FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1997
Commission file number 0-15893
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Nevada 91-1256470
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
38 Pond Street, Suite 305
Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
(508) 520-2422
Registrant's telephone number, including area code
Not applicable
Former name, former address and former fiscal year,
if changed since last report.
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 periods that the registrant was
required to file such report), 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
stock, as of September 30, 1997.
Common Stock, $.012 Par Value -- 15,859,583
<PAGE>
INDEX
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
PAGE # PART I. FINANCIAL INFORMATION
------ ------- ---------------------
Item 1. Financial Statements (Unaudited)
3 Condensed Consolidated Balance Sheets -- September 30, 1997 and
December 31, 1996
4 Condensed Consolidated Statements of Operations -- Three months
and Nine months ended September 30, 1997 and 1996
5 Condensed Consolidated Statements of Cash Flows -- Nine months
ended September 30, 1997 and 1996
6 Notes to Condensed Consolidated Financial Statements --
September 30, 1997
7-11 Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
12 - 14 Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
15 SIGNATURES
2
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
=================================================================================================================
Condensed Consolidated Balance Sheets
=================================================================================================================
(unaudited)
ASSETS: 09/30/97 12/31/96
- ------ ----------- -----------
<S> <C> <C>
Current assets:
Cash $ 44,575 $ 37,141
Accounts receivable (net of allowance for doubtful accounts of $760,000 in
1997 and $977,000 in 1996) 1,079,198 1,817,036
Other account receivables 907,068 535,225
Other current assets 64,469 176,403
----------- -----------
Total current assets 2,095,310 2,565,805
----------- -----------
Property and equipment, at cost:
Equipment 1,191,167 1,316,166
Less accumulated depreciation and amortization (864,243) (862,305)
----------- -----------
Property and equipment, net 326,924 453,861
----------- -----------
Other assets:
Goodwill (net of accumulated amortization of $441,000 in 1997 and $385,000
in 1996) 2,371,754 2,428,463
Other 378,665 132,437
----------- -----------
Total other assets 2,750,419 2,560,900
----------- -----------
TOTAL $ 5,172,653 $ 5,580,566
=========== ===========
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
Current liabilities:
Short-term debt, current portion of long-term debt and lease obligations $ 902,705 $ 353,023
Accounts payable 827,178 778,358
Accrued payroll, taxes, & benefits 409,176 377,085
Accrued expenses and other liabilities 121,954 173,038
----------- -----------
Total current liabilities 2,261,013 1,681,504
----------- -----------
Long-term debt 796,269 1,804,550
----------- -----------
Total liabilities 3,057,282 3,486,054
----------- -----------
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized; issued 1,727,305 in 1997 and 1996 1,727,305 1,727,305
Common stock, $.012 par value, 50,000,000 shares authorized; issued
16,559,583 in 1997 and 16,369,583 in 1996 198,715 196,435
Additional paid-in capital 8,293,329 8,230,611
Accumulated deficit (8,016,478) (7,972,339)
----------- -----------
2,202,871 2,182,012
Less-treasury stock, 700,000 shares, at cost (87,500) (87,500)
----------- -----------
Total stockholders' equity 2,115,371 2,094,512
----------- -----------
TOTAL $ 5,172,653 $ 5,580,566
=========== ===========
- -----------------------------------------------------------------------------------------------------------------
See notes to Condensed Consolidated Financial Statements.
