<PAGE> 1
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: March 31, 1997
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21910
CONTINUCARE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Florida 59-2716023
<S> <C>
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
100 SOUTHEAST SECOND STREET
36TH FLOOR
MIAMI, FLORIDA 33131
(Address of principal executive offices)
(Zip Code)
(305) 350-7515
(Registrant's telephone number, including area code)
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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At May 13, 1997, the Registrant had 10,888,993 shares of $0.0001 par value
common stock outstanding.
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CONTINUCARE CORPORATION
INDEX
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<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet as of March 31, 1997 (Unaudited) and June 30, 1996 .....................3
Consolidated Statement of Income for the three months ended March 31, 1997 (Unaudited).............4
Consolidated Statement of Income for the nine months ended March 31, 1997 (Unaudited)..............5
Consolidated Statement of Cash Flow for the nine months ended March 31, 1997 (Unaudited)...........6
Notes to Consolidated Financial Statements.........................................................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................................11
PART II - OTHER INFORMATION.......................................................................14
SIGNATURE PAGE....................................................................................15
</TABLE>
2
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONTINUCARE CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
----------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $11,664,505 $ 819,066
Accounts receivable, net of allowance for doubtful
accounts of $979,799 and $146,692, respectively 6,615,741 1,967,978
Note receivable 139,333
Prepaid expenses and other current assets 185,183 800
---------------------------
Total current assets 18,604,762 2,787,844
Property and equipment, net 670,908 4,806
Intangible assets, net 373,734 1,499
Other assets, net 385,101 70,747
---------------------------
Total assets $20,034,505 $ 2,864,896
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 35,881 $ 270,374
Accrued expenses 1,063,998 44,210
Accrued interest payable 40,280 23,161
Unearned revenue 18,301
Current portion of capital lease obligation 20,491
Income and other taxes payable 1,241,196 412,686
---------------------------
Total current liabilities 2,401,846 768,732
Notes payable 641,500 655,000
Obligation under capital lease 215,484
---------------------------
Total liabilities 3,258,830 1,423,732
---------------------------
Minority interest 32,686
---------------------------
Commitments and contingencies
Shareholders' equity
Common stock; $0.0001 par value; 100,000,000 shares
authorized, issued and outstanding--12,150,993,
3/31/97; 6,666,667, 6/30/96 1,215 667
Additional paid-in capital 14,823,469 763,202
Retained earnings 1,950,991 644,609
---------------------------
Total shareholders' equity 16,775,675 1,408,478
---------------------------
Total liabilities and shareholders' equity $20,034,505 $ 2,864,896
===========================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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CONTINUCARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
For the three months
ended March 31, 1997
--------------------
(Unaudited)
<S> <C>
Revenues $3,597,241
Expenses
Payroll and employee benefits 1,666,470
Provision for bad debt 363,767
Professional fees 537,092
General and administrative 286,362
Depreciation and amortization 43,479
----------
Total expenses 2,897,170
----------
Income from operations 700,071
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Other income (expenses)
Interest income, net 84,278
Minority interest --
Loss on purchase of minority interest --
----------
Other expenses 84,278
Income before taxes 784,349
Provision for income taxes 286,597
----------
Net income $ 497,752
==========
Earnings per common share and common equivalent share $ 0.04
==========
Earnings per common share and common equivalent share
assuming full dilution $ 0.04
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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CONTINUCARE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
For the nine months
ended March 31, 1997
--------------------
(Unaudited)
<S> <C>
Revenues $ 9,604,216
Expenses
Payroll and employee benefits 4,425,929
Provision for bad debt 833,107
Professional fees 1,004,543
General and administrative 518,417
Depreciation and amortization 83,950
-----------
Total expenses 6,865,946
-----------
Income from operations 2,738,270
-----------
Other income (expenses)
Interest income, net 149,648
Minority interest (162,233)
