<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File Number 0-7667
NURSECARE HEALTH CENTERS, INC.
A PENNSYLVANIA CORPORATION
I.R.S. EMP. I.D. #23-1712311
THREE STATION SQUARE
PAOLI, PENNSYLVANIA 19301
Registrant's telephone number: Area Code (610) 644-4051
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.10 Par Value Per Share - Class A
Registrant 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.
Yes X No
---------- -----------
Registrant has been subject to such filing requirements for the past 90 days.
Yes X No
---------- -----------
As of December 31, 1996, the Issuer had outstanding one class of stock totaling
536,571 shares. The Aggregate Market Value of the shares held by Non-Affiliated
Holders (180,736) is approximately $92,175.
1
<PAGE>
INFORMATION REQUIRED IN REPORT
PART I
ITEM 1. BUSINESS
Nursecare Health Centers, Inc. (the "Company") was organized in 1969
and for most of its existence provided skilled nursing, convalescent
and rehabilitation care in the operation of two health care facilities.
Virtually all of the Company's revenue for all years of its existence
had been derived from these services.
The two facilities, Union Forge Nursing Home, Inc. and the Northwood
Nursing and Convalescent Home, Inc. were separately incorporated and
operated as wholly-owned subsidiaries of the Company. The Union Forge
Nursing Home, Inc., located in Hunterton County, New Jersey, was sold
in 1990. The Northwood Nursing and Convalescent Home, Inc. was sold in
1994.
In 1995, the Company formed the Pinnacle Healthcare Group, Inc., a
wholly-owned subsidiary of the Company which provides long-term care
consulting to long-term care facilities. This includes assistance in
achieving regulatory compliance and providing the highest level of
quality care through education and staff awareness.
ITEM 2. PROPERTIES
Company's headquarters are located in leased space of Three Station
Square, Paoli, Pennsylvania, 19301. Registrant occupies approximately
one thousand and forty-five (1,045) square feet on the second floor of
this office building, which constitutes approximately fourteen percent
(14%) of the rental space on that floor. The Registrant's lease runs
for a one (1) year term from February 1996, to February, 1997. The
annual rental for the year ending December 31, 1996, was $12,830.00.
2
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
LICENSURE
All legal proceedings of a material nature previously reported in the
Company's Annual Form 10K were settled or resolved before December 31,
1996 with one exception.
Suit was filed in the Court of Common Pleas of Philadelphia County in
July 1994 on behalf of the Estate of Elsie Regina against the
Northwood Nursing Home claiming deficient care. Northwood is
adequately insured for the claim against this claim, in the opinion of
management, and the carrier has engaged counsel to defend this law
suit.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS
A shareholders meeting took place on September 25, 1996 pursuant to
notice. The only matte to be voted upon by the shareholders was the
election of Directors for the following year. The Directors then in
office were elected by unanimous vote.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDERS MATTERS
(a) Market. There is no active market for Registrant's Common Stock.
The Company is aware that private sales between security holders
occur from time to time by way of private negotiation. The
Registrant is not involved in such transactions and the price
established is between the individuals involved. The Company is
aware that securities brokers from time to time will negotiate
sales of the Company's stock. The Company does not participate in
any such transactions, has not listed any of its shares on any
securities exchange and does not know how or what prices are
established. Otherwise, to the Company's knowledge, no stock
exchange or brokerage firm makes a market in its securities
although purchases and sales of its shares reportedly take place
from time to time. As of December 31, 1996, the Company had 485
shareholders.
(b) Dividends. The Registrant has never paid a cash, stock or
property dividend. The Company's policy has been to reinvest
its earnings.
