= ======== =======
(Continued)
</TABLE>
11
<PAGE> 12
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
6. EARNINGS PER SHARE (CONTINUED)
(A) 1,000 stock options not associated with convertible debt were
excluded from the computation of diluted EPS because the
exercise price was greater than the average market price of
the common shares.
(B) 414,538 warrants were excluded from the computation of diluted
EPS because the exercise price was greater than the average
market price of the common shares. See Note 5 concerning the
expiration of warrants.
(C) 500,000 stock options associated with convertible debt were
excluded because their exercise would be anti-dilutive.
(D) At June 30, 1999, all potential common stock options,
warrants, and options associated with convertible debt were
excluded because their exercise would be anti-dilutive due to
the net loss.
7. UNCONSOLIDATED AFFILIATES
Unaudited financial information of the affiliates which are accounted for by the
equity method is summarized below:
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Current assets $ 2,337,329 $ 2,298,676
Property, plant and equipment
net of accumulated depreciation 6,936,441 10,483,313
Other non-current assets 358,615 704,639
----------- -----------
Total assets $ 9,632,385 $13,486,628
=========== ===========
Liabilities $ 9,919,888 $12,415,875
Equity (287,503) 1,070,753
----------- -----------
Total liabilities and equity $ 9,632,385 $13,486,628
=========== ===========
</TABLE>
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------ ------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service revenues $ 3,809,594 $ 3,382,878 $ 1,895,082 $ 1,731,092
Operating income (loss) (927,218) 84,006 (226,024) (18,158)
Income (loss) before cumulative effect
of a change in accounting principle (886,126) (245,050) (413,294) (165,128)
Cumulative effect of writing off
start-up costs (427,516) -- -- --
Net income (loss)...@100% $(1,313,642) $ (245,050) $ (413,294) $ (165,128)
(Continued)
</TABLE>
12
<PAGE> 13
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
7. UNCONSOLIDATED AFFILIATES (CONTINUED)
As a result of the limited liability companies being taxed as
partnerships for Federal income tax purposes, there is no tax provided
for earnings. See Note 4. Income Taxes. Also see Note 11.
8. MARKETABLE SECURITIES
The Company determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation at
each balance sheet date. At the beginning of the year, marketable
securities were classified as available-for-sale and were carried at
fair value, with unrealized holding gains and losses reported as a
separate component of stockholders' equity. During the March 31, 1999
quarter the securities were sold and the realized loss of approximately
$90,000 is included in the caption Other Expense in the Consolidated
Statements of Operations.
9. NEW ACCOUNTING PRONOUNCEMENTS
Effective for fiscal years beginning after June 15, 1999, FASB
Statement No. 133 "Accounting for Derivative Instruments and Hedging
Activities" requires the recording of deferred gains or losses on
foreign currency hedge transactions as a component of comprehensive
income. Such cumulative, net deferred gains/(losses) are recognized in
the statements of operations at the time of finalizing the underlying
transaction. At June 30, 1999 the Company has deferred approximately
$290,000 of losses on the foreign currency hedges ($191,500 net of
tax).
10. PURCHASE OF MINORITY INTEREST STOCKHOLDER'S COMMON STOCK AND LIMITED
PARTNERSHIP INTERESTS...WITHDRAWAL OF REGISTRATION STATEMENTS
The Wendt-Bristol Health Services Corporation ("WBHSC") announced on
June 23, 1998 that it was proceeding with plans to acquire the
approximate 15% of the outstanding shares of Wendt-Bristol Diagnostics
Company that it does not already own through a subsidiary
(Wendt-Bristol Company).
Additionally, the Company announced plans to acquire all of the limited
partnership interests in Wendt-Bristol Diagnostics Company, L.P.
Wendt-Bristol Diagnostics Company, a subsidiary of the Company, is the
general partner.
The Company had filed amended preliminary Forms S-4, with the
Securities and Exchange Commission concerning the issuance of
preferred stock in exchange for the above interests. Such
Registration Statements had not become effective.
(Continued)
13
<PAGE> 14
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
10. PURCHASE OF MINORITY INTEREST STOCKHOLDER'S COMMON STOCK AND LIMITED
PARTNERSHIP INTERESTS...WITHDRAWAL OF REGISTRATION STATEMENTS (CONTINUED)
On July 26, 1999, the Company announced that it was withdrawing the
afore-mentioned Registration Statements, Forms S-4. The Company further
stated that it remains the Board of Directors express intent to
continue its goal to accomplish the acquisition of all of the minority
interests in each of the two aforementioned affiliates. In that regard,
management is reviewing the resources available to enable the
possibility of a cash offering. Additionally, from time to time, the
Company will acquire partnership units and Diagnostic Company shares in
the open market.
