<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 March 31, 2000 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.
THE FOLLOWING CLASS IS TRADED IN THE OVER THE COUNTER MARKET AS "WMDB".
CLASS OUTSTANDING AT OCTOBER 31, 2000
----- -------------------------------
Common Stock, par value 6,069,356
$.01 per share
<PAGE> 2
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
I N D E X
PART I PAGE NO.
------ --------
Financial Statements:
Consolidated Balance Sheets - March 31, 2000 (Unaudited)
and December 31, 1999 (See Note 1) 3-4
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 2000 and 1999 5
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended March 31, 2000 and 1999 6
Consolidated Statements of Cash Flow (Unaudited)
Three Months Ended March 31, 2000 and 1999 7-8
Notes to Consolidated Financial Statements 9-15
Management's Discussion and Analysis of Financial Condition
and Results of Operations 16-20
PART II
-------
Other Information 21
Signatures 21
Exhibits:
Exhibit 27 EDGAR Financial Data Schedule 22
2
<PAGE> 3
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT MARCH 31, 2000 AND DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
--------------------- --------------------
(Unaudited) (See Note 1)
<S> <C> <C>
Current assets:
Cash $ 11,969 $ 99,558
--------------------- --------------------
Restricted cash 462,399 460,813
--------------------- --------------------
Receivables:
Trade, net of allowance for doubtful accounts
of $698,000 (March) and $638,000 (December) 1,716,408 1,840,160
Notes receivable 6,175 6,076
Miscellaneous 268,724 233,627
--------------------- --------------------
1,991,307 2,079,863
--------------------- --------------------
Inventories 15,149 15,149
Prepaid expenses and other 175,284 176,767
--------------------- --------------------
Total current assets 2,656,108 2,832,150
--------------------- --------------------
Property, plant and equipment, at cost 13,282,525 13,234,424
Less: Accumulated depreciation and
amortization (2,597,596) (2,414,890)
--------------------- --------------------
10,684,929 10,819,534
--------------------- --------------------
Investments and other assets:
Notes and other receivables, net of current portion 62,452 64,033
Notes receivable from officers, employees and
related parties, net of amounts payable 730,936 735,107
Life insurance premiums receivable 351,295 396,337
Investment and related advances, net 3,801,405 3,440,171
Excess of cost over assets of businesses
and subsidiaries acquired, less amortization 144,407 146,569
Deferred income taxes
Deferred charges 709,327 719,363
Other assets 23,627 25,046
--------------------- --------------------
Total investments and other assets 5,823,449 5,526,626
--------------------- --------------------
$ 19,164,486 $ 19,178,310
===================== ====================
</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 MARCH 31, 2000
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
AS AT MARCH 31, 2000 AND DECEMBER 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
--------------------- ---------------------
(Unaudited) (See Note 1)
<S> <C> <C>
Current liabilities:
Notes payable-officer $ 255,000 $ 225,000
Accounts payable 2,308,328 1,987,196
Accrued expenses and other liabilities:
Salaries and wages 100,967 169,427
Taxes, other than federal income taxes 1,904,162 1,586,292
Interest 237,329 219,397
Other 740,842 704,128
Long-term obligations classified as current 8,131,132 5,881,325
--------------------- ---------------------
Total current liabilities 13,677,760 10,772,765
--------------------- ---------------------
Long-term obligations, less amounts classified
as current 6,853,039 9,324,236
--------------------- ---------------------
Total liabilities 20,530,799 20,097,001
--------------------- ---------------------
Minority interests 439,685 433,900
--------------------- ---------------------
Stockholders' equity:
Preferred stock: $10 stated value
authorized: 500,000 shares
issued: none - -
Common stock: $.01 par;
authorized: 12,000,000 shares
issued: 8,280,807 shares (March) and
8,280,807 shares (December) 82,808 82,808
Capital in excess of par 10,261,735 10,261,735
Retained earnings (deficit) (9,384,705) (8,931,298)
--------------------- ---------------------
959,838 1,413,245
Treasury stock, at cost, 2,211,451 shares (March)
and 2,211,451 shares (December) (2,765,836) (2,765,836)
--------------------- ---------------------
Total stockholders' equity (1,805,998) (1,352,591)
--------------------- ---------------------
$ 19,164,486 $ 19,178,310
===================== =====================
</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 MARCH 31, 2000
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------------------------------