3
<PAGE>
PART II
ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Continuing
Operations
Revenues $ 20,935 $ 63,606 $ - $ - $ -
========== ========== ========== ========== ==========
Discontinued
Operations
Revenues $ 275,889 $ 452,438 $4,930,930 $5,717,131 $5,041,132
========== ========== ========== ========== ==========
Net Loss
Continuing
Operations $ (309,841) $ (323,830) $ - $ - $ -
========== ========== ========== ========== ==========
Net Income
(Loss)
Discon-
tinued
Operations $ 275,889 $ 452,438 $1,745,940 $ (347,365) $ (402,333)
========== ========== ========== ========== ==========
Net Loss Per
Share
Continuing
Operations $ (.58) $ (.60) $ - $ - $ -
========== ========== ========== ========== ==========
Net Income
(Loss) Per
Share
Discon-
tinued
Operations $ .52 $ .84 $ 3.16 $ (.63) $ (.73)
========== ========== ========== ========== ==========
Working
Capital
(Deficiency) $ (467,355) $ (471,363) $ 750,919 $ (846,068) $ (414,112)
========== ========== ========== ========== ==========
Total Assets $1,937,442 $2,338,504 $2,962,357 $4,488,607 $4,680,263
========== ========== ========== ========== ==========
Long-term Debt:
Current
Portion $ - $ - $ - $ 111,643 $ 125,629
Long-term
Portion - - - 2,096,913 2,184,708
---------- ---------- ---------- ---------- ----------
Total $ - $ - $ - $2,208,556 $2,310,337
========== ========== ========== ========== ==========
Dividends Paid $ - $ - $ - $ - $ -
========== ========== ========== ========== ==========
</TABLE>
4
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Prior to November 30, 1994, the Company operated two nursing
facilities with 210-bed capacity. Of the 210 beds, 148 were in
Philadelphia, Pennsylvania (Northwood) and 62 beds were in Clinton
Township, New Jersey (Union Forge). Union Forge was sold on February
7, 1990. From February, 1990 to November, 1994, only Northwood was
operational. On November 30, 1994, Northwood was sold.
The Company has been wrapping up the affairs of Northwood. There is no
comparison of the revenue and income from discontinued operations of
the Northwood and continuing operation. The continuing operations
primarily exist of the 1995 start up on Pinnacle Healthcare Group, Inc.
The Company has been concentrating its efforts in marketing and
developing this new venture. Pinnacle Healthcare Group, Inc. is a long-
term care consulting firm dedicated to helping long-term care
facilities achieve regulatory compliance by providing the highest
level of quality care through education and staff awareness.
We recognize that with the advent of new regulations, survey format
and reimbursement methodology, keeping a facility's staff education
and up-to-date while remaining in compliance is a challenge. Therefore,
we have developed a wide range of programs that will not only educate
each facility's staff on how to identify problem areas, but will also
give them the tools and training necessary to implement interventions
which will maintain regulatory compliance and increase the facility's
profit margin.
5
<PAGE>
PART II - ITEM 8
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Pages
Independent Auditors' Report 7
Consolidated Financial Statements
As of December 31, 1996 and 1995
Balance Sheets 8 - 9
For the Years Ended December 31, 1996, 1995, and 1994
Statements of Operations 10 - 11
Statements of Changes in Stockholders' Equity 12
Statements of Cash Flows 13 - 15
Notes to Consolidated Financial Statements 16 - 24
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Nursecare Health Centers, Incorporated and Subsidiaries
Paoli, Pennsylvania
We have audited the accompanying consolidated balance sheets of
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES as of December 31, 1996
and 1995, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES at December 31, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
ZELENKOFSKE, AXELROD & CO., LTD.
Jenkintown, Pennsylvania
February 20, 1997
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
Current Assets
Unrestricted Cash and Cash
Equivalents (Note 1G) $ 162,957 $ 108,205
Restricted Cash - Escrow - 121,546
Accounts Receivable, Net of
Allowance For Doubtful Accounts
(Note 1I) - 126,522
Interest Receivable 15,429 34,567
Prepaid Expenses 3,905 5,176
---------- ----------
Total Current Assets 182,291 396,016
- - - - - - - - - -
Marketable Debt Securities (Note 2) 1,455,873 1,642,097
- - - - - - - - - -
Property and Equipment, at Cost
(Note 1C)
Furniture and Equipment 53,851 131,144
Less: Accumulated Depreciation (51,193) (127,373)
