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 September 30, 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
SEPTEMBER 30,
ASSETS 1995
Current Assets:
Cash $ 222,406
Management fee receivable, less allowance
for doubtful accounts of $429,323 967,238
Operating supplies 148,855
Prepaid and other assets 90,689
Advances to Medical Corporations 77,098
Advanes to Shareholders 6,741
Short-term notes receivable from
shareholder 51,898
Total current assets 1,564,925
Property and equipment:
Equipment and furnishings 1,058,213
Leasehold improvements 488,835
Medical equipment 841,229
2,388,277
Less accumulated depreciation and
amortization 2,121,226
267,051
Other:
Deposits and other 44,035
Goodwill, less accumulated amortization
of $241,618 327,305
Other intangibles, less accumulated
amortization of $196,139 60,958
432,298
$2,264,274
See accompanying notes to consolidated financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30,
LIABILITIES AND SHAREHOLDERS' CAPITAL DEFICIT 1995
Liabilities:
Accounts payable $ 200,244
Short-term financing 4,897,709
Current portion of long-term debt 350,000
Accrued payroll 119,827
Other accruals 59,633
Total current liabilities 5,627,413
Long-term debt 0
Total Liabilities 5,627,413
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 (6,947,840)
(3,313,331)
Notes receivable, Medical Corporations (49,808)
(3,363,139)
$2,264,274
See accompanying notes to consolidated financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF LOSS
QUARTER ENDED SEPTEMBER 30, 1994 1995
Revenues $1,098,044 $126,842
Less net fees to Medical Corporations (341,014) 30,097
Net revenues 757,030 156,939
Costs and expenses:
Salaries and benefits 432,633 182,504
Medical and office supplies 81,112 4,588
Other operating expenses 293,874 145,950
Depreciation and amortization 53,356 39,232
Interest 95,717 140,128
Total costs and expenses 956,692 512,402
Loss before income taxes (benefits) (199,663) (355,463)
Income taxes (benefit) 0 0
Net loss $ (199,663) $(355,463)
Net loss per share $(0.08) $(0.14)
See accompanying notes to consolidated financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTER ENDED SEPTEMBER 30, 1994 1995
Cash flows from operating activities:
Net loss $(199,663) $(355,463)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 53,356 39,232
Loss on disposal of equipment - 768
Changes in assets and liabilities:
Management fee receivable (232,202) (79,539)
Operating supplies and other
current assets (16,910) (39,602)
Accounts payable and other accrued
expenses (187,808) ( 48,541)
Net cash used in operating activities (583,228) (483,145)
Cash flows from investing activities:
Acquisition of property and equipment 0 (4,576)
(Increase) decrease in advances to and
notes receivable from shareholders, net (5,000) 5,000
Net cash used in investing activities (5,000) 424
Cash flows from financing activities:
Proceeds from short-term financing, net 497,101 587,312
Net cash provided by financing activities 497,101 587,312
Net increase (decrease) in cash and cash
equivalents (91,126) 104,591
Cash and cash equivalents, beginning of
period 98,649 117,815
Cash and cash equivalents, end of period $ 7,523 $222,406
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 September 30,
1995, the related consolidated statements of loss for the quarters
ended September 30, 1994 and September 30, 1995, and the related
consolidated statements of cash flows for the quarters ended
September 30, 1994 and September 30, 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 $6,948,000 at September 30, 1995, at which
date its total liabilities exceeded its total assets by $3,363,000
and its current liabilities exceeded its current assets by
$4,062,000. Also, the Company incurred losses of $6,244,000 since
fiscal year 1992. In addition, as discussed in Note 3, as of
September 30, 1995, the Medical Corporations have extended $4,481,000
to the Company as short-term financing from the cash they received
from the Purchaser, and the Purchaser has extended $417,000, 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 $131,000
were earned during the quarter ended September 30, 1995.
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 September 30, 1995, the total
funding received by the Medical Corporations and the Company, net of
cash receipts from the accounts receivable, was $4,790,000 or
$2,790,000 over the total commitment amount. The over-funding, which
represents a default under the Agreement, and additional funding
subsequent to September 30, 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 September 30, 1995, the Medical Corporations
extended $4,481,000 to the Company as short-term financing from the
cash they received from the Purchaser, and the Purchaser extended
$417,000, net of cash receipts from accounts receivable, to the
Company as short-term financing.
Item 2. Management's Discussion and Analysis
On September 30, 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 September 30, 1995 compared
to Quarter Ended September 30, 1994
Net loss for the quarter ended September 30, 1995 was $355,463 or
$0.14 per share, compared to a net loss of $199,663 or $0.08 for the
quarter ended September 30, 1994.
Gross revenues for the quarter ended September 30, 1995 were
$126,842, a decrease of $971,202 or 88% compared to the quarter ended
September 30, 1994. This decrease was primarily accounted for by the
elimination of the Medical Corporations' revenues ($1,043,000 last
year) and insurance adjustments to prior year's revenues ($52,000) as
offset by management fees ($131,000). As a comparision, the Medical
Corporations' comparable revenues for the current quarter were
$830,000, a decrease of $213,000 or 20%, primarily due to the
expiration of the City of Oakland contract.
The $355,000 net loss consisted of a $116,000 loss relating to the
management of the Medical Corporations' clinics; a $52,000 loss
relating to insurance adjustments of prior year's revenues;
a $47,000 operating loss at its rehabilitation clinic; and $140,000
of interest charges.
Liquidity and Capital Resources
Note 2 of the Notes to Consolidated Financial Statements discusses
the going concern issue.
The Company's cash balance at September 30, 1995 was $222,406,
while the Company's working capital deficit was $4,023,862, a decline
of $281,000 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 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<PAGE>
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