Loss on purchase of minority interest (9,081)
-----------
Other expenses (21,666)
Income before taxes 2,716,604
Provision for income taxes 1,035,471
-----------
Net income $ 1,681,133
===========
Earnings per common share and common equivalent share $ 0.16
===========
Earnings per common share and common equivalent share
assuming full dilution $ 0.16
===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
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CONTINUCARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
For the nine months
ended March 31, 1997
--------------------
(Unaudited)
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 1,681,133
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 83,950
Bad debt expense 833,107
Loss on purchase of minority interest 9,081
Income applicable to minority interest 162,233
Changes in assets and liabilities, excluding
the effect of acquisitions:
Increase in accounts receivable (5,480,870)
Increase in note receivable (139,333)
Increase in prepaid expenses and other current assets (184,383)
Increase in intangible assets (375,392)
Increase in other assets (314,354)
Increase in accounts payable and accrued expenses 1,024,507
Increase in accrued interest payable 17,119
Decrease in unearned revenue (18,301)
Increase in income and other taxes payable 828,510
-----------
Net cash used in operating activities (1,872,993)
-----------
CASH FLOW FROM INVESTING ACTIVITIES
Property and equipment additions (746,894)
----------
Net cash used in investing activities (746,894)
----------
CASH FLOW FROM FINANCING ACTIVITIES
Beechwood Repurchase (375,000)
Principal repayments under capital lease obligation (16,737)
Proceeds received from Private Placement 6,600,000
Proceeds from acceleration of Series A Warrants 5,412,060
Costs incurred associated with Private Placement & Merger (225,000)
Proceeds from issuance of common stock 2,070,003
-----------
Net cash provided by financing activities 13,465,326
-----------
Net increase in cash and cash equivalents 10,845,439
Cash and cash equivalents at beginning of period 819,066
------------
Cash and cash equivalents at end of period $ 11,664,505
============
Cash paid for income taxes $ 187,000
============
Cash paid for interest $ 51,202
============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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CONTINUCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
(unaudited)
NOTE 1 - UNAUDITED INTERIM INFORMATION
The accompanying interim consolidated financial data for Continucare
Corporation ("Continucare" or the "Company") are unaudited; however, in the
opinion of management, the interim data include all adjustments necessary for a
fair presentation of the results for the interim period. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
The results of operations for the three months and nine months ended March 31,
1997 are not necessarily indicative of the results to be expected for the year
ending June 30, 1997.
The interim unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto for the period from February 12, 1996 (inception) to June 30, 1996 as
set forth in the Company's Form 10-KSB/A.
NOTE 2 - MERGER
On August 9, 1996, the Company signed a definitive Agreement and Plan of Merger
(the "Merger Agreement") with Zanart Subsidiary, Inc. ("ZSI"), a wholly-owned
subsidiary of the Company, and Continucare Acquisition Corp. (formerly known as
Continucare Corporation), a Florida corporation ("CAC"). The Merger Agreement
provided for the merger (the "Merger") of ZSI with and into CAC. Upon
consummation of the Merger, which occurred on September 11, 1996 (the "Closing
Date"), the separate existence of ZSI terminated, CAC became a wholly-owned
subsidiary of the Company, the Company agreed to sell or otherwise dispose of
its assets (other than cash) and discharge all liabilities relating to its
existing licensing business prior to December 11, 1996 and the Company's Board
of Directors and management became comprised of designees of CAC. On October 8,
1996, the Company changed its corporate name to Continucare Corporation. Prior
to the Merger, CAC was a development stage company established for the purpose
of managing mental and physical rehabilitation health care programs.
NOTE 3 - NOTE RECEIVABLE
Pursuant to the Merger, the operations of the licensing business of pre-merger
Zanart Entertainment, Inc. ("Zanart") terminated on December 11, 1996. In
connection with the winddown of pre-Merger Zanart operations, in November 1996,
certain assets and related liabilities of Zanart were sold to a third party for
$250,000 of which $152,000 is evidenced by a note receivable and $98,000 by the
assumption of liabilities. The note receivable is due in equal monthly
installments over one year and is a component of current assets in the
accompanying unaudited consolidated balance sheet as of March 31, 1997.