---------- ----------
2,658 3,771
- - - - - - - - - -
Other Assets
Advances to Related Party (Note 3) 96,620 96,620
Notes Receivable (Note 6) 200,000 200,000
---------- ----------
296,620 296,620
---------- ----------
Total Assets $1,937,442 $2,338,504
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current Liabilities
Accounts Payable $ 177,160 $ 186,210
Accrued Expenses and Other Liabilities
Payroll - 6,007
Real Estate Taxes and Other Taxes 41,792 45,765
Insurance 187,048 187,048
Other 35,288 151,359
Income Taxes Payable (Notes 1E and 4) 127,108 209,740
Deferred Taxes Payable (Note 4) 81,250 81,250
---------- ----------
Total Current Liabilities 649,646 867,379
- - - - - - - - - -
Commitments and Contingencies (Notes 3,
and 7) - -
Stockholders' Equity
Common Stock, $.10 par; Authorized
3,060,000 Shares; Issued 553,251
Shares 55,325 55,325
Additional Paid-in Capital 535,383 535,383
Unrealized Gains (Losses) on
Marketable Securities
(Notes 1H and 2) (76,563) 72,814
Retained Earnings 784,472 818,424
------------ ------------
1,298,617 1,481,946
Less: Treasury Stock, at Cost
(1996 and 1995 - 16,680 Shares) 10,821 10,821
---------- ----------
1,287,796 1,471,125
---------- ----------
Total Liabilities and
Stockholders' Equity $1,937,442 $2,338,504
========== ==========
</TABLE>
9
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service Revenue $ 20,935 $ 63,606 $ -
Cost of Services Sold 122,026 89,870 -
--------- --------- ------
Deficit (101,091) (26,264) -
General and Administrative 408,031 404,676 -
--------- --------- ------
Loss From Operations (509,122) (430,940) -
- - - - - - - - - - - - -
Other Income (Expenses)
Interest Income 177,017 112,258 -
Gain (Loss) on Sale of
Marketable Securities 22,264 (5,148) -
--------- --------- ------
199,281 107,110 -
--------- --------- ------
Loss Before Provision for Income
Taxes (309,841) (323,830) -
Provision for Income Taxes
(Note 4) - - -
--------- --------- ------
Loss From Continuing Operations (309,841) (323,830) -
- - - - - - - - - - - - -
Discontinued Operations (Note 5):
Loss From Operations of
Nursing Facility Disposed of - - (692,399)
Gain on Disposal of Nursing
Facility, Net of Income Taxes
(1996 - $8,500; 1995 -
$104,956; and 1994 - 355,296) 275,889 452,438 2,438,339
--------- --------- ----------
275,889 452,438 1,745,940
--------- --------- ----------
Net Income (Loss) $ (33,952) $ 128,608 $1,745,940
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
10
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Earnings (Loss) Per Share (Note 1F)
Loss From Continuing Operations $ (.58) $ (.60) $ -
Loss From Discontinued
Operations - - (1.25)
Gain on Disposal of Nursing
Facility .52 .84 4.41
------- ------- -------
Net Income (Loss) $ (.06) $ .24 $ 3.16
======= ======= =======
Weighted Average Number of Common
Shares Outstanding 536,571 541,484 551,921
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
11
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
Common Stock Unrealized Treasury Stock
------------------ Gains and -----------------
Number Additional Losses on Retained Number
of Paid-in Marketable Earnings of
Shares Amount Capital Securities (Deficit) Shares Amount
------ ------ ------- ---------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 553,251 $55,325 $535,383 $ - $(1,056,124) 2,660 $ 2,645
Unrealized Loss on Investments - - - (32,038) - - -
Net Income for the Year - - - - 1,745,940 - -
------- ------- -------- -------- ----------- ------ ------
Balance, December 31, 1994 553,251 55,325 535,383 (32,038) 689,816 2,660 2,645
Unrealized Gain on Investments - - - 104,852 - - -
Purchase of Treasury Stock - - - - - 14,020 8,176
Net Income for the Year - - - - 128,608 - -
------- ------- -------- --------- ----------- ------ ------
Balance, December 31, 1995 553,251 55,325 535,383 72,814 818,424 16,680 10,821
Unrealized Loss on Investments - - - (149,377) - - -
Net Loss for the Year - - - - (33,952) - -
------- ------- -------- -------- ----------- ------ -------
Balance, December 31, 1996 553,251 $55,325 $535,383 $(76,563) $ 784,472 16,680 $10,821
======= ======= ======== ======== =========== ====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
12
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating
Activities
Net Income (Loss) $ (33,952) $ 128,608 $ 1,745,940
- - - - - - - - - - - - - - - -
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Provided by (Used in)
Operating Activities:
Depreciation and
Amortization 1,113 982 159,566