=================================================================================================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
==================================================================================================
Condensed Consolidated Statements of Operations (Unaudited)
==================================================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
==================================================================================================
1997 1996 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue, net $ 1,243,220 $ 2,281,626 $ 5,895,281 $ 6,901,137
------------ ------------ ------------ ------------
Cost and expense:
Operating costs 1,168,596 1,856,126 4,668,926 5,258,124
Administrative and selling costs 608,026 823,858 1,755,718 1,662,655
Depreciation and amortization 50,934 59,930 154,575 175,486
------------ ------------ ------------ ------------
Total cost and expense 1,827,556 2,739,914 6,579,219 7,096,265
------------ ------------ ------------ ------------
Operating income/(loss) (584,336) (458,288) (683,938) (195,128)
------------ ------------ ------------ ------------
Interest expense, net 71,396 83,645 211,773 207,356
Other expense/(income) (6,328) 0 (49,563) 0
------------ ------------ ------------ ------------
Total other expense/(income) 65,068 83,645 162,210 207,356
------------ ------------ ------------ ------------
Income/(loss) before income taxes (649,404) (541,933) (846,148) (402,484)
Gain/(loss) on sale of clinics 0 0 802,724 0
Income tax provision 0 49,502 715 55,788
------------ ------------ ------------ ------------
Net loss $ (649,404) $ (591,435) $ (44,139) $ (458,272)
============ ============ ============ ============
Net loss per share: $ (0.04) $ (0.03) $ (0.00) $ (0.03)
============ ============ ============ ============
Average shares outstanding 15,722,833 15,389,965 15,722,833 15,389,965
- --------------------------------------------------------------------------------------------------
See notes to Condensed Consolidated Financial Statements.
==================================================================================================
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
===================================================================================================
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30,1997 and 1996
===================================================================================================
1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (44,139) $(458,272)
Adjustments to reconcile net income to net cash from (used by) operating
activities:
Depreciation and amortization 154,575 174,733
(Gain)/loss on sale of clinics (802,724) 0
Non-cash expenses 416 154,645
Decrease (increase) in accounts receivable 42,654 (239,588)
Decrease (increase) in other current assets 10,400 (49,783)
Decrease (increase) in other assets and deferred costs 0 (12,109)
Increase (decrease) in accounts payable and accrued expenses 299,033 262,668
--------- ---------
Net cash used by operating activities (339,785) (167,706)
--------- ---------
Cash Flows From Investing Activities:
Proceeds from sale of clinics 884,361 0
Purchases of equipment (10,180) (21,855)
--------- ---------
Net cash provided by (used in) investing activities 874,181 (21,855)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from issuance of debt 450,000 180,000
Proceeds from exercise of stock options 0 10,000
Non-cash proceeds from issuance of common stock 0 248,374
Principal payments on debt and lease obligations (976,962) (243,588)
--------- ---------
Net cash provided by (used in) financing activities (526,962) 194,786
--------- ---------
Net increase in cash 7,434 5,225
Cash, beginning of period 37,141 85,557
--------- ---------
Cash, end of period $ 44,575 $ 90,782
========= =========
- ---------------------------------------------------------------------------------------------------
See notes to Condensed Consolidated Financial Statements.
===================================================================================================
</TABLE>
Footnote: The Company issued 90,000 and 100,000 shares of common stock
in conjunction with proceeds from the issuance of debt and
in satisfaction of the employers 401(K) matching liability,
respectively.
The Company satisfied approximately $462,000 of notes
payable incurred in connection with business acquisitions
through the assignment of accounts receivables related to
those businesses.
5
<PAGE>
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Rule 10-01 of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the nine month
period ended September 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. The results should
be read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's Form 10-KSB for the year ended December 31,
1996.
6
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's discussion and analysis of financial condition and
results of operations
General
Consolidated Health Care Associates, Inc. "the Company", provides ancillary
health care and outpatient rehabilitation services through a network of
outpatient clinics principally in the Northeast and Mid-Atlantic regions. The
Company owns and operates eight clinics under the name PTS Rehab, Inc. ("PTS")
of which four are in Massachusetts, one is in Pennsylvania, and three are in
Delaware. The Company closed one non-performing clinic in Massachusetts late in
the second quarter in 1997. The Company also provides managed ancillary health
care rehabilitation services through contract staffing under the name
Consolidated Rehabilitation Services, Inc ("CRS"), principally in Massachusetts
and New York.
In 1996, the company began development of a program of Managed
Rehabilitation Services ("MRS"), pursuant to which the Company would furnish
contract development, staffing, administrative, payroll, billing, collection and
management services to local, independently owned community based clinics,
nursing homes and home health agencies. The Company expected that over time the
MRS business would become the substantial focus of the Company's operations.