2000 1999
---------------------- -----------------------
<S> <C> <C>
Revenues:
Service income $ 1,355,860 $ 817,356
Costs and expenses:
Selling, general and administrative
expenses, net 1,601,142 981,901
Depreciation 182,706 163,059
---------------------- -----------------------
1,783,848 1,144,960
---------------------- -----------------------
Operating loss (427,988) (327,604)
Other income (expense):
Minority interest in affiliates, net of tax (5,787) 4,112
Equity in earnings (losses) of affiliates 186,214 (47,545)
Interest expense (274,707) (199,041)
Other, net 91,903 (80,527)
---------------------- -----------------------
(2,377) (323,001)
---------------------- -----------------------
Loss before income taxes (430,365) (650,605)
Income tax benefit (expense) (819) 175,400
---------------------- -----------------------
Net loss from continuing operations (431,184) (475,205)
Net loss discontinued operations (22,224) (34,998)
---------------------- -----------------------
Income (Loss) before extraordinary item and cumulative effect
of a change in accounting principle (453,408) (510,203)
Cumulative effect of a change in accounting principle,
net of minority interests - (304,912)
---------------------- -----------------------
Net income (loss) $ (453,408) $ (815,115)
====================== =======================
Loss per common share - basic and diluted: (Note 6)
Income(loss) from continuing operations $ (0.07) $ (0.08)
Income(loss) from discontinued operations 0.00 (0.01)
Cumulative effect of a change in accounting principle,
net of minority interests 0.00 (0.05)
---------------------- -----------------------
Net Income(loss) $ (0.07) $ (0.14)
====================== =======================
Weighted average shares outstanding:
Basic 6,069,356 6,056,255
====================== =======================
Diluted 6,069,356 6,056,255
====================== =======================
</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 MARCH 31, 2000
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
2000 1999
------------------ ---------------------
<S> <C> <C>
Income (loss) before cumulative effect of
a change in accounting principle $ (453,408) $ (510,203)
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 (453,408) (426,494)
Cumulative effect of a change in accounting principle,
net of minority interest - (304,912)
------------------ ----------------
Comprehensive income (loss) $ (453,408) $ (731,406)
================== ================
</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 MARCH 31, 2000
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31
-------------------------------------------------------
2000 1999
-------------------------- ---------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (453,408) $ (815,115)
-------------------------- ---------------------------
Adjustments required to reconcile net income
to net cash provided by operating activities:
(Income) loss from discontinued operations 22,224 34,998
Amortization, depreciation and other, net 184,868 166,695
Provision for losses on notes and accounts receivable 37,825 4,234
Provision for deferred income taxes - (175,400)
(Gain) loss on disposition of assets (65,724) 89,560
Minority interest in earnings (losses) of consolidated affiliates 5,785 (4,112)
Equity in net losses (earnings) of unconsolidated affiliates (186,214) 47,545
Changes in assets and liabilities:
Receivables 39,330 566,598
Merchandise inventories - 6,822
Prepaid expenses and other current assets 1,483 7,226
Accounts payable 321,132 2,768
Accrued expenses and other liabilities 304,056 297,029
Deferred charges and other 11,456 (134,766)
-------------------------- ---------------------------
Total adjustments 676,221 909,197
Net cash provided by (utilized in) continuing operations 169,659 183,398
Net cash provided by (utilized in) discontinued operations 53,154 (89,316)
-------------------------- ---------------------------
Net cash provided by operating activities 222,813 94,082
-------------------------- ---------------------------
Cash flows from investing activities:
Proceeds from the sale of assets 65,724 89,748
Decrease in notes receivable 1,482 75,002
Investment and advances to affiliates (185,744) (1,152,484)
(Increase) decrease in receivable due from related parties
and former affiliates, net 49,213 265,387
Utilization of or (deposit to) restricted cash (1,586) 32,951
Capital expenditures (48,102) (70,090)
-------------------------- ---------------------------
Net cash used in investing activities (119,013) (759,486)
-------------------------- ---------------------------
Cash flows from financing activities:
Treasury stock purchased - (24,592)