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<PAGE> 8
NOTE 4 - INTANGIBLE ASSETS
As a result of the Merger and the listing of shares of the Company's common
stock, $.0001 par value (the "Common Stock"), issued to the former shareholders
of pre-merger Continucare Corporation on the American Stock Exchange, the
Company incurred certain costs which were capitalized as organization costs.
These are being amortized using the straight line method over ten years. In
addition, in the third fiscal quarter the Company incurred capitalizable costs
related to the acquisition of certain arthritis rehabilitation centers and
affiliated physician practices that was completed subsequent to the end of the
quarter.
NOTE 5 - LOSS ON PURCHASE OF MINORITY INTEREST
Effective December 31, 1996 (the "Effective Date"), the Company purchased the
25% interest (the "Minority Interest") in a subsidiary, Continucare Medical
Care Network, Inc. ("CMCN") held by a third party owner. The Minority Interest
was purchased in exchange for 40,000 shares of Continucare common stock, $.0001
par, having a market value of $204,000 on the Effective Date. As a result, the
Minority Interest on Continucare's consolidated financial statements,
approximately $195,000 as of the Effective Date, was eliminated and a loss on
the purchase of minority interest of approximately $9,000 was recorded.
NOTE 6 - STOCK OPTION PLAN
In December 1996, the Company's shareholders approved the Company's Amended and
Restated 1995 Stock Option Plan (the "Stock Option Plan") covering employees of
the Company. The Stock Option Plan authorizes 1,200,000 shares for issuance
upon the exercise of stock options. The Stock Option Plan authorizes (i) the
granting of Incentive or Non-Qualified stock options to purchase Common Stock
to employees of the Company determined to contribute significantly to the
successful performance of the Company, (ii) the provision of loans for the
purpose of financing the exercise of options and the amount of taxes payable in
connection therewith, and (iii) the use of already owned Common Stock as
payment of the exercise price for options granted under the Stock Option Plan.
Under the terms of the Stock Option Plan, the exercise price for options
granted is required to be at least the fair market value of the Company's
common stock on the date of grant.
NOTE 7 - EARNINGS PER SHARE
The treasury stock method was used to determine the dilutive effect of the
options and warrants on earnings per share data.
Earnings per share and the weighted average number of shares outstanding used
in the computation are summarized elsewhere herein.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company entered into new employment contracts with two of its executive
officers which became effective in September 1996. The agreements are for terms
of three years (with one agreement providing for one additional year term for
each year of service by such executive). The agreements also provide for
payment of bonuses and one agreement provides for a one-time grant of stock
options to purchase 100,000 shares of Common Stock at $5.00, vesting at a rate
of 20% per year.
In February 1997, the Company entered into an employment agreement with an
executive officer. The agreement is for a term of three years and may be
extended at the sole option of the executive for an additional two years. The
agreement also provides for bonuses and stock option grants at the discretion
of the Company's President and Board of Directors.
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<PAGE> 9
As provided for in the management contracts with the Company's providers, the
Company maintains annual claims made policies for general and professional
liability insurance jointly with each of the providers. Coverage under the
policies are $1,000,000 per incident and $3,000,000 aggregate. It is the
Company's intention to renew such coverage on an on-going basis.
Effective September of 1996, the Company entered into consulting agreements
with a company controlled by Mr. Douglas Miller and a company controlled by Mr.
Barry Goldstein (collectively, the "Consulting Agreements"). Messrs. Miller and
Goldstein served as executive officers of CAC prior to the Merger. Each of the
Consulting Agreements, contained the following terms: (i) three year term, (ii)
annual payments, payable semi-monthly, of approximately $325,000, (iii) ability
of the Company to terminate the agreement without "cause" (as defined) with 30
days' notice, provided that the consultant will receive a termination payment
equal to the amount otherwise payable under the Consulting Agreement through
the end of the term over the period of the remaining term of the agreement, and
(iv) ability of the Company to terminate the agreement for "cause" at any time
with no payment due to the consultant. Subsequent to the end of the current
quarter, the Consulting Agreements were terminated. See discussion at Note 10
below.