During the third quarter 1997, the Company elected to terminate the current MRS
arrangements and not to pursue any additional development of the MRS product,
primarily as a result of the decision made by the Board of Directors to pursue a
merger or sale of the company, and to a lesser extent, as a result of increased
cash flow deficiencies being experienced by the Company.
In September 1997, the Company announced that it had entered into a
non-binding Letter of Intent to sell certain operating assets of the Company
with Olympus Health Care Group and was continuing to pursue the sale of the
remaining assets of the Company. Proceeds from the proposed transactions, along
with the collections of the Company's receivables, would be used to satisfy the
Company's outstanding liabilities, although there are no assurances that the
completion of such transactions will enable the Company to completely satisfy
all liabilities. See "Other Information" below.
Results of operations
Net revenues decreased to $5,895,281 for the nine months ending September
30, 1997 from $6,901,137 as compared to the nine month period ended September
30, 1996, a decrease of $1,005,856 or 14.6%. Net revenues for the quarter ending
September 30, 1997 declined 45.6% to $1,243,220 from $2,281,626 as compared to
the same period of time during 1996. The year to date net revenue decrease is
primarily from a direct result of four fewer Company owned clinics in operation
during the nine month period ended September 30, 1997 as compared to the similar
nine month period during 1996. In February 1997, the
7
<PAGE>
Company's PTS division sold three of its clinics in Pennsylvania ("the
Disposition") and in March 1997, returned one clinic in Florida to its former
owner. Lower net revenues during the first nine months of 1997 are also
attributable to higher accruals for contractual allowances as compared to
reserves for contractual allowances recorded during the same period in 1996.
Higher accruals of approximately $223,000 are reflected in the first nine months
of 1997 and as a result, cost are not comparable to those accruals recorded
during the same period in 1996.
Operating costs represented 94% and 79% of revenue during the quarter and
nine months ended September 30, 1997 compared to 81% and 76%, respectively. The
increase in operating costs during 1997 as compared to the same period in 1996
is specifically related to higher subcontract labor and benefit cost associated
with the Company's nursing home rehabilitation contracts and MRS start up costs,
and to a lesser extent, as a result of lower revenues resulting from the
seasonality of the Company's outpatient business. During 1997, the Company
continued the integration of the Company's contract service division in the
Company's out-patient clinics which allowed certain fixed overhead costs to be
reduced, however during the third quarter 1997, the Company was not able to
lower fixed costs at a ratio comparable to the changes occurring in the general
business and from the regular seasonal decline in outpatient revenue.
Administrative and selling costs constituted 49% and 30% of net revenue
during the quarter and nine months ended September 30, 1997 as compared to 36%
and 24% for the same periods of 1996. The increase reflects $93,063 in higher
administrative and selling costs for nine months ended September 30,1997 as
compared to the nine months ended September 30, 1996. The increase costs are
associated with the Company's continued effort to negotiate an agreement to
effectuate a merger or sale of the Company, and are attributable to increase
legal and accounting costs. During the first three quarters of 1997, the Company
accrued for accounting, legal, consulting and financing costs at a higher rate
and as a result there are no comparable accruals during the first six months of
1996, however the Company did record a significant accounting and legal charge
in the third quarter of 1996.
Depreciation and amortization decreased by $20,911 during the nine months
ended September 30, 1997 as compared to the same period during 1996. The
decrease is attributable to lower depreciation expenses resulting from the sale
of certain fixed assets in February and March 1997.
Interest expense increased by $4,417 for the nine months ended September
30, 1997 as compared to the same period in 1996. The increase is primarily the
result of the increased use of the Company's factoring arrange ment to support
its operations and interest expense accrued on term debt, offset by lower
interest expense resulting from the use of proceeds from the Disposition to
retire certain current and long-term debt. During the third quarter 1997, the
Company was advanced $300,000 under an arrangement with Renaissance, a major
stockholder of the Company. Interest expense related to this loan accrues at a
rate of 8% per annum.