Proceeds from officer loan 50,000 105,000
Principal payments of officer loan (20,000) (30,000)
Principal payments of long-term obligations (310,240) (57,481)
Proceeds from long-term obligations 88,850 100,000
-------------------------- ---------------------------
Net cash provided by (used in) financing activities (191,390) 92,927
-------------------------- ---------------------------
Net decrease in cash (87,590) (572,477)
Cash at beginning of period 99,558 575,749
-------------------------- ---------------------------
Cash at end of period $ 11,968 $ 3,272
========================== ===========================
</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 MARCH 31, 2000
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE THREE MONTHS ENDED MARCH 31 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------------------------
2000 1999
-------------------------- ---------------------------
<S> <C> <C>
Cash paid during the three months for:
Interest, net of interest income $ 231,755 $ 190,919
Income taxes $ - $ -
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 $ $ 73,461
Increase in long-term obligations - (73,461)
</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 MARCH 31, 2000
----------------------------------------------
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 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 March
31, 2000 and December 31, 1999 and the consolidated results of its
operations for the three months ended March 31, 2000 and 1999 as well
as the cash flows for the respective three 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, 1999, WHICH IS HEREBY INCORPORATED BY REFERENCE.
REFERENCE SHOULD ALSO BE MADE TO THE NOTE CONCERNING THE INDEPENDENT
AUDITORS "GOING CONCERN" AND RECLASSIFICATIONS OPINION, WHEN ISSUED,
CONTAINED THEREIN.
As a result of the Company's inability to pay its outside auditors the
balance of prior year audit fees, the financial statements included in
this report have not been reviewed as required by Rule 10-01(d). A
mutually acceptable payment schedule has been negotiated and payments
are being made.
2. FINANCIAL STATEMENTS RESTATEMENT AND RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to current
year classifications, including the reclassification to "Discontinued
Operations" of the results of operations of the nursing home segment.
In addition, the 1999 continuing operations Federal income tax benefit
($216,000) and the Federal income tax benefit attributable to the
cumulative effect of writing off start-up costs ($121,000) were
reversed and offset by the reversal of the Deferred tax liability
($175,400) in order to conform with the determination presented in the
Company's Form 10-K at December 31, 1999.
(Continued)
9
<PAGE> 10
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
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 as of January 1,
1999. The cumulative effect of the adoption of SOP 98-5 was a charge to
earnings of $304,912 (including minority interests) for the quarter
ended March 31, 1999.
4. INCOME TAXES
Federal, state and local taxes are summarized as follows:
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
Federal taxes:
Current expense (benefit) $ -- $ --
Deferred expense (benefit) -- (175,400)
State and local taxes:
Current expense 819
------------ ----------
Total expense (benefit) $ 819 $(175,400)
============ ==========
Reference is made to Note 2 herein.
5. 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 MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
5. EARNINGS PER SHARE (CONTINUED)
Three Months Ended
March 31,
2000 1999
---- ----
Income (loss) from continuing operations $ (431,184) $ (475,205)
Income (loss) from discontinued operations (22,224) (34,998)
Cumulative effect of a change in
accounting principle -- (304,912)
----------- -----------
Income (loss) available to common stockholders
and assumed conversions $ (453,408) $ (815,115)
=========== ===========
Shares:
Weighted average shares (basic) 6,069,356 6,056,255
Effect of dilutive securities
Options -- --
Warrants -- --
Convertible Debt -- --
----------- ----------
Diluted weighted average shares 6,069,356(1) 6,056,255(1)
=========== ==========
Income (loss) per common share-basic and diluted:
Income (loss) from continuing operations $ (.07) $ (.08)
Income (loss) from discontinued operations (.01)
Cumulative effect of a change in
accounting principle -- (.05)
----------- ----------
Net income (loss) $ (.07) $ (.14)
=========== ==========
(1) At March 31, 2000 and 1999 all potential common stock options,
warrants, and options associated with convertible debt were excluded
because they have expired or their exercise would be anti-dilutive due
to the net loss.