NOTE 9 - RECENT DEVELOPMENTS
On November 12, 1996, the Company entered into an asset purchase agreement (the
"Asset Purchase Agreement") to purchase certain assets of a Medicare certified
comprehensive outpatient rehabilitation facility (the "CORF"). The CORF
provides various physical rehabilitation services to patients in the South
Florida area and bills the Medicare program for the cost of covered CORF
services rendered to Medicare beneficiaries. Under the terms of the Asset
Purchase Agreement, the Company assumed the Medicare Provider Number of the
CORF in exchange for $85,000 (the "Purchase Price"). The Purchase Price
consisted of cash at closing of $42,500 and a promissory note (the "Promissory
Note") in the amount of $42,500. The Promissory Note, which bears interest at
10% per annum, provides for full payment of all principal and accrued interest
on November 12, 1997. Interest expense and accrued interest for the quarter
ended March 31, 1997 was approximately $12,800. Interest expense and accrued
interest for the nine months ended March 31, 1997 was approximately $21,300.
Concurrent with the Asset Purchase Agreement for the CORF, the Company entered
into an equipment lease agreement (the "Equipment Lease") with Aventura
Comprehensive Rehabilitation Center, Inc. whereby the Company leases certain
physical therapy and rehabilitation equipment, furniture, fixtures and other
personal property located at the CORF. The Equipment Lease provides for monthly
payments of $5,300. Payments under the Equipment Lease for three and nine
months ended March 31, 1997 were approximately $15,600 and $26,300,
respectively.
On November 20, 1996, the Company, pursuant to the terms of that certain Series
A Warrant Agreement, dated as of May 11, 1995 (the "Warrant Agreement"), between
the Company and Fidelity Transfer Company (the prior Warrant Agent), accelerated
the exercise period for each of the Company's issued and outstanding Series A
Warrants (the "Warrants"). The exercise period was set to expire on December 20,
1996. As a result of the acceleration of the exercise period, approximately
$5,400,000 was received by the Company. The exercise of the Warrants is
reflected in the equity section of the accompanying unaudited consolidated
balance sheet as of March 31, 1997.
On February 11, 1997, the Company entered into a management agreement with
Bally Total Fitness whereby the Company will provide outpatient rehabilitation
services at Bally Total Fitness centers. During the next three years, the
Company expects to open outpatient rehabilitation centers at Bally facilities
in Florida, Texas, Illinois and Ohio.
9
<PAGE> 10
During the current quarter, the Company entered into a $2,000,000 Revolving
Loan Promissory Note (the "Revolving Note"). Concurrently the Company executed
a $3,000,000 Revolving Term Promissory Note (the "Term Note") and
Security Agreement. Under the terms of the Revolving Note and the Acquisition
Note, the Company may elect the interest rate to be either the bank's prime
plus 1/4 or the London InterBank Offered Rate ("LIBOR") plus 275 basis points.
Interest on the Revolving Note is payable quarterly in arrears on any
outstanding balances. Interest on advances made under the Acquisition Note is
due monthly in arrears for the first six months. On the seventh month and
thereafter, interest and principal is due. In all events, the Notes mature and
all unpaid principal and interest is due in full on November 15, 1999. The
Notes are secured by substantially all of the assets of the Company and contain
restrictive covenants which, among other things, require the Company to
maintain certain financial ratios, limit the incurrence of additional debts and
limit the payment of dividends. As of March 31, 1997, no borrowings had been
made under either of the Notes. However, borrowings were made in subsequent to
March 31, 1997 as discussed in Note 10 below.