(Gain) Loss Realized on
Sale of Marketable Debt
Securities (22,264) 5,148 2,382
Deferred Charges - - 39,457
Allowance for Doubtful
Accounts - - (600,000)
Accounts Payable
Settlements - - (460,179)
Gain on Sale of Property
and Equipment - - (2,793,635)
Covenant Not-to-Compete - - (100,000)
Deferred Taxes - 35,454 45,796
(Increase) Decrease in Assets
Accounts Receivable 126,522 161,067 995,909
Estimated Third-party
Payor Settlements - (400,000) 1,234,434
Interest Receivable 19,138 (31,105) (3,462)
Prepaid Expenses 1,271 971 (7,323)
Increase (Decrease) in
Liabilities
Accounts Payable (9,050) (300,843) (68,294)
Accrued Expenses and
Other Liabilities (126,051) (83,988) (31,199)
Income Taxes Payable (82,632) (99,760) 309,500
--------- --------- -----------
Total Adjustments (91,953) (712,074) (1,277,048)
--------- --------- -----------
Net Cash Provided by (Used in)
Operating Activities (125,905) (583,466) 468,892
- - - - - - - - - - - - - - - -
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
13
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Investing
Activities
Capital Expenditures - (4,163) (33,115)
Decrease in Escrowed Funds 121,546 1,405 73,799
Other Receivables - - 205,437
Proceeds at Maturity of
Short-term Investments - - 243,750
Purchase of Short-term
Investments - - (300,099)
Proceeds from Sale of
Marketable Debt Securities 802,428 633,552 30,493
Purchase of Marketable Debt
Securities (743,317) (1,978,233) (34,278)
Proceeds from Notes
Receivable - 975,000 -
Net Costs and Cash
Received From Sale of
Property and Equipment - - 433,337
--------- ----------- -----------
Net Cash Provided by (Used
in) Investing Activities 180,657 (372,439) 619,324
- - - - - - - - - - - - - - - - -
Cash Flows from Financing
Activities
Proceeds From Borrowings - - 18,038
Payments on Note Payable - - (32,297)
Payments on Long-term Debt - - (123,906)
Purchase of Treasury Stock - (8,176) -
--------- ----------- -------
Net Cash Used in Financing
Activities - (8,176) (138,165)
--------- ----------- -----------
Net Increase (Decrease) in
Unrestricted Cash and Cash
Equivalents 54,752 (964,081) 950,051
Unrestricted Cash and Cash
Equivalents - Beginning of
Year 108,205 1,072,286 122,235
--------- ----------- -----------
Unrestricted Cash and Cash
Equivalents - End of Year $ 162,957 $ 108,205 $ 1,072,286
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
14
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
Supplemental Disclosure of Cash Flow Information:
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash Paid During the Year for:
Interest $ - $ - $ 270,394
======= =========== ==========
Income Taxes $91,132 $ 169,262 $ 3,550
======= =========== ==========
</TABLE>
Supplemental Disclosure of Noncash Investing and Financing Activities:
On November 30, 1994, the Company sold the property and equipment of the
Northwood facility for $4,800,000 resulting in a gain of $2,793,635
as follows:
<TABLE>
<CAPTION>
<S> <C>
Property and Equipment $ 2,006,365
Covenant Not-to-Compete 100,000
Payments on Behalf of the Company for:
Long-term Debt, Net of Assets Whose
Use is Limited (1,946,724)
Notes Receivable (1,175,000)
Amounts Held in Escrow for Payment of
Accounts Payable Settlements and for
Third-party Payor Recapture of
Depreciation (196,749)
Working Capital, Other Than Cash (1,148,190)
Gain on Sale of Property and Equipment 2,793,635
-----------
Net Cash Proceeds $ 433,337
===========
</TABLE>
Unrealized gains (losses) on marketable debt securities that are available-
for-sale as of December 31, 1996 and 1995 were $(149,377), and $104,852,
respectively, and are included as a component of stockholders' equity.
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, and 1994
NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nursecare Health Centers, Incorporated and Subsidiaries (the
"Company"), was incorporated in 1969 for the purpose of owning and
operating two nursing facilities (one located in Pennsylvania with 148
beds which was sold in 1994 and the other in New Jersey with 62 beds
which was sold in 1990). The facilities provided nursing, convalescent
and rehabilitation care to the aged.
On November 30, 1994, the Company sold its building, furniture and
fixtures, and inventories associated with the Northwood Nursing
Facility to Complete Care Services, L.P. ("CCS") for $4,800,000, under
an installment sale agreement ("Agreement"). Additionally, all of the
assets and liabilities relating to the New Jersey facility were
previously sold in February, 1990.