(Continued)
11
<PAGE> 12
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
6. UNCONSOLIDATED AFFILIATES/MINORITY INTEREST
Unaudited financial information of the affiliates which are accounted for by the
equity method is summarized below:
COMBINED BALANCE SHEETS
March 31, 2000 December 31, 1999
---------------- -----------------
Current assets $ 2,648,707 $ 2,364,919
Property, plant and equipment
net of accumulated depreciation 6,428,513 6,636,526
Other non-current assets 315,839 264,201
---------------- ----------------
Total assets $ 9,393,059 $ 9,265,646
================ ================
Liabilities $ 8,803,817 $ 8,725,655
Equity 589,242 539,991
---------------- ---------------
Total Liabilities and equity $ 9,393,059 $ 9,265,646
================ ================
COMBINED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
2000 1999
---- ----
Service Revenues $ 2,180,664 $ 1,914,512
Operating income (loss) $ 50,842 $ (273,678)
Income (loss) before cumulative effect
of a change in accounting principle $ 49,250 $ (472,832)
Cumulative effect of a change in
accounting principle $ -- $ (427,516)
Net Income (loss)....@100% $ 49,250 $ (900,348)
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.
7. 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 1999 quarter, 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 1999 quarter the securities were sold and the realized loss
of approximately $90,000 is included in the caption Other income (expense) in
the Consolidated Statements of Operations. There have been no marketable
securities held in the year 2000.
(Continued)
12
<PAGE> 13
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
8. NEW ACCOUNTING PRONOUNCEMENTS
Effective for fiscal years beginning after June 15, 2000, FASB
Statement No. 133 "Accounting for Derivative Instruments and Hedging
Activities", as amended, requires the recording of deferred gains or
losses on foreign currency hedge transactions for the effective portion
of the cash flow hedge as a component of comprehensive income and
reclassifies into earnings in the same period as the hedged forecasted
transactions affects earnings. At March 31, 2000 the Company has
deferred approximately $542,000 of losses on the foreign currency
hedges .
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ('SAB") No. 101, "Revenue Recognition in Financial
Statements." The guidelines in SAB 101 must be adopted during the
fourth quarter of fiscal 2000 and the effects, if any, are required to
be recorded through a retroactive, cumulative-effect adjustment as of
the beginning of the fiscal year, with a restatement of all prior
interim quarters in the year. Management has not completed its
evaluation of the effects, if any, that SAB 101 will have on its income
statement presentation, operating results, or financial position.
9. LONG-TERM DEBT RECLASSIFICATION TO CURRENT
Reference should be made to Note 7 in the Company's Form 10-K for the
year ended December 31, 1999 concerning the re-classification of
certain long-term debt to current installments. In addition to those
items, at March 31, 2000, the Company has also re-classified the debt
of an equipment lender ($177,500) to current as a result of the receipt
of notices of default. A notice was received, by a Subsidiary, in
September 2000 from its bank concerning a default on the mortgages on
two facilities acquired from non- consolidated affiliates for failure
of borrower to pay the scheduled payments when due. The total due under
the obligations at the time of the notice was $2,581,300; the Company
has reclassified the entire balance of March 31, 2000 ($2,603,200) as
current. Management is currently addressing alternate payment schedules
and other possible remedies to the defaults and remains cautiously
optimistic of the outcome.