NOTE 10 - SUBSEQUENT EVENTS
On April 10, 1997, the Company acquired certain arthritis rehabilitation
centers and affiliated physician practices. The aggregate purchase price was
approximately $3,300,000. In connection with the purchase of these centers and
physician practices, the Company borrowed a total of $2,500,000 under the
Revolving Note and the Term Note. The acquisition will be accounted for using
the purchase method of accounting.
In April 1997, the Company terminated the Consulting Agreements with the
companies controlled by Mr. Douglas Miller and Mr. Barry Goldstein.
Concurrently, the Company repurchased approximately 1,262,000 shares of Company
Common Stock from Messrs. Miller and Goldstein.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pre-Merger Continucare was incorporated on February 12, 1996, in the State of
Florida. Continucare develops and manages mental and physical rehabilitation
health care programs that offer a continuum of mental and physical
rehabilitation health services ranging from partial hospitalization care to day
treatment and outpatient services. Continucare offers a comprehensive
health care product line by providing the following types of services to
general acute care and psychiatric hospitals, community mental health centers
and comprehensive outpatient rehabilitative facilities: clinical development,
marketing, financial management, operational oversight, human resources
support, quality assurance and outcome management.
On August 9, 1996, the Company signed the Merger Agreement with ZSI and CAC
(formerly known as Continucare Corporation). The Merger Agreement provided for
the Merger of ZSI with and into CAC. Upon the consummation of the Merger on the
Closing Date, the separate existence of ZSI terminated, CAC became a
wholly-owned subsidiary of the Company, the Company agreed to sell or otherwise
dispose of its assets (other than cash) and discharge all liabilities relating
to its existing licensing business prior to December 11, 1996 and the Company's
Board of Directors and management became comprised of designees of CAC. On
October 8, 1996, the Company changed its corporate name to Continucare
Corporation.
As previously noted, pre-Merger Continucare commenced operations on February
12, 1996. Accordingly, no comparative data is available for the three and nine
months ended March 31, 1997. Further, management does not believe that its
results for the three and nine month periods ending March 31, 1997 are
indicative of the Company's future performance. Accordingly, the Company has
limited its discussions with respect to this area.
This Form 10-QSB contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Such statements should specifically be considered in light of various factors
identified in this Form 10-QSB, including the matters set forth below, which
could cause actual results to differ materially from those indicated by such
forward-looking statements.
REVENUES
Total revenues were approximately $3,597,000 and $9,604,000 for the three and
nine months ended March 31, 1997, respectively. Revenues from the employee
leasing operations and the billing service, for which certain assets, contracts
and liabilities were acquired effective May 1, 1997, represent $1,415,000 and
$4,309,000 of total revenues for the three and nine month periods ended March
31, 1997, respectively. In addition, total revenues for the quarter ended March
31, 1997 includes approximately $277,000 related to the operation of a CORF
acquired by the Company during the second fiscal quarter. Prior to acquiring
the CORF, the Company had entered into a management agreement with the CORF
under which the Company received a monthly management fee. Total revenues
related to the CORF owned by the Company for the nine months ended March 31,
1997 were approximately $485,000. In February 1997, the Company entered into an
agreement to manage a CORF. Revenues realized under this management agreement
were approximately $25,000 for the three months ended March 31, 1997.
EXPENSES
Payroll and employee benefits were approximately $1,666,000 and $4,426,000 for
the three and nine months ended March 31, 1997, respectively, which represented
46.3% and 46.1% of total revenues,
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respectively. Of total consolidated payroll and employee benefits for the
quarter ended March 31, 1997, approximately $721,000 or 43.2% was payroll and
benefits paid to employees of the employee leasing operation. Payroll and
benefits for employees of the employee leasing operation for the nine months
ended March 31, 1997 were $2,358,000 or 53.3% of total payroll and employee
benefits for that period.
Continucare's provision for bad debt was approximately $364,000 and $833,000
for the three and nine months ended March 31, 1997, respectively, which
represented 10.1% and 8.7% of total revenues, respectively.
