FORM 10-QSB-QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from to
Commissions file number 94-2669749
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
CALIFORNIA IRS EIN 94-2669749
(State of incorporation)
9811 Bigge Avenue, Oakland, CA 94603
(Address of principal executive office)
(510) 639-2100
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the issuer was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: 2,519,550 shares.
<PAGE>
Item 1. Financial Statements
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
ASSETS 1995
Current Assets:
Cash $ 86,472
Management fee receivable, less allowance
for doubtful accounts of $434,857 1,089,394
Operating supplies 37,204
Prepaid and other assets 58,477
Advances to Medical Corporations 77,098
Advances to Shareholders 19,866
Short-term notes receivable from
shareholder 51,898
Total current assets 1,420,409
Property and equipment:
Equipment and furnishings 1,061,619
Leasehold improvements 488,835
Medical equipment 843,786
2,394,240
Less accumulated depreciation and
amortization 2,141,537
252,703
Other:
Deposits and other 44,035
Goodwill, less accumulated amortization
of $251,104 317,820
Other intangibles, less accumulated
amortization of $206,459 50,638
412,493
$2,085,605
See accompanying notes to consolidated financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' CAPITAL DEFICIT 1995
Liabilities:
Accounts payable $ 208,001
Short-term financing 4,955,989
Current portion of long-term debt 350,000
Accrued payroll 119,244
Other accruals 54,005
Total current liabilities 5,687,239
Long-term debt 0
Total Liabilities 5,687,239
Shareholders' Capital Deficit:
Common stock, no par value, authorized
10,000,000 shares, issued and outstanding
2,519,550 shares 3,571,805
Additional paid-in capital 62,704
Deficit (7,186,335)
(3,551,826)
Notes receivable, Medical Corporations (49,808)
(3,601,634)
$2,085,605
See accompanying notes to consolidated financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF LOSS
QUARTER ENDED DECEMBER 31, 1994 1995
Revenues $ 916,865 $207,822
Less net fees to Medical Corporations (282,817) 7,816
Net revenues 634,048 215,638
Costs and expenses:
Salaries and benefits 438,928 167,341
Medical and office supplies 52,903 7,339
Other operating expenses 787,563 92,948
Depreciation and amortization 34,817 40,117
Interest 139,071 146,388
Total costs and expenses 1,453,282 454,134
Loss before income taxes (benefits) (819,234) (238,496)
Income taxes (benefit) 656 0
Net loss $ (819,890) $(238,496)
Net loss per share $(0.33) $(0.09)
See accompanying notes to consolidated financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF LOSS
SIX MONTHS ENDED DECEMBER 31, 1994 1995
Revenues $2,014,909 $334,664
Less net fees to Medical Corporations (623,831) 37,913
Net revenues 1,391,078 372,577
Costs and expenses:
Salaries and benefits 871,561 349,846
Medical and office supplies 134,015 11,927
Other operating expenses 1,081,437 238,898
Depreciation and amortization 88,173 79,349
Interest 234,788 286,516
Total costs and expenses 2,409,974 966,536
Loss before income taxes (benefits) (1,018,896) (593,959)
Income taxes (benefit) 656 0
Net loss $(1,019,552) $(593,959)
Net loss per share $(0.40) $(0.24)
See accompanying notes to consolidated financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1994 1995
Cash flows from operating activities:
Net loss $(1,019,552) $(593,959)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 88,173 79,349
Provision for doubtful accounts 509,216 33,580
Loss on disposal of equipment 7,145 768
Changes in assets and liabilities:
Management fee receivable (171,557) (235,275)
Operating supplies and other
current assets (10,940) 104,261
Deposits and other 2,717 0
Accounts payable and other accrued
expenses (264,139) ( 46,995)
Net cash used in operating activities (788,937) (658,271)
Cash flows from investing activities:
Acquisition of property and equipment (14,061) (10,540)
(Increase) decrease in advances to and
notes receivable from shareholders, net 1,055 8,125
Net cash used in investing activities (13,006) (18,665)
Cash flows from financing activities:
Proceeds from short-term financing, net 881,143 645,593
Net cash provided by financing activities 881,143 645,593
Net increase (decrease) in cash and cash
equivalents 79,200 (31,343)
Cash and cash equivalents, beginning of
period 98,649 117,815
Cash and cash equivalents, end of period $177,849 $ 86,472
See accompanying notes to consolidated financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated balance sheet as of December
31, 1995, the related consolidated statements of loss for the
quarters and six months ended December 31, 1994 and December 31,
1995, and the related consolidated statements of cash flows for
the six months ended December 31, 1994 and December 31, 1995 have
not been audited. However, in the opinion of management, the
consolidated financial statements include all adjustments
necessary for a fair presentation of the financial position and
the results of operations and cash flows for the periods
presented. For further information, refer to the audited
consolidated financial statements and accompanying footnotes
included in the Company's Form 10-KSB for the year ended June 30,
1995.