10. EQUITY IN AFFILIATES
Reference should be made to Notes 6 and 11I in the Company's Form 10-K
for the year ended December 31, 1999 concerning the forgiveness of debt
($1,745,000) of an unconsolidated entity. During the quarter ended
March 31, 2000, approximately $330,000 additional advances occurred in
order to sustain the entity
(Continued)
13
<PAGE> 14
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
10. EQUITY IN AFFILIATES (CONTINUED)
during the transition period of restructuring and/or disposing of the
business. Management will further review its estimate of the
collectibility of the advances upon completion of the December 31, 2000
annual results to be included in its Form 10-K since the outcome will
be more readily determinable based upon potential transactions
currently under consideration.
11. LEGAL PROCEEDINGS
(a) On August 17, 2000, a group of individuals alleging ownership
of 1,820,987 shares of common stock of the Company filed a
Schedule 13D with the Securities and Exchange Commission
indicating an intention to elect a slate of directors which
they intend to nominate. No slate has, as of yet, been
proposed by such parties. On August 30, 2000 the Company filed
a Complaint for Declaratory Injunctive and Other Relief in the
United States District Court for the Southern District of
Ohio, Eastern Division, Civil Action No. 200-996 against the
parties to the 13D, alleging, among other things (i) the
intentional and fraudulent omission of required information
rendering the 13D statement invalid and unenforceable and
asking for a declaratory judgment and injunctive relief and
(ii) breach of fiduciary duty by defendants Clemente Del
Ponte, a past director, and McBridge Advisory Ltd., an
affiliate of Del Ponte, by disclosing confidential and
proprietary financial and other information to third parties,
resulting in monetary damage to the Company.
In November 2000, the parties agreed to a settlement whereby
all litigation would be dismissed without prejudice and the
schedule 13D('s) would be re-filed to indicate such
shareholders are currently holding shares for investment
purposes only.
(b) As a result of a class-action suit brought against one of the
Company's equipment and maintenance vendors (by third
parties), a tentative settlement has been proposed. The
Company has not estimated its portion of the proposed
settlement (approximately $20 million total to all customers);
the proposed settlement is related to previously paid
maintenance expenses ($2,000,000 paid over an 8 year period by
the Company and affiliates). Such amount, when resolved, might
result in either a credit against its open accounts payable or
a credit toward future purchases, but no cash to be issued by
the Vendor. Due to the uncertainty, the Company has NOT ---
recorded the proposed settlement.
(Continued)
14
<PAGE> 15
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
11. LEGAL PROCEEDINGS (CONTINUED)
(c) A lawsuit was filed in the Court of Common Pleas, Franklin
County, Ohio (Case no. 00CVH098642) on September 26, 2000,
captioned Siemens Financial Services, Inc., f/k/a Siemens
Credit Corporation v. Wendt-Bristol Health Services
Corporation (and other named affiliates).
Reference is hereby made to "Threatened Litigation" included
in Item 3 of the Company's Form 10-K for the year ended
December 31, 1999 concerning Siemens Financial Services, Inc.
15
<PAGE> 16
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
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, unless necessary to prevent such statements from becoming misleading.
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 has been focusing the Company on an aggressive expansion of
its Diagnostic business, nuclear medicine and advanced imaging
services, including the opening of a center featuring the only Positive
Emission Tomography ("PET") technology in central Ohio. During this
expansion, the Company's revenues and profitability have been adversely
affected by the trend in the healthcare industry toward cost
containment, governmental constraints and reductions in rates which
have put downward
(Continued)
16
<PAGE> 17
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION (CONTINUED)
pressure on revenue. Additionally, the Company's expansion, through a
minority interest in radiation oncology business, proved to be costly
both from a cash and profitability perspective. The radiation oncology
business has been comprised of two centers. One of the centers ceased
operations June 30, 2000 and the company intends to utilize those
premises as its new corporate offices; the other center, which is
adjacent to a hospital, is currently under review for possible sale or
"turn-key" lease.
