<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[ 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 PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-17401
OPTIMUMCARE CORPORATION
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(Exact name of registrant specified in its charter)
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<S> <C>
Delaware 33-0218003
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30011 Ivy Glenn Drive, Ste 219
Laguna Niguel, CA 92677
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(714) 495-1100
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(Registrants telephone number, including area code)
Not Applicable
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(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
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
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<CAPTION>
Number of Shares Outstanding
Class at September 30, 1995
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<S> <C>
Common Stock, $.001 par value 4,922,109
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INDEX
OPTIMUMCARE CORPORATION
PART I FINANCIAL INFORMATION
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Page
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Item 1. Financial Statements (Unaudited)
Balance Sheets as of September 30, 1995 and December 31, 1994 3
Statements of Income for the Three Months and Nine Months 4
Ended September 30, 1995 and 1994
Statements of Cash Flows for the Three Months and Nine 5
Months Ended September 30, 1995 and 1994
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II OTHER INFORMATION 10
SIGNATURE 11
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OPTIMUMCARE CORPORATION
BALANCE SHEETS
(UNAUDITED)
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<CAPTION>
SEPTEMBER 30 DECEMBER 31
1995 1994
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<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH $ 249,844 $ 36,657
ACCOUNTS RECEIVABLE LESS ALLOWANCES FOR
DOUBTFUL ACCOUNTS OF $120,000 AT SEPTEMBER 30,
1995 AND $0 AT DECEMBER 31, 1994 1,818,623 1,642,040
PREPAID EXPENSES 98,143 21,104
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TOTAL CURRENT ASSETS 2,166,610 1,699,801
NOTES RECEIVABLE FROM OFFICERS 119,800 97,000
FURNITURE AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $31,709 AT SEPTEMBER 30, 1995
AND $25,463 AT DECEMBER 31, 1994 17,748 16,093
TRADENAME, LESS ACCUMULATED AMORTIZATION
OF $969 AT SEPTEMBER 30, 1995 AND $816 AT
DECEMBER 31, 1994 1,106 1,259
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TOTAL ASSETS $2,305,264 $1,814,153
========== ==========
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 150,919 $ 152,535
ACCRUED LIABILITIES 176,252 180,674
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TOTAL CURRENT LIABILITIES 327,171 333,209
NOTE PAYABLE TO BANK 166,000 0
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 PAR VALUE; AUTHORIZED
20,000,000 SHARES, 4,938,509 SHARES ISSUED
AND 4,922,109 SHARES OUTSTANDING AT SEPTEMBER 30,
1995 AND 4,904,509 SHARES ISSUED AND 4,896,009
SHARES OUTSTANDING AT DECEMBER 31, 1994 4,939 4,905
PAID-IN-CAPITAL 2,937,141 2,919,348
ACCUMULATED DEFICIT (1,119,631) (1,422,581)
LESS COST OF 1,400 SHARES IN TREASURY AT SEPTEMBER
30, 1995 AND 8,500 SHARES AT DECEMBER 31, 1994 (793) (5,075)
STOCK SUBSCRIPTIONS RECEIVABLE (9,563) 0
NOTE RECEIVABLE FROM OFFICER 0 (15,653)
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TOTAL STOCKHOLDERS' EQUITY $1,812,094 $1,480,944
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,305,264 $1,814,153
========== ==========
</TABLE>
See notes to financial statements.
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OPTIMUMCARE CORPORATION
STATEMENTS OF INCOME
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
REVENUES $1,516,130 $1,350,798 $4,513,760 $4,277,725
INTEREST INCOME 3,332 2,864 6,972 4,858
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$1,519,462 $1,353,662 $4,520,732 $4,282,583
---------- ---------- ---------- ----------
OPERATING EXPENSES:
COSTS OF SERVICES PROVIDED $1,172,967 $1,046,714 $3,386,703 $3,072,683
PROVISION FOR DOUBTFUL ACCOUNTS 33,000 3,514 120,000 232,926
GENERAL AND ADMINISTRATIVE 209,537 177,679 672,501 534,356
INTEREST 3,427 692 4,621 2,814
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1,418,931 1,228,599 4,183,825 3,842,779
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 100,531 125,063 336,907 439,804
INCOME TAXES 11,352 2,050 33,957 13,955
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NET INCOME $ 89,179 $ 123,013 $ 302,950 $ 425,849
========== ========== ========== ==========
NET INCOME
PER COMMON SHARE $ 0.02 $ 0.02 $ 0.06 $ 0.08
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
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OPTIMUMCARE CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
NINE MONTHS ENDING
SEPTEMBER 30 SEPTEMBER 30
1995 1994
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $302,950 $425,849
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & Amortization 6,399 4,233
Loss on Abandonment of Office Furniture 0 514
Changes in operating assets and liabilities:
(Increase) in accounts receivable, net (176,583) (539,547)
(Increase) in notes receivable from officers (22,800) (22,162)
(Increase)/Decrease in prepaid expenses (77,039) 169,008
(Decrease) in accounts payable (1,616) (4,883)
(Decrease) in accrued liabilities (141) (67)
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CASH AND CASH EQUIVALENTS
PROVIDED BY OPERATING ACTIVITIES 31,170 32,945
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of furniture & equipment (7,901) (8,751)
-------- --------
CASH AND CASH EQUIVALENTS (USED) IN
INVESTING ACTIVITIES (7,901) (8,751)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 8,265 1,680
Payment of note receivable from officer 15,653 0
Proceeds from note payable to bank 166,000 0
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CASH AND CASH EQUIVALENTS PROVIDED BY
FINANCING ACTIVITIES 189,918 1,680
INCREASE IN CASH AND CASH EQUIVALENTS 213,187 25,874
Cash and cash equivalents at beginning of period 36,657 302,631
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $249,844 $328,505
======== ========
</TABLE>
See notes to financial statements.