Note 2. Going Concern and Management's Plans
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern; they
do not include adjustments relating to the recoverability of
recorded asset amounts and classification of recorded assets and
liabilities. The going concern basis may not be appropriate
since the Company has an accumulated deficit of $7,186,000 at
December 31, 1995, at which date its total liabilities exceeded
its total assets by $3,602,000 and its current liabilities
exceeded its current assets by $4,267,000. Also, the Company
incurred losses of $6,482,000 since fiscal year 1992. In
addition, as discussed in Note 3, as of December 31, 1995, the
Medical Corporations have extended $4,495,000 to the Company as
short-term financing from the cash they received from the
Purchaser, and the Purchaser has extended $461,000, net of cash
receipts from accounts receivable, to the Company as short-term
financing. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. In December
1994, the Company's management met with the Purchaser to discuss
continuation of a prior additional funding arrangement. The
Purchaser agreed to continue the additional funding arrangement
on a month-to-month basis. Since then the Company's management
has met on numerous occasions with the Purchaser to discuss the
current status of the Company's operations and the additional
funding arrangement. The Purchaser is reviewing this funding
arrangement; in the meantime, the additional funding arrangement
has continued, but on a more limited basis.
The Medical Corporation contract with the City of Oakland
expired on June 30, 1995. That contract provided about 15% of
Medical Corporations' revenues in fiscal year 1995.
The Company and the Medical Corporations entered into a new
Sublease and Facilities Management Agreement, effective July 1,
1995, whereby the Company no longer absorbs all income and losses
of the Medical Corporations. In return for providing the
facilities and equipment as well as administrative and business
development functions, the Company is reimbursed the cost of
leased facilities and equipment, charges rent on owned equipment,
and earns a management fee equal to fifteen percent (15%) of the
Medical Corporations' health care revenues. All non-physician
staff at the medical clinics are now employees of the Medical
Corporations (as were the physicians). In addition to its
management fees, the Company generates revenues through its Work
Fitness Institute, rental of equipment, and interest on loans.
Management fees of $119,000 and $250,000 were earned during the
quarter and six months ended December 31, 1995, respectively.
To reduce operating losses and improve operating cash flows,
the Company is focusing on business development for the Medical
Corporations. The areas of concentration have included: reasons
for the high attrition rate; improvement of quality of service
and care; continued efforts to broaden the patient base; and
alliances with provider and/or patient groups.
Note 3. Short-term Financing
In July 1993, Spectrum Medical Care, A Medical Group, Inc.
(fka Interstate Environmental Medical Group, Inc.), a California
professional corporation, Interstate Environmental Medical
Group, Physicians and Surgeons, Inc., a Washington professional
corporation, (together, the "Medical Corporations") and the
Company entered into a Sales and Subservicing Agreement
("Agreement") with NPFII, Inc. ("Purchaser"). The Purchaser
agreed to purchase from the Medical Corporations and the Company
up to 85% of the eligible accounts receivable with recourse, as
defined in the Agreement, up to a total commitment of $2 million.