The Company, through a subsidiary, opened in June 1999 it's Women's
Health Center on Kenny Road. This 7,500 square foot center focuses on
women's health and imaging services and includes an outpatient surgical
suite for breast surgery expected to open in fourth quarter 2000.
Management believes that the new centers, including the Fall 2000
opening of a Cyclotron center, with a partner, (providing timely
isotopes for the PET) should produce increased revenues that lead to an
increase in operating earnings.
The company sold its remaining nursing home on November 30, 1999.
Management has considered the need for a valuation (addressing the
potential realizability), related to the deferred tax assets. As noted
herein the Company has incurred significant losses and negative cash
flow. As a significant portion of the deferred tax asset relates to net
operating loss carryforwards, a valuation allowance was recorded in
1999 as the realization of the deferred tax assets were not assessed as
more likely than not. Additionally, management believes that the
deferred tax liabilities will be recognized and offset by the existing
deferred tax assets prior to the expiration of the net operating loss
carryforwards in 2014.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a
timely basis, to comply with the terms of its financing agreements, to
obtain additional financing or refinancing as may be required, and
ultimately to attain profitability. The Company is also actively
pursuing additional equity financing through discussions with potential
business affiliations, vendors and/or customers possessing related
technological and/or marketing capabilities that can help it develop
the new markets for its currently available technology as well as its
new cyclotron venture, with a partner, which opened in the Fall of
2000.
Working capital decreased approximately $3,081,000 from a deficit of
$7,941,000 at December 31, 1999 to a deficit of $11,022,000 at March
31, 2000. Current assets decreased approximately $176,000 due mostly
from decreases in cash ($88,000), and accounts receivable trade
($124,000) offset by miscellaneous receivable
(Continued)
17
<PAGE> 18
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION (CONTINUED)
increases ($36,000). Current liabilities increased approximately
($2,905,000), due primarily to increases in long-term debt
($2,250,000), (see Note 2.), accounts payable ($321,000), taxes, other
than federal income taxes ($318,000) and other accrued liabilities
($16,000). Such increases were a result of the expansion of facilities,
operating losses and the funding of the radiation oncology business
which is currently under review. Reference should be made to the
discussion in the first paragraph herein concerning the radiation
oncology business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity remains poor with a working capital deficit of
$11,022,000 at March 31, 2000. In order to address its liquidity needs
during the year 2000, the Company has undertaken a program to achieve a
strategic alliance with a major healthcare provider that would combine
utilization of its current facilities as well as achieve a customer
relationship for its new Cyclotron venture open in the Fall of 2000
(with a partner currently in the business, but not in Central Ohio).
Additionally, the Company is exploring financing packages that would,
along with the cooperation or repayment of current bond holders,
provide working capital funds through the utilization of accounts
receivable as collateral. Separately, the Company is considering the
possible sale of certain centers including a "turn-key" sale or lease
of its remaining radiation oncology facility. Although the Company is
working to achieve one or more of the aforementioned transactions in
the near future, there can be no assurance of the success of any of the
possible transactions.
Cash decreased approximately $86,000 during the quarter ended March 31,
2000. Cash flow used in investing activities was approximately $119,000
as compared to approximately $760,000 provided in the previous year.
Significant utilization occurred in advances to affiliates, net
(186,000), and capital expenditures ($48,000), offset by reductions in
amounts due from related parties and former affiliates ($49,000) and
proceeds from the disposition of mortgage interest rate hedge
($66,000). Net cash of approximately $191,000 was used in financing
activities. This was achieved primarily through principal payments on
long-term borrowings ($330,000), offset by proceeds in long-term
borrowings ($139,000). There was net cash provided by operating
activities of approximately ($223,000). The net loss of approximately
$453,000 including discontinued operations of ($53,000) was offset
primarily by amortization and depreciation ($185,000) and increases to
accounts payable ($321,000) and accrued expenses ($304,000) and other
items totaling ($118,000), offset by earnings of unconsolidated
affiliates ($186,000) and proceeds from the disposition of mortgage
interest rate hedge ($66,000).