8
<PAGE>
Other income increased by $49,563 for the nine months ended September 30,
1997 as compared to the same nine months in 1996, primarily as a result of the
successful negotiations and settlements made to lower liabilities of certain
outstanding accounts payable debt.
On February 28, 1997, the Company completed the sale of three of its four
Pennsylvania clinics for a purchase price of $1,050,000 in cash and a note,
subject to adjustment. The clinics include those located in Millersburg, PA,
Mechanicsburg, PA and Shermansdale, PA. The Company had purchased these clinics
from "the Buyer" in 1993. The cash portion of the transaction was $900,000 which
at the closing was reduced by the payment of certain operating expenses due the
Buyer of $15,636. The Buyer also assumed up to $230,000 in associated
liabilities. Additionally, in January 1997 the Company agreed to satisfy a note
held by the Buyer issued in connection with the 1993 business acquisition in the
approximate amount of $413,000, by assigning and without guarantee as to the
amount of the collect ability to the note holder $484,000 in face amount of
accounts receivable, but only to the extent of collections in the amount due
under the note. The clinics sold accounted for approximately 22% of the
Company's total revenues for the year ended December 31, 1996. The Company is
utilized the proceeds from the Disposition to pay down debt and for other
general corporate purposes.
In March 1997, the Company returned one non-performing clinic in Florida to
its "former owner". The Company assigned approximately $64,000 of net trade
receivables, approximately $4,000 of prepaid assets and approximately $6,000 of
net fixed assets related to the returned clinic to the former owner. In
conjunction with the return of the clinic, the former owner agreed to forgive
the balance of a Company note held in the amount of $48,000, forfeit accrued
earned time benefits in the approximate amount of $10,000, and assumed certain
accounts payable in the approximate amount of $13,000. The returned clinic
accounted for approximately 4.7% of the Company's total net revenues for the
year ended December 31, 1996. The sale of the Pennsylvania clinics and the
return of the Florida clinic resulted in a net gain on sale of assets for the
period ending March 31, 1997 of $802,724.
The Company elected to sell certain Pennsylvania clinics and return the
Florida clinic after determining that current and projected future cash flows of
these operations did not and would not satisfy operating and debt service
requirements.
The Company's tax provision is substantially the result of state income tax
accruals.
As a result of the above factors, the Company incurred a net loss of
$44,139 for the nine months of 1997 as compared to a net loss of $458,272 for
the same period of 1996.
9
<PAGE>
Liquidity and Capital Resources
The Company's liquidity, as measured by its cash increased by $7,434 in the
first nine months of 1997. The increase in cash is primarily the result of the
sale of the Pennsylvania clinics and additional proceeds received from the
issuance of new term debt, less certain financing activities of the Company
described below.
The Company's cash and working capital continues to decline primarily as a
result of operational losses, making it increasingly difficult for the Company
to meet scheduled debt repayments. Additionally, the Company continues to be
dependent upon its factoring arrangements which it has assigned a certain
portion of its accounts receivable to support its operations. The Company's
current factoring arrangement has resulted in availability of funds equal to the
current month's cash collections. The matters described above have resulted in
the Company seeking a merger, sale of the Company assets or to seek additional
outside capital that is required to meet the cash needs of the Company. No
assurances can be given that any additional capital or financing may be
available or if available, that it will be on terms and conditions acceptable to
the Company. Additionally, no assurances can be given that any proposed merger
or sale will occur. If the Company is unsuccessful in achieving the above, this
would have a material adverse effect on the Company.
Net accounts receivable were $1,079,198 at September 30, 1997 compared to
$1,817,036 at December 31, 1996, a decrease of $737,838. In January 1997 the
Company agreed to satisfy a note held by the Buyer issued in connection with the
1993 business acquisition in the approximate amount of $413,000 by assignment to
the note holder of $484,000 in face amount of accounts receivable, but only to
the extent of collections in the amount due under the note. Subsequently,
included in the February 1997 Pennsylvania Disposition were approximately
$230,000 of remaining net accounts receivables related to the clinics included
in the disposition. In the March 1997 return of the Florida clinic to its Former
Owner, net accounts receivable returned were approximately $65,000. Net accounts
receivables further decreased through additional reserves for contractual
allowances of approximately $133,000. The decreases were offset by increased
accounts receivables of approximately $175,000 generated primarily in the CRS
division.