On March 23, 1995, Pinnacle Healthcare, Inc. was incorporated in the
state of Pennsylvania to provide consulting services to long-term care
providers. The Company is the sole stockholder.
The Company's summary of significant accounting policies is described
below:
A) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Pinnacle Healthcare,
Inc. ("Pinnacle"), Northwood Nursing & Convalescent Home, Inc.
("Northwood") (the "Facility"), and Union Forge Nursing Home, Inc.
("Union Forge"). The operations of Northwood and Union Forge have
been inactive since the sale of their assets. All significant
intercompany transactions and balances have been eliminated in
consolidation.
16
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995, and 1994
NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
B) Revenues From Discontinued Operations
Revenues from the Facility were recorded based on standard charges
applicable to all residents. Under Medicare, Medicaid, and other
cost-based reimbursed programs, the facility was reimbursed for
services rendered to covered program residents as determined by
reimbursement formulas. Medicaid and Medicare did not account for
any revenues in 1996 and 1995. In 1994, Medicare and Medicaid
revenues accounted for approximately 88%. The differences between
facility established billing rates and the amounts reimbursable by
the programs and resident payments was recorded as contractual
allowances and deducted from revenues.
Retroactively calculated third-party contractual adjustments were
accrued on an estimated basis in the period the related services
are rendered or when such amounts were determined. Differences
between estimated contractual adjustments and subsequent audits by
third-party payors were recorded in operations in the year such
amounts are determined.
Net revenue from the Northwood facility for the years ended
December 31, 1996, 1995 and 1994 were $$-0-, $-0-, and $4,930,930,
respectively. These amounts are included in discontinued
operations in the accompanying statement of operations.
C) Property and Equipment
Property and equipment are recorded at cost and are depreciated
over the estimated useful lives of the related assets using the
straight-line method.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and
equipment are sold or otherwise disposed of, the asset accounts
and related accumulated depreciation accounts are relieved, and
the gain or loss included in operations.
17
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995, and 1994
NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
C) Property and Equipment (Continued)
The useful lives of property and equipment for purposes of
computing depreciation are:
Furniture and Equipment 5 - 12 Years
Depreciation expense was $1,113, $982, and $144,474 for the years
ended December 31, 1996, 1995 and 1994, respectively.
D) Deferred Financing Costs
Costs incurred in connection with obtaining mortgage and bond
financing were being deferred. Mortgage costs were being
amortized using the straight-line method over a 20-year period.
Bond costs were amortized on the basis of the amount of bonds
outstanding each year. Amortization expense for each of the years
ending December 31, 1996, 1995 and 1994 was $-0-, $-0-, and
$15,092, respectively.
Upon the sale of the facility, the bonds outstanding were
redeemed. As a result of the bond redemption, the remaining
unamortized portion of these costs, $39,457, were written off
during 1994.
E) Income Taxes
Income tax expense is the tax payable for the period and the
change during the period in deferred tax assets and liabilities.
Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year-
end based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect
taxable income. The principal difference is the deferral of gain
on sale of property and equipment for income tax purposes.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
18
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995, and 1994
NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
F) Earnings (Loss) Per Share
Earnings (Loss) per share is computed on the basis of weighted
average number of common shares outstanding during the respective
periods.
G) Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased
with a maturity of three months or less to be cash equivalents.
H) Investments in Debt Securities
Investments are categorized as either trading, available-for-sale,
or held-to-maturity. Investments in the trading category are
carried at fair value and unrealized gains and losses are
included in net earnings. Investments in the available-for-sale
category are carried at fair value with unrealized gains and
losses recorded as a special component of stockholders' equity.
Investments in the held-to-maturity category are carried at
amortized cost. At December 31, 1996 and 1995, the Company had no
investments that qualified as trading or held-to-maturity.
I) Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts equal to
the estimated losses that will be incurred in the collection of
all receivables. The estimated losses are based on a review of
the current status of the existing receivables. An allowance for
doubtful accounts has not been established as the amounts are
considered immaterial.
J) Use of Estimates
The preparation of financial statements in conformity with the
accounting and reporting practices prescribed by generally
accepted accounting principles, requires management to make
estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results could differ from
those estimates.