(Continued)
18
<PAGE> 19
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
As a result of the June 30, 2000 closing of the radiation oncology
center operated in the same building as the Diagnostic business which
includes PET technology, the Company plans to vacate and move its
corporate offices to such center in the fourth quarter of 2000.
Management believes that, despite the financial hurdles and funding
uncertainties going forward, it is exploring various opportunities
that, if successfully funded and executed, could significantly improve
operating results, but no assurance can be given. The continued support
of the Company's vendors, customers, lenders, stockholders and
employees will continue to be key to the Company's future success.
Other than as indicated above there are no further material commitments
for capital expenditures.
YEAR 2000
A potential problem existed for all companies that relied on computers
as the year 2000 approached. 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. The Company addressed its
Year 2000 compliance needs by implementing a new accounting software
and other necessary applications. The Company experienced no internal
problems or problems with third parties in regards to the "Year 2000"
problem. The Company spent approximately $45,000 on software and
hardware to ensure Year 2000 compliance.
The Company's payroll system is currently not Year 2000 compliant.
Payroll is currently being processed by its previously existing
software until such time as the payroll system associated to its other
new software can be implemented (expected to be January 1, 2001). No
problems have occured as a result of this continuation of the existing
software.
RESULTS OF OPERATIONS 2000 - 1999
It should be noted that the following analysis reflects the
discontinuation of the nursing home operations.
Service revenues increased $539,000 or 66%, from the comparable period
in 1999. The service revenues increase is due mostly to: the opening of
two new diagnostic centers during the prior year, (1998); opening of
the Women's Health Center in June 1999; and increases to equipment at
the existing centers.
(Continued)
19
<PAGE> 20
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
AND SUBSIDIARIES
----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS 2000 - 1999 (CONTINUED)
Equity in earnings (losses) of affiliates increased from a loss of
$(47,500) in 1999 to a profit of $186,200 in 2000 primarily as a result
of the pro rata results related to increased revenues ($332,200)
attributable to additional modalities and procedures performed;
decreases in depreciation ($49,700) and interest expense ($70,400)
offset by an increase in rent expense ($71,600), each attributable to
sales of the respective buildings to a consolidated subsidiary;
decreased selling, general and administrative expenses ($81,300)
attributable to cost control measures and the absence of the 1999
write-off of start-up costs ($427,500) which represented a change in
accounting principle.
Other income increased from a loss of $(80,500) in 1999 to a profit of
$91,900 in 2000 primarily attributable to the 1999 loss on sale of
marketable securities ($83,700) and the gain on the disposition of the
mortgage interest rate hedge in 2000 ($66,000).
Selling, general and administrative expenses increased approximately
$616,000 or 63% for the quarter ended March 31, 2000 from the
comparable period in 1999. The increase is mostly due to increases in
expenses of the new Granville and Jasonway diagnostic centers, the new
Women's Center. Selling, general and administrative expenses at the new
centers contribute heavily to the costs during their initial period of
market development. Such costs have had a significant impact to the
consolidated results. However, management anticipates each of the
centers, upon reaching its operating goals, to contribute profits to
the company's results of operations.
Interest expense for the quarter ended March 31, 2000 increased
approximately $76,000 or 38% as compared to the same period a year ago.
The increase is mostly due to the debt from the mortgages on two
facilities acquired from non-consolidated affiliates and the interest
expense on additional equipment at the new diagnostic centers.
20
<PAGE> 21
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION
---------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
----------------------------------------------
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 -EDGAR Financial Data Schedule
(b) Reports on Form 8-K
None
-------------------------------
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)
November 17, 2000 By: /S/ MARVIN D. KANTOR
--------------------
Marvin D. Kantor
Chairman and CEO
(Principal Executive Officer)
November 17, 2000 By: /S/ SHELDON A. GOLD
-------------------
Sheldon A. Gold
President
(Principal Financial and
Accounting Officer)
21