Accounts payable, accrued payroll, taxes and benefits, and accrued other
increased by $29,827 in the first nine months of 1997 as compared to the
balances at December 31, 1996. As the Company continues to incur losses during
1997, its working capital and available cash declined. In response, the Company
extended the time needed to satisfy its obligations to vendors, resulting in
increased accounts payable. Increased accounts payables were offset by the
combined assumption of approximately $269,000 of accounts payable and accrued
payroll and related benefit costs by the Buyer of the Pennsylvania clinics and
by the former owner of the Florida clinic.
Cash provided by investing activities for the nine months ended September
30, 1997 was $874,181, which consisted of net proceeds provided by the sale of
clinics of $884,361 less cash used for the purchases of equipment of $10,180.
The cash portion of the
10
<PAGE>
Pennsylvania disposition was $900,000 which at the closing was reduced by the
payment of certain operating expenses due the Buyer of $15,639.
Financing activities in the first nine months of 1997 used cash of
$526,962. Proceeds from the issuance of debt were $450,000 and payments of
$976,416 were made on term debt. Due to the shortfalls in working capital as
discussed above, the Company discontinued scheduled principal and interest
payments on several of its note payable obligations during 1996. During 1997, in
conjunction with the assignment of accounts receivables and the utilization of
proceeds from the dispositions, the Company cured certain defaults in principal
and interest payments by remitting past-due amounts.
At September 30, 1997 and December 31, 1996, the Company had outstanding
approximately $1,699,000 and $2,158,000 in notes payable and long-term debt,
respectively. At December 31,1996 of such amount, approximately $462,000 related
to clinics included in the February disposition and the March 1997 clinic
returned to the former owner. During the three months ended March 31,1997 by
assignment of accounts receivable from the Company to the note holders, the
remaining balance of these notes were satisfied. Net term debt remaining
decreased during the nine months ended September 30, 1997 primarily as a result
of the continuation of certain scheduled payments of term debt offset by the
issuance of new term debt of $450,000.
Stockholders' equity increased $20,859 during the first nine
months of 1997 due to the issuance of common stock $65,998 offset by the net
loss $44,139.
In January 1997, the Company negotiated a $150,000 promissory note with
Davstar II Managed Investments Corporation N.V. Pursuant to the promissory note,
the Company is obligated to pay interest on the unpaid monthly balance of the
promissory note at a rate of 10% per annum, computed in arrears, with the entire
principal balance plus any unpaid interest due in full in May 1997. In
consideration of the promissory note, the note holder was issued 90,000 shares
of the Company's common stock at $.375 per share. In early April 1997, the
Company subsequently satisfied in full, the outstanding principal and interest
balance under this promissory note.
In July 1997, the Company negotiated a $300,000 promissory note with
Renaissance Capital Group, Inc.. Pursuant to the promissory note, the Company is
obligated to pay interest on the unpaid monthly balance of the promissory note
at a rate of 8% per annum, computed in arrears, with the entire principal plus
any unpaid interest due in full November 20, 1997.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are actions pending against the Company arising out of the normal conduct
of business. In the opinion of management the amounts, if any, which may be
awarded as a result of these claims would not have a significant impact on the
Company's consolidated financial position and results of operations.
Item 2. Changes In Securities
A telephonic Board of Directors meeting was held on July 8, 1997 whereby the
Board unanimously approved a change in the conversion price at which shares of
Series A Preferred Stock can be converted into shares of Common Stock from a
conversion price of $.57 per share to $.38 per share. The Board further resolved
to allow, at the option of the Company, to pay the accumulated preferred
dividends in arrears on the Series A and Series B Preferred Stock in the form of
Common Stock, and to be issued at the applicable conversion price for the Series
A and Series B Preferred Stock, respectively.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of matters to a Vote of Security Holders
None
Item 5 Other Information
The Company announced August 13, 1997 that it had signed a non-binding letter of
intent to sell all of the Company's assets and business to a wholly-owned
subsidiary ("Acquisition Sub") of the Olympus Healthcare Group, Inc.("Olympus").