19
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995, and 1994
NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
K) Reclassifications
Certain items in 1995 have been reclassified to conform with the
1996 presentation.
NOTE 2: MARKETABLE DEBT SECURITIES
Marketable debt securities available-for-sale are stated at fair
value at December 31, 1996 and 1995 and include the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
U.S. Treasury Bonds
and Notes $1,424,474 $1,434,794
Corporate Bonds 31,399 207,303
---------- ----------
$1,455,873 $1,642,097
========== ==========
</TABLE>
The fair value of debt securities held as available-for-sale at
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Due Within Due After
One Year Ten Years
---------- ---------
<S> <C> <C>
U.S. Treasury Bonds
and Notes $ - $1,424,474
Corporate Bonds - 31,399
---------- ----------
$ - $1,455,873
========== ==========
</TABLE>
An unrealized loss of $76,563 in 1996 and an unrealized gain of
$72,814 in 1995 are reflected as a separate component in the
stockholders' equity section.
20
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995, and 1994
NOTE 3: RELATED PARTY TRANSACTIONS
Advances to a related party consist of the following at December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Non-interest bearing amounts due from Nursecare Health Centers'
parent company, Northeastern Investment Company, Inc.
("Northeastern") with no specific repayment terms. Northeastern
owns 56% of the Company's outstanding common stock. $96,620 $96,620
======= =======
</TABLE>
The Company leases office space from Northeastern, for which rental
expenses of $12,830, $12,475, and $12,140 were incurred during
1996, 1995, and 1994, respectively.
For the years ended December 31, 1996, 1995 and 1994, the Company
incurred fees totaling $24,364, $51,201 and $134,175, respectively,
for accounting services provided by an accounting firm for which
an officer of the Company is a partner.
NOTE 4: INCOME TAXES
The provision for income taxes consists of the following for
December 31, 1996, 1995, and 1994 which are included in
discontinued operations in the accompanying statement of
operations:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current
Federal $8,500 $ 69,502 $ 659,600
State - - 264,500
Deferred
Federal - 21,454 (65,765)
State - 14,000 (45,773)
Change in Valuation
Allowance - - (457,266)
------ --------- ---------
$8,500 $ 104,956 $ 355,296
====== ========= =========
</TABLE>
21
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995, and 1994
NOTE 4: INCOME TAXES (CONTINUED)
A reconciliation of income tax at the statutory rate to the
Company's effective rate is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Computed at the Expected
Statutory Rate (34)% 34%
Nondeductible Expenses 2 1
Surtax Exemption - (2)
Effect of Net Operating Loss
Carryforward and Change in
Valuation Allowance 57 6
--- --
25% 39%
=== ==
</TABLE>
The Company has available at December 31, 1996, net operating loss
carryforwards of $2,220,610 for state tax purposes expiring in
various years through 2002.
The deferred tax assets and deferred tax liabilities recorded on
the balance sheet as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred Tax Assets
Tax Loss Carryforwards:
Federal $ - $ 19,500
State 222,000 209,000
Alternative Minimum Tax
Credits - -
--------- ---------
222,000 228,500
Valuation Allowance (222,000) (228,500)
--------- ---------
- -
Deferred Tax Liability
Gain on Sale of Property
and Equipment (81,250) (81,250)
--------- ---------
Deferred Tax Liability, Net $ (81,250) $ (81,250)
========= =========
</TABLE>
22
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995, and 1994
NOTE 4: INCOME TAXES (CONTINUED)
Realization of deferred tax assets associated with the net operating
loss carryforwards is dependent upon generating sufficient taxable
income prior to their expiration. Management believes that there is a
risk that certain of these net operating loss carryforwards may expire
unused and, accordingly, has established a valuation allowance against
them.
NOTE 5: DISCONTINUED NURSING FACILITY OPERATIONS
On August 12, 1994, the Company entered into an asset purchase
agreement with Northwood Retirement Community, Inc. (NRCI), an
unaffiliated, Pennsylvania, nonprofit corporation. Under the agreement,
the Company sold the land, building, furniture and fixtures, with a
carrying amount of $2,006,365 associated with the Northwood nursing
facility to NRCI for approximately $4,800,000 resulting in a gain of
$2,793,635. On October 21, 1994, NRCI assigned to CCS all rights,
title and interest of the asset purchase agreement and on November 30,
1994, the facility was sold to CCS. The Company received two notes,
a $975,000 non-interest bearing demand note and a $200,000, 5-year 9%
interest bearing note and the remainder of the purchase price in cash.