Professional fees, which include consulting, legal and other professional fees,
were approximately $537,000 for the quarter ended March 31, 1997 and $1,005,000
for the nine months ended March 31, 1997. Professional fees represented 14.9%
and 10.5% of total revenues for the three and nine months ended March 31, 1997,
respectively. Total professional fees for the three and nine months ended March
31, 1997 include $105,000 and $315,000, respectively, under a subcontract
agreement with a third-party.
General and administrative expenses ("SG&A") were approximately $286,000 and
$518,000 for the three and nine months ended March 31, 1997, respectively. As a
percentage of total revenues, SG&A was approximately 8.0% and 5.4% for the
three and nine months ended March 31, 1997, respectively, and was comprised of
expenses such as rent, utilities, travel and supplies.
INTEREST
Net interest income was approximately $84,000 and $150,000 for the three and
nine months ended March 31, 1997, respectively and is primarily attributable to
interest earned on the $6,600,000 raised by the Company as a result of the
Private Placement that took place in August 1996 and the $5,400,000 raised by
the Company as a result of the acceleration of the exercise period of the
Company's Series A Warrants which was announced on November 20, 1996 and
expired on December 20, 1996.
MINORITY INTEREST
Effective December 31, 1996, the Company purchased the 25% interest in a
subsidiary, Continucare Medical Care Network, Inc. held by a third party owner.
As a result, the Minority Interest on Continucare's consolidated balance sheet
as of December 31, 1996 of approximately $195,000 was eliminated and a loss on
the purchase of minority interest of approximately $9,000 was recorded.
Minority interest for the nine month period ended March 31, 1997 was
approximately $162,000.
PROVISION FOR INCOME TAXES
The provision for income taxes was approximately $287,000 and $1,035,000 for
the three and nine months ended March 31, 1997, respectively, as a result of
income before taxes of approximately $784,000 and $2,717,000 respectively for
the three and nine months then ended. The provision for income taxes was
calculated at a rate of approximately 37% which estimates the blended statutory
federal and state income tax rates.
NET INCOME
Continucare had net income of approximately $498,000 and $1,681,000 for the
three and nine months ended March 31, 1997, respectively. As a percentage of
total revenues, net income was 13.8% for the three months ended March 31, 1997
and 17.5% of total revenues for the nine months then ended.
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<PAGE> 13
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
EBITDA is not presented as an alternative to operating results or cash flow
from operations as determined by generally accepted accounting principles
("GAAP"), but rather to provide additional information related to the ability
of Continucare to meet current trade obligations and debt service requirements.
EBITDA should not be considered in isolation from, or construed as having
greater importance than, GAAP operating income or cash flows from operations as
a measure of an entity's performance.
EBITDA was approximately $744,000 and $2,660,000 for the three and nine months
ended March 31, 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ended March 31, 1997, net cash used in operating
activities was approximately $1,873,000 primarily as a result of the increase
in accounts receivable of approximately $5,481,000 during the period. During
this time, the Company had been in the process of obtaining Medicare
certification for five of the programs it manages which would facilitate the
collection of related accounts receivable. The Company obtained such
certification for four of the five programs in January 1997 and received the
certification for the final program in February 1997. The Company anticipates
that its receivables position will improve by the end of the current fiscal
year as collections are enhanced by the certification discussed above. For the
nine month period ended March 31, 1997, net cash used in investing activities
was approximately $747,000 and net cash provided by financing activities was
approximately $13,465,000.
The Company's working capital was approximately $16,203,000, with a current
ratio of 7.8 to 1, at March 31, 1997. The Company's working capital and current
ratio at June 30, 1996 were $2,019,000 and 3.6 to 1, respectively. The
improvement in working capital and the current ratio are primarily due to cash
generated by the Company from the Private Placement of 3,300,000 shares at $2.00
per share in August 1996, the cash received from pre-Merger Zanart as a result
of the Merger in September 1996, and the cash received from acceleration of the
exercise period of the Series A Warrants.