11. PURCHASE OF REAL PROPERTY ASSOCIATED TO UNCONSOLIDATED AFFILIATES
During the quarter ended June 30, 1999, a subsidiary of the Company
acquired the real property associated to the operation of a diagnostic
center and a radiation oncology center. Each facility is operated by an
unconsolidated affiliate. The combined purchase price of the two
transactions was approximately $3,900,000 and included the placement of
mortgages in the total amount of $2,550,000 and the reduction of
Advances to affiliates of approximately $975,000. No gain or loss was
recognized in the transactions. Each of the affiliates entered
long-term leases with the subsidiary of the Company.
12. SALE OF UNDEVELOPED REAL ESTATE
During the quarter ended June 30, 1999, the Company sold undeveloped
land previously acquired for possible expansion of operations. A gain
of approximately $150,000 was recognized and is included in the
accompanying Consolidated Statements of Operations in "Other, net"
(Continued)
14
<PAGE> 15
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NOTE: REFERENCE SHOULD BE MADE TO THE NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS HEREIN.
Except for historical information contained herein, certain matters discussed
herein are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Any
statements that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as will likely result, are
expected to, will continue, is anticipated, estimated, projection, outlook) are
not statements of historical facts and may be forward-looking. Forward-looking
statements involve estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed in the forward-looking
statements. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties, including
but not limited to, economic, competitive, regulatory, growth strategies,
available financing and other factors discussed elsewhere in this report and in
other documents filed by the Company with the SEC. Many of these factors are
beyond the Company's control. Actual results could differ materially from the
forward-looking statements made. In light of these risks and uncertainties,
there can be no assurance that the results anticipated in the forward-looking
information contained in this report will, in fact, occur.
Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
FINANCIAL CONDITION
Management continues to position the Company to focus on continuing the
aggressive expansion of its Diagnostic and Radiology business, including
radiation therapy. During December 1998 the Company sold its remaining retail
pharmacy in order to concentrate on its core business. In October 1998 the
Company opened its fourth diagnostic center which is located on Jasonway Avenue
in Columbus, Ohio. This 21,000 square foot medical complex includes the
Company's second radiation oncology facility as well as an advanced diagnostic
center that includes the first Positron Emission Tomography (PET) scanning unit
in Central Ohio and a full nuclear medicine department.
The Company, through a subsidiary, opened its fifth center in May 1999. The
Women's Health Center is located in a newly constructed addition to its facility
on Kenny Road in Columbus, Ohio. This 7,500 square foot center will focus on
women's health and imaging services and will include an outpatient surgical
suite for breast surgery.
(Continued)
15
<PAGE> 16
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION (CONTINUED)
Working capital decreased approximately $1,500,000 from $476,000 at December 31,
1998 to a deficit of $1,024,000 at June 30, 1999. Current assets decreased
approximately $368,000 due mostly from a decrease in cash of approximately
$336,000. The decrease in cash is due to supporting the new centers while they
are in a start-up mode (start-up costs are expensed for financial statement
presentation - See Note 3). Current liabilities increased approximately
$1,130,000, due primarily from increases in accrued taxes ($339,000), accrued
other expenses ($290,000) and current portion of long-term debt ($417,000). The
increases in taxes and other expenses are primarily due from the strains of
operating in a start-up mode while the increase in current portion of long-term
debt is due to increased principal payment schedules during 1999 as a result of
the addition of equipment for the new centers as well as the purchase of real
property associated to unconsolidated affiliates (Note 11).
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity position has diminished in the first six months with a
working capital deficit of $1,024,000 at June 30, 1999. The Company and its
subsidiaries, limited partnership, and limited liability companies, have
committed to certain equipment upgrades or acquisitions that will be financed
through vendor programs. As of June 30, 1999, the cost of such equipment
currently on order and expected to be installed in the third quarter is
approximately $80,000.
Cash decreased approximately $336,000 during the first six months of 1999. Cash
used in operations was approximately $659,000 while cash used in investing
activities was $71,000. The major use of cash in investing activities was the
investment and advances to affiliates with start-up operations ($623,000) offset
by capital expenditures ($541,000). The unconsolidated affiliates required cash
during the first half of 1999 and will continue to need additional support in
the second half. As of July 1, 1999, the Company's nursing facility received a
rate increase that will provide an estimated annual increase of approximately
$500,000.