During 1995, the Company received payment on the $975,000 note. In
addition, the Company agreed to enter into a 3-year, noncompete
agreement in conjunction with the sale (see Note 7).
NOTE 6: NOTE RECEIVABLE
The Company has an outstanding note receivable from CCS at December 31,
1996 and 1995 which was received in connection with the sale of the
Northwood facility in November, 1994. The note, in the amount of
$200,000 is receivable in quarterly installments of interest only at
9% with the principal payment due on November 30, 1999. The Company's
right to payments under the note agreement are subordinate to the
rights of the senior debtholders on the Northwood facility.
23
<PAGE>
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995, and 1994
NOTE 7: NONCOMPETE AGREEMENT
In accordance with the terms of the asset purchase agreement between
the Company and NRCI dated August 12, 1994, the Company received as
part of the proceeds of the sale, $100,000 for a noncompete agreement.
The terms of the noncompete agreement are that the Company cannot
enter into an agreement to purchase a nursing facility or be the sole
manager of a nursing facility in a twenty-mile radius of the Northwood
facility prior to November 30, 1997.
NOTE 8: FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair values of its financial instruments.
Cash and cash equivalents: The carrying amounts reported in the
balance sheets approximate their fair value.
Notes receivable: The carrying amounts reported in the balance sheets
approximate their fair value.
Marketable Debt Securities: These assets consist of U.S. Treasury
Bonds and Notes, and corporate bonds, and are reflected at their
current traded value.
<TABLE>
<CAPTION>
1996 1995
-------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- -------- -----
<S> <C> <C> <C> <C>
Cash and
Cash
Equivalents $ 162,957 $ 162,957 $ 229,751 $ 229,751
Notes
Receivable 200,000 200,000 200,000 200,000
Marketable
Debt
Securities 1,455,873 1,455,873 1,642,097 1,642,097
</TABLE>
24
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company's accountants are Zelenkofske & Axelrod & Co., Ltd.,
certified public accountants. During 1996, there was no change in the
Company's accountants nor were there any disagreements with the
accountants on accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company has five (5) members of its Board of Directors who are
listed below including Executive Offices held by each, if any. As
noted in the table below, four (4) members of the Board have been
serving in the capacity for twenty-four (24) years.
<TABLE>
<CAPTION>
Director Shares Percent
Officer Name Principal Occupation Since Age Nursecare of Class
- -------------- -------------------- -------- --- --------- --------
<S> <C> <C> <C> <C>
James F. President
Hubbert Nursecare Health Centers, Inc. 1969 57 5,000 .9%
Frank H. CPA
Slattery Colucci & Slattery, P.C.
Horsham, PA
Secretary-Treasurer of Nursecare Health
Centers, Inc. since 1981 (and Treasurer
since 1979) 1971 56 5,000 .9%
Harry Half-A-Car, Inc.
Wolfington 308 Lancaster Avenue
Wynnwood, PA 1971 58 5,000 .9%
Joseph Zoll President, Co-Owner Associates for
Research, Testing and Certifying Children
and Adults Ascertaining Learning Potential
of Disability also Marketing and Analysis
Survey Firm 1971 56 41,035 7.62%
F. Joseph Pennsylvania State Senator
Loeper, Majority Leader
Jr. Pennsylvania Senate 1990 52 -0- -0-
</TABLE>
25
<PAGE>
ITEM 11. REMUNERATIONS OF MANAGEMENT
Nursecare Health Centers, Inc. does not have any retirement benefits
for its Officers or Directors. The following table indicates the
aggregate cash and cash equivalent form of remuneration including
salaries, Directors fees, commissions and bonuses of all Officers of
the Company in excess of Fifty Thousand Dollars ($50,000.00) each and
all Officer and Directors of the Company as a group.
<TABLE>
<CAPTION>
Name Capacity
of Individual in
or Persons Which Cash and Cash Equivalent
as a Group Served Forms of Remuneration
---------- ------ ------------------------
Salaries, Securities or prop-
Director fees, erty insurance bene-
commissions and fits or reimburse-
bonuses ment, personal bene-
fits
<S> <C> <C>
James F. Hubbert President $165,192 $23,950
All Officers and
Directors as a
Group $265,622 $29,475
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The first following table sets forth the names as of December 31,
1996, of persons owning of record, directly, indirectly or
beneficially more than five percent (5%) of Nursecare Health Centers,
Inc. Common Stock.