In addition, Olympus shall assume all of the disclosed liabilities and
obligations of the Company.
The letter of intent contemplated a purchase price of $5,000,000, consisting of
175,620 shares of Olympus common stock, par value $.01 per share, and $750,000
in cash, subject to a working capital adjustment. Additional purchase price of
between $750,000 and $1,200,000, payable in shares of Olympus stock, would be
payable to the Company if Acquisition Sub meets certain targets for adjusted net
operating income in 1998.
On September 30, 1997 the Company announced the signing of a revised Letter of
Intent with Olympus, whereby Olympus would acquire all of the operating assets
and assume certain liabilities of PTS Rehab, Inc. and Consolidated
Rehabilitation Services, Inc., wholly owned subsidiaries of Consolidated Health
Care Associates, Inc. in exchange for 42,553 shares of common stock of Olympus
and $1,400,000 cash, subject to completion of due diligence, signing of a
definitive agreement and approval of Consolidated shareholder along with certain
other customary conditions. The additional purchase price adjustment previously
included in the August 13, 1997 announcement for achieving certain 1998 net
operating income targets was eliminated. The transaction, as announced, was
anticipated to close after a shareholders meeting proposed to be held in
October.
12
<PAGE>
During November 1997, the Company announced the revisions of the Letter of
Intent agreement with Olympus, whereby Olympus would acquire all of the
operating assets and assume certain liabilities of PTS Rehab, Inc. consisting of
the four outpatient clinics located in Attleboro, Leominster, West Bridgewater,
and Berkshire, Massachusetts on premises leased from third parties. The
Transaction contemplates a purchase price of $1,400,000 cash and 12,765 shares
of Olympus common stock, par vlaue $.01 per share. The transaction is
anticipated to close after a shareholders meeting which is proposed to be held
in December 1997. The consummation of the transaction is subject to a number of
conditions, including the signing of a definitive agreement, the approval of
Consolidated's shareholders and certain other customary conditions.
During November 1997 the Company entered into negotiations with Olympus to
provide a Management Agreement whereby Olympus Health Care Group would provide
advisory, supportive, consultive and administrative services and expertise in
the management of the Company's four Massachusetts outpatient clinics ("the
Business"). As of the effective date, Olympus ("the Manager") agrees to act as
operating manager of the Business including all phases of its operations. The
Management Agreement would remain in effect until the proposed transaction with
Olympus has been consummated.
Olympus Health Care Group, Inc. is a privately owned, integrated post-acute
Healthcare services company with extended business activities in inpatient
services, ancillary services, and ambulatory services. The Company's activities
are centered in the New England states, principally in Massachusetts,
Connecticut and Maine.
The foregoing description is qualified by reference to the press release
announcing the proposed transaction, a copy of which is attached to this report
as Exhibit 99.1 and 99.2 and are incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 99.1 Press Release issued by the Registrant on
August 13,1997.
Exhibit 99.2 Press Release issued by the Registrant on
September 30, 1997.
13
<PAGE>
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.
CONSOLIDATED HEALTH CARE
ASSOCIATES, INC.
Dated: November 14, 1997 By: /s/ Robert M. Whitty
------------------------ --------------------
Robert M. Whitty
President
Dated: November 14, 1997 By: /s/ Raymond L. LeBlanc
------------------------ ----------------------
Raymond L. LeBlanc
Chief Financial Officer
14
<PAGE>
Exhibit 99.1 Press release issued by the Registrant on August 13, 1997.