As of December 31, 1995, the total funding received by the
Medical Corporations and the Company, net of cash receipts from
the accounts receivable, was $4,965,000 or $2,965,000 over the
total commitment amount. The over-funding, which represents a
default under the Agreement, and additional funding subsequent to
December 31, 1995 have been discussed with the Purchaser who has
continued the additional funding arrangement on a more limited
basis. The financing fee for this arrangement is 13.5% per annum
of the total funding, net of cash receipts from accounts
receivable. As of December 31, 1995, the Medical Corporations
extended $4,495,000 to the Company as short-term financing from
the cash they received from the Purchaser, and the Purchaser
extended $461,000, net of cash receipts from accounts receivable,
to the Company as short-term financing.
Item 2. Management's Discussion and Analysis
On December 31, 1995 the Company had Sublease and Facilities
Management Agreements with the Medical Corporations' five medical
clinics located in Oakland, Berkeley, and Hayward, California
and Seattle, Washington and operated its rehabilitation clinic in
conjunction with one of the medical clinics in Oakland,
California. As indicated in Note 2, the new Sublease and
Facilities Management Agreement between the Company and the
Medical Corporations established a management fee to the Company
equal to 15% of the Medical Corporations' revenues, but
eliminated the pass through of revenues and expenses of the
Medical Corporations. Also, all non-physician staff at the
medical clinics became employees of the Medical Corporations.
Quarter Ended December 31, 1995 compared
to Quarter Ended December 31, 1994
Net loss for the quarter ended December 31, 1995 was $238,496
or $0.09 per share, compared to a net loss of $819,890 or $0.33
for the quarter ended December 31, 1994.
Gross revenues for the quarter ended December 31, 1995 were
$207,822, a decrease of $709,043 or 77% compared to the quarter
ended December 31, 1994. This decrease was primarily accounted
for by the elimination of the Medical Corporations' revenues
($836,000 last year) as offset by management fees ($119,000). As
a comparision, the Medical Corporations' comparable revenues for
the current quarter were $693,000, a decrease of $143,000 or 17%,
primarily due to the expiration of the City of Oakland contract.
The $238,000 net loss consisted of a $85,000 loss relating to
the management of the Medical Corporations' clinics; $146,000 of
interest charges; and a $7,000 operating loss at its
rehabilitation clinic.
Liquidity and Capital Resources
Note 2 of the Notes to Consolidated Financial Statements
discusses the going concern issue.
The Company's cash balance at December 31, 1995 was $86,472,
while the Company's working capital deficit was $4,266,831, a
decline of $524,000 since June 30, 1995. As indicated in
Footnote 3 to the consolidated financial statements, funding of
cash requirements is provided through the sale of the Medical
Corporations' and the Company's accounts receivable to the
Purchaser and the subsequent transfer of such funds from the
Medical Corporations to the Company. Pursuant to an earlier
agreement, the Purchaser has provided additional funding in
excess of the amount provided by the sale of receivables.
However, the Purchaser is evaluating this funding arrangement,
and there is no assurance that the amount of such funding will
continue or that alternative or supplemental sources of funding
will be available.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Previously reported.
Items 2 through 3 - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
On December 15, 1995, the registrant held is annual meeting
of shareholders and Don R. Livingston (1,334,735 votes FOR and
1,000 votes withheld), Harry W. Brooks, Jr. (1,334,735 votes FOR
and 1,000 votes withheld), Frederick Foston (1,334,735 votes FOR
and 1,000 votes withheld for 1,000 votes withheld), and Milton
Sanders (1,334,735 votes for and 1,000 votes withheld) were
elected as directors for the next fiscal year. In addition, BDO
Seidman was approved (1,334,585 votes FOR and 150 votes
ABSTAINED) as the registrant's independent accountants for the
June 30, 1996 fiscal year.
Items 5 through 6 - Not applicable.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
June 28, 1996 /s/ George Fujikawa
George Fujikawa
Vice President and
Chief Financial Officer
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<NAME> OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
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<PERIOD-END> DEC-31-1995
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<SECURITIES> 0
<RECEIVABLES> 1,089,394
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<PP&E> 2,394,240
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0
0
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<SALES> 207,822
<TOTAL-REVENUES> 207,822
<CGS> (7,816)
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (238,496)
<INCOME-TAX> 0
<INCOME-CONTINUING> (238,496)
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