During October 1998, the Company, along with a partner, completed construction
of a major 31,000 square foot, two-building center including radiology, nuclear
medicine, cytology, radiation therapy, Positron Emission Tomography (the first
PET scanner in Central Ohio), and a therapy and rehab center. A subsidiary of
the Company has a 22-1/2% interest and management control and responsibility in
the radiation therapy, and 100% ownership in the radiology, PET and nuclear
medicine operations. In addition, the Company, through a subsidiary, has opened
a Women's Health Center in the second quarter of 1999, which will focus on
women's health and imaging services. The outpatient surgical suite for breast
surgery is expected to open in the fourth quarter 1999.
Management believes that present resources will meet anticipated requirements
for operations of the business. Other than as indicated above, there are no
further material commitments for capital expenditures.
(Continued)
16
<PAGE> 17
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS 1999 VS. 1998
Consolidated pre-tax earnings/(loss), before the cumulative effect of a change
in accounting principle - write off of start-up costs and exclusive of
depreciation of $370,200 and interest of $428,800, was $(129,000) for the first
half of 1999 compared to $308,900 (exclusive of $121,000 of depreciation and
$77,000 of interest) in the first half of 1998. Results for the June quarters,
on the same basis, was $138,700 in 1999 and $339,400 (1998). The Company does
not believe that the results of the first half are indicative of the full year
results. In addition to the increasing revenues of the new ventures (P.E.T.
etc), the Company's nursing home received a rate increase that should provide
additional estimated revenues of $250,000 in the second half. The focus on the
expansion of Diagnostic and Radiology, including radiation therapy, along with
the economies of size and cost control are expected to generate profits upon the
completion of the start-up mode later in 1999. The new medical complex located
on Jasonway Avenue in Columbus was completed in October 1998. This major
facility includes the Company's second Radiation Oncology facility as well as an
advanced Diagnostic Center including the first Positron Emission Tomography
(PET) scanning unit in Central Ohio. The Company also has opened its Women's
Health Center on Kenny Road in the second quarter of 1999.
Consolidated revenues from operations for the three and six months ended June
30, 1999 increased approximately $395,000 or 21% and $715,000 or 20% from the
same periods in 1998. Net sales decreased $261,000 (three months) and $548,000
(six months). The aforementioned consolidated revenues reflect the increase in
service revenues, net of the absence of 1999 net sales. The decline in net sales
is due to the December 31, 1998 sale of the Company's last pharmacy while the
increase in service revenues is attributable to increased diagnostic volumes due
to the opening of two centers during 1998.
Cost of sales decreased approximately $236,000 and $416,000 for the three and
six months ended June 30, 1999 due to the sale of the pharmacies during 1998.
Selling, general and administrative expenses increased approximately $948,000
and $1,500,000 for the three and six months ended June 30, 1999 as compared to
the comparable period in 1998. The increase is mostly due to the opening of two
diagnostic centers during 1998 and the expansion of the Company's mobile
mammography division.
Interest expense for the three and six months ended June 30, 1999 increased
approximately $177,000 and $352,000 as compared to the same period in 1998. The
increase is primarily due to the increased amount of debt attributable to the
addition of equipment at the two new diagnostic centers.
(Continued)
17
<PAGE> 18
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
WENDT-BRISTOL HEALTH SERVICES CORPORATION
-----------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 COSTS
A potential problem exists for all companies that rely on computers as the year
2000 approaches. The "Year 2000" problem is the result of the past practice in
the computer industry of using two digits rather than four to identify the
applicable year. This practice could result in incorrect results when the
Company's computers or those of the third parties with which it deals perform
arithmetic operations, comparisons or data field sorting involving years later
than 1999.
The Company has conducted a preliminary assessment of its computer systems to
identify items that could be impacted by the Year 2000 issue and formulated the
following course of action. The Company has begun reviewing its non-information
technology systems. Although the Company does not anticipate that
non-information technology systems will pose a major problem, as its reliance on
such systems is relatively small; non-information technology systems are more
difficult to evaluate and repair than information technology systems and may
require replacement. The Company has already begun its review of its information
technology systems and will make any further necessary software upgrades in
1999. In addition, the Company has been separately evaluating its accounting
software and is currently in the process of implementing a new system with
implementation anticipated to be completed during the third and fourth quarters
of 1999. Total cost of the conversion is expected to be approximately $45,000.