Exhibit 99.2 Press release issued by the Registrant on September 30, 1997.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Consolidated Health Care Associates, Inc.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 44,575
<SECURITIES> 0
<RECEIVABLES> 1,839,198
<ALLOWANCES> (760,000)
<INVENTORY> 0
<CURRENT-ASSETS> 2,095,310
<PP&E> 3,191,167
<DEPRECIATION> (864,243)
<TOTAL-ASSETS> 5,172,653
<CURRENT-LIABILITIES> 2,261,013
<BONDS> 0
0
1,727,305
<COMMON> 198,715
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,172,653
<SALES> 7,529,584
<TOTAL-REVENUES> 5,895,281
<CGS> 4,668,926
<TOTAL-COSTS> 6,579,219
<OTHER-EXPENSES> (49,563)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 211,773
<INCOME-PRETAX> (846,148)
<INCOME-TAX> 715
<INCOME-CONTINUING> (846,148)
<DISCONTINUED> 0
<EXTRAORDINARY> 802,724
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CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
38 Pond Street, Suite 305
Franklin, Massachusetts 02038
FOR IMMEDIATE RELEASE
August 13, 1997
Contact: Robert M. Whitty, President & CEO
(508) 520-2422
CONSOLIDATED HEALTH CARE ANNOUNCES PROPOSED SALE
FRANKLIN, MA - Consolidated Health Care Associates, Inc. (NASDAQ:CHCA) announces
the signing of a non-binding letter of intent with Olympus Healthcare Group,
Inc. whereby Olympus will acquire substantially all of the operating assets and
assume certain liabilities of Consolidated in consideration of $5,000,000,
consisting of 175,620 shares of common stock of Olympus and $750,000 cash,
subject to completion of due diligence, signing of a definitive agreement and
the approval of Consolidated shareholders and certain other customary
conditions. The transaction is currently expected to close after a meeting of
Consolidated shareholders in October.
Robert M. Whitty, President of Consolidated, stated "The proposed combination
with Olympus will be good for all of Consolidated's clients, employees and
shareholders as it will combine our operations with a group that is a
marketplace leader in providing health care to New England. Olympus is in a much
stronger position to assume the continued development of Consolidated's
services."
Consolidated operates nine (9) rehabilitation clinics in Massachusetts,
Pennsylvania and Delaware. In addition Consolidated offers home health
rehabilitation services. Olympus provides a variety of post acute health care
services in the New England regions.
Further information will be available at a later date.
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
38 Pond Street, Suite 305
Franklin, massachusetts 02038
FOR IMMEDIATE RELEASE
September 30, 1997
Contact: Robert M. Whitty, President & CEO
(508)-520-2422
CONSOLIDATED HEALTH CARE ANNOUNCES REVISED PROPOSED SALE
FRANKLIN, MA - Consolidated Health Care Associates, Inc. (NASDAQ:CHCA) announces
the signing of a revised non-binding letter of intent with Olympus Healthcare
Group, Inc. whereby Olympus will acquire all of the operating assets and assume
certain liabilityes of PTS Rehab, Inc. and Consolidated Rehabilitation Services,
Inc., wholly owned subsidiaries of Consolidated Health Care Associates, Inc. in
exchange for 42,553 shares of common stock of Olympus and $1,400,000 cash,
subject to completion of due diligence, signing of a definitive agreement and
approval of Consolidated shareholders and certain other customary conditions. It
is anticipated that the transaction will close after a shareholders meeting in
October.
Robert M. Whitty, President of Consolidated, stated "This revised transaction
with Olympus which constitutes the sale of the Company's Massachusetts
outpatient clinics and the Company's Contract Service business in Massachusetts
and New York, is anticipated to be beneficial for all of the clients and
employees of the respective Consolidated subsidiaries."
The Company also announced that Consolidated will pursue the sale of the
remaining Company's outpatient clinics in Delaware and Pennsylvania. Proceeds
from the transactions, along with the collections of the Company's receivables,
will be used to satisfy the Company's outstanding liabilities. There are no
assurances that such transactions will enable the Company to completely pay all
liabilities.
Olympus Healthcare Group, Inc. is a privately owned, integrated post acute
healthcare services company, located in Westborough, Massachusetts. Olympus
provides a variety of post acute health care services in a number of sites
ranging from inpatient (hospitals, skilled nursing facilities) to ambulatory
(outpatient, day treatment center, home) throughout the New England region.