<TABLE>
<CAPTION>
TABLE 1
-------
<S> <C> <C> <C>
Title of Name and Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
- --------- --------------------------- ----------------------- ----------
Common Northeastern Investment Of Record and 56%
Stock Company, Inc. Beneficially: 300,000
Class A 3 Station Square Shares
Paoli, PA
Common Joseph C. Zoll 41,035 Shares 7.62%
Stock 2240 Deerfield
Class A Media, PA
</TABLE>
The second following table sets forth the amount of stock owned of
record, beneficially, directly or indirectly, by the Directors and
Officers of Nursecare Health Centers, Inc., as a group and
individually as appropriate of Northeastern Investment Company, Inc.
As of December 31, 1996, Northeastern Investment Company, Inc. had
one (1) class of Common Stock outstanding and the total amount issued
was one hundred seventy-three thousand five hundred seventy-six
(173,576) shares.
26
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
<TABLE>
<CAPTION>
Amount of
Beneficially Percent
Title of Class Owned of Class
-------------- ----- --------
<S> <C> <C>
Common Stock* 152,005 87.57%
</TABLE>
*James F. Hubbert, President of Nursecare Health Centers, Inc. and
Chairman of its Board of Directors, owns 140,000 shares of the above
amount. This represents 80.66 percent of the outstanding shares.
Northeastern Investment Company, Inc. has authorized Mr. Hubbert to
vote its shares of Nursecare Health Centers, Inc., at the Annual
Meeting.
ITEM 13. CERTAIN RELATIONS AND RELATED TRANSACTIONS
Frank H. Slattery, a director of the Company and a partner in a
certified public accounting firm provided some accounting services
for the Company during 1996. During the period covered in this report
he had a 50% equity interest in the CPA firm.
PART IV
ITEM 14. EXHIBITS
Previously submitted Exhibits are incorporated herein by reference.
They include the Articles of Incorporation of the Company, its bylaws,
financial statements and material agreements concerning the sale of
the Company's two nursing homes.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Security
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned therefore duly authorized.
NURSECARE HEALTH CENTERS, INC.
Dated: March 27, 1997 __________________________________
JAMES F. HUBBERT
President and Chairman of the Board
28
<PAGE>
FOOTNOTES
1. Mr. Hubbert is also the President and Chairman of the Board of
Northeastern Investment Company, Inc. and by reason thereof is
beneficial owner of the shares held by Northeastern Investment Company,
Inc. (See ITEM 12.)
2. 5,000 of the shares owned by Mr. Zoll and all shares owned by the
other Directors were acquired pursuant to stock options exercised in
January, 1987. No other stock options exist.
3. Mr. Hubbert and Mr. Slattery are first cousins.
4. The total percentage of shares owned by the Directors as a group of all
outstanding shares of the Company is 10.4%.
5. The Company maintains life and health insurance for its Officers as
well as a medical and dental protection plan for its President. The
President also has use of the Company automobile. The Company
reimburses its President for travel relating to Company business.
Indirect remuneration includes all payments on account of these
benefits.
6. The Board of Directors met on five (5) occasions in 1996. Of the
figure included above, $25,000 was paid to Directors for meetings
attended. $24,364.75 was paid to Colucci & Slattery, P.C. for
accounting services. The Company's Assistant Secretary, Treasurer and
Board Member Frank H. Slattery is a 50% partner in the firm.
29
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000073354
<NAME> NURSECARE HEALTH CENTERS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 162,957
<SECURITIES> 1,455,873
<RECEIVABLES> 15,429
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 182,291
<PP&E> 53,851
<DEPRECIATION> 51,193
<TOTAL-ASSETS> 1,937,442
<CURRENT-LIABILITIES> 649,646
<BONDS> 0
0
0
<COMMON> 55,325
<OTHER-SE> 1,232,471
<TOTAL-LIABILITY-AND-EQUITY> 1,937,442
<SALES> 0
<TOTAL-REVENUES> 20,935
<CGS> 0
<TOTAL-COSTS> 530,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (309,841)
<INCOME-TAX> 0
<INCOME-CONTINUING> (309,841)
<DISCONTINUED> 275,889
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,952)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