The Company anticipates that the funds raised through the Private Placement, the
cash received from pre-Merger Zanart as a result of the Merger, and the cash
received from the acceleration of the exercise period of the Series A Warrants
together with cash flow generated by operations and the cash available from the
Term Note and the Revolving Note, will be used to make strategic acquisitions in
order to grow its operations and pursue its business strategy. Based upon
current expectations, the Company believes that cash flow from operations will
be sufficient to meet its working capital requirements through the end of the
current fiscal year, although there can be no assurance that it will be able to
do so.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11 Statement re: computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated April 10, 1997 subsequent to the
Company's third quarter of fiscal 1997. The Form 8-K reported under
Item 2 the acquisition of certain arthritis rehabilitation centers and
affiliated physician practices.
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<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CONTINUCARE CORPORATION
Dated: May 15, 1997 By: /s/ CHARLES M. FERNANDEZ
--------------------------------
Charles M. Fernandez, Chairman,
Chief Executive Officer
and President
Dated: May 15, 1997 By: /s/ MARIA T. SOSA
--------------------------------
Maria T. Sosa, Principal Accounting
Officer
15
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EXHIBIT 11
----------
CONTINUCARE CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
MARCH 31, 1997
--------------
Net income $ 497,752
===========
PRIMARY EARNINGS PER SHARE
Number of shares:
Weighted average common shares outstanding (1) 12,149,904
Add: Net additional shares issuable (2) 29,138
-----------
Weighted average shares used in the per share computation 12,179,042
===========
Earnings per common and common equivalent share $ 0.04
===========
FULLY DILUTED EARNINGS PER SHARE
Number of shares:
Weighted average common shares outstanding (1) 12,149,904
-----------
Weighted average shares used in the per share computation 12,149,904
===========
Earnings per common and common equivalent share $ 0.04
===========
(1) Includes warrants exercised during the period as of the beginning of the
period.
(2) Assumes exercise of outstanding common stock equivalents (options) at the
beginning of the period.
<PAGE> 2
EXHIBIT 11
----------
CONTINUCARE CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
FOR THE NINE
MONTHS ENDED
MARCH 31, 1997
--------------
Net income $ 1,681,133
===========
PRIMARY EARNINGS PER SHARE
Number of shares:
Weighted average common shares outstanding (1) 10,742,435
Add: Net additional shares issuable (2) 5,161
-----------
Weighted average shares used in the per share computation 10,747,596
===========
Earnings per common and common equivalent share $ 0.16
===========
FULLY DILUTED EARNINGS PER SHARE
Number of shares:
Weighted average common shares outstanding (1) 10,742,435
-----------
Weighted average shares used in the per share computation 10,742,435
===========
Earnings per common and common equivalent share $ 0.16
===========
(1) Includes warrants exercised during the period as of the beginning of the
period.
(2) Assumes exercise of outstanding common stock equivalents (options) at the
beginning of the period.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,664,505
<SECURITIES> 0
<RECEIVABLES> 7,595,540
<ALLOWANCES> 979,799
<INVENTORY> 0
<CURRENT-ASSETS> 18,604,762
<PP&E> 751,983
<DEPRECIATION> 81,075
<TOTAL-ASSETS> 20,034,505
<CURRENT-LIABILITIES> 2,401,846
<BONDS> 856,984
0
0
<COMMON> 1,215
<OTHER-SE> 16,774,460
<TOTAL-LIABILITY-AND-EQUITY> 20,034,505
<SALES> 0
<TOTAL-REVENUES> 3,597,241
<CGS> 0
<TOTAL-COSTS> 1,666,470
<OTHER-EXPENSES> 866,933
<LOSS-PROVISION> 363,767
<INTEREST-EXPENSE> 40,087
<INCOME-PRETAX> 784,349
<INCOME-TAX> 286,597
<INCOME-CONTINUING> 497,752
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 497,752
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