The Company has already begun assessing the Year 2000 readiness of those third
parties that could have a material impact on the Company's operations. The
Company began sending Year 2000 questionnaires to these third parties in late
1998 with the intent to evaluate the steps these parties have taken to assess
and remedy their Year 2000 problems. The Company is in the process of evaluating
these questionnaires. The area in which the Company is most dependent on third
parties is technical equipment and accounts receivable. Most of the equipment is
from major vendors who have already made assurances of Year 2000 compliance. The
vast majority of the Company's account receivables are paid through both private
and public insurance programs. Since these organizations are either governmental
in nature or heavily regulated by the government, the Company is confident that
they either are or will shortly be Year 2000 compliant. Nonetheless, the Company
has begun evaluating the readiness of these organizations as discussed above.
(Continued)
18
<PAGE> 19
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
WENDT-BRISTOL HEALTH SERVICES CORPORATION
-----------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 (CONTINUED)
The most reasonably likely worst case scenario the Company faces in regards to
Year 2000 problems is a lack of compliance on the part of the third parties with
which it deals. Though not highly dependent on any particular vendor, the
failure on the part of its vendors could result in the Company not being able to
get those supplies it needs to administer its business. The Company is prepared
to find alternative vendors should this problem result and is considering
building up an inventory of any necessary supplies to prevent any shortage if
such an eventuality were to occur. The area of noncompliance that would have the
greatest negative impact on the Company's business is that of the private and
public insurance programs that ultimately pay for the Company's services. A lack
of compliance on their part could result in the Company not being promptly or
properly paid for the services provided, impacting the Company's cash flow and
its ability to meet its operational needs. The Company has yet to formulate a
contingency plan in this regard, but is working to develop alternative billing
procedures to deal with any lack of readiness on the part of these third
parties.
The Company will utilize both internal and external resources to reprogram or
replace and test all of its software. The Company estimates that it will cost
$5,000 to evaluate, reprogram and replace equipment and software to ensure Year
2000 compliance, of which all $5,000 will likely be spent on outside
consultants. In addition, as discussed above, the Company estimates a cost of
approximately $45,000 to replace its existing accounting system. Such costs have
been financed during the second quarter of 1999.
19
<PAGE> 20
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The matters set forth in this Item 4 were submitted to a vote of
security holders of the Company at an Annual Meeting of Stockholders
held on August 20, 1999.
(a) The following directors, constituting the entire Board of Directors,
were elected at the Annual Meeting of Stockholders held on August 20,
1999. Also indicated are the affirmative, negative and authority
withheld votes for each director.
<TABLE>
<CAPTION>
Authority
For Against Withheld
<S> <C> <C> <C>
Marvin D. Kantor 3,037,113 - 990,343
Harold T. Kantor 3,037,113 - 990,343
Sheldon A. Gold 3,475,350 - 552,106
Reed A. Martin 3,475,350 - 552,106
Paul H. Levine 3,475,350 - 552,106
Gerald M. Penn 3,475,350 - 552,106
Clemente Del Ponte 3,475,350 - 552,106
David E. Fernie 3,475,350 - 552,106
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 -EDGAR Financial Data Schedule
(b) Reports on Form 8-K
(1) Report dated April 9, 1999 relating to the sale of
Series 2 Bonds (400,000 Swiss francs) pursuant to
Regulation S.
20
<PAGE> 21
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
---------- ------------------------------------
-------------------------------
SIGNATURES
Pursuant to the requirements 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.
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
(Registrant)
August 23, 1999 By: /s/ Marvin D. Kantor
--------------------
Marvin D. Kantor
Chairman
(Principal Executive Officer)
August 23, 1999 By: /s/ Sheldon A. Gold
-------------------
Sheldon A. Gold
President
(Principal Financial and Accounting Officer)
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 372,574
<SECURITIES> 0
<RECEIVABLES> 1,869,978
<ALLOWANCES> 215,000
<INVENTORY> 16,014
<CURRENT-ASSETS> 3,171,465
<PP&E> 15,255,891
<DEPRECIATION> 2,234,591
<TOTAL-ASSETS> 23,460,575
<CURRENT-LIABILITIES> 4,071,943
<BONDS> 14,115,554
0
0
<COMMON> 82,485
<OTHER-SE> 4,645,179
<TOTAL-LIABILITY-AND-EQUITY> 23,460,575
<SALES> 0
<TOTAL-REVENUES> 4,217,741
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 428,765
<INCOME-PRETAX> (928,015)
<INCOME-TAX> (316,000)
<INCOME-CONTINUING> (612,015)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (234,087)
<NET-INCOME> (846,102)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