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OPTIMUMCARE CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements for the three and nine month
periods ended September 30, 1995 have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information 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 three and nine month periods ended September 30, 1995
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1995. For further information, refer to the financial
statements and footnotes thereto included in the Company's Form 10-K for the
year ended December 31, 1994.
NOTE B -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company recorded an allowance for doubtful accounts of $120,000 as of
September 30, 1995 due to the termination of three partial hospitalization
programs licensed under (1) one hospital. All three programs were relicensed
through another hospital effective July 1, 1995. The Company has negotiated a
settlement agreement with the hospital for the payment of $447,730 in fees due
the Company for patient claims paid to the hospital through April 30, 1995.
The hospital is required to make various monthly installments through November
20, 1995. As of October 25, 1995, $300,000 of scheduled payments had been
timely received.
The remaining receivable recoverable by the Company from this hospital is based
on preliminary estimates of patient claims paid by the hospital's payors
subsequent to April 30, 1995. These estimates could vary which may have a
significant adverse effect on the actual amount recoverable by the Company.
NOTE C -- PREPAID EXPENSES
The direct cost of fees paid to outside consultants and other professionals
incurred in assisting with the acquisition of Psychological Healthcare, Inc.
have been capitalized as prepaid expenses. As of September 30, 1995, these
fees approximated $65,000.
Psychological Healthcare operates outpatient mental health clinics. The
Company plans to amortize all acquisition costs over the useful life of the
Psychological Healthcare products and services. The specific terms of the
purchase have not yet been finalized. In the event the acquisition is not
consumated these items will be expensed.
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NOTE D -- NOTE PAYABLE TO BANK
On April 12, 1995, the Company entered into a $500,000 line of credit agreement
with a bank which expires May 1, 1996. At the expiration date, the then
principal balance of the loan shall be convertible into a one year term loan
with an initial due date of May 1, 1997, but with a five (5) year repayment
schedule. The term loan is renewable for an additional term of one year. The
loan bears interest at the rate of 11% per year and is secured by all the
assets of the Company. As of October 25, 1995, no additional funds had been
borrowed under this agreement.
NOTE E -- INCOME TAXES
The provision for income taxes represent current Federal and State income
taxes. At September 30, 1995, the Company has available for financial
reporting and Federal income tax purposes net operating loss carryforwards of
approximately $1,140,000 which begin to expire in 2003. The provision for
Federal income taxes is computed on annualized alternative minimum taxable
income at the alternative minimum tax rate. The provision for State income
taxes is computed on annualized taxable income at current rates.
NOTE F -- NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common
shares outstanding giving effect to outstanding shares and common stock
equivalents arising to the extent they are dilutive from stock options
aggregations of 5,477,649 and 5,262,664 at September 30, 1995 and September 30,
1994 respectively.
NOTE G -- NEW BUSINESS
Effective November 1, 1995, the Company entered into an agreement to manage a
56 bed adult psychiatric program at Mission Community Hospital in San Fernando,
California.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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OPERATION
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MATERIAL CHANGES IN FINANCIAL CONDITION
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At September 30, 1995 and December 31, 1994, the Company's working capital was
$1,839,439 and $1,366,592 respectively. Overall liquidity is improving due to
continuing profitable operations. The increase in working capital at September
30, 1995 over December 31, 1994 is due to the increase in revenue and an
increase in Program accounts receivable. To support the expansion of revenues,
the Company borrowed $166,000 under a line of credit agreement with a bank.
The nature of the Company's business requires significant working capital to
fund operations of its Programs as well as to fund corporate expenditures until
receivables can be collected. The concentration of the net accounts receivable
balance at September 30, 1995 and December 31, 1994 is similar.
It is expected that cash flow from the Company's operating Programs will be
sufficient to sustain current operations. However, expansion of the existing
business through the opening of a significant number of additional Programs
would likely require additional funding through the line of credit agreement
described in Note D of the Notes to Financial Statements. The long term
liquidity of the Company is dependent upon operating revenues being sufficient
to offset Program operating expenses and all of its general and administrative
costs. The Company's principal sources of liquidity for the remainder fiscal
year 1995 are cash on hand, accounts receivable, internally generating cash
flow from operating Programs, and the line of credit agreement.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
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Comparison of the Three Months Ended September 30, 1995 to Three Months Ended
- -----------------------------------------------------------------------------
September 30, 1994
- ------------------
Net revenues increased 12% for the quarter ended September 30, 1995 over the
comparable quarter ended September 30, 1994.
The Company had fifteen (15) operational Programs during the quarter ended
September 30, 1995 and fourteen (14) operational Programs during the quarter
ended September 30, 1994. The increase in net revenues among comparative
quarters is due to the increase in operating Programs among comparative
quarters.
While there was an increase in revenue among comparative quarters, there has
also been a corresponding increase in the cost of services provided. These
increases primarily stem from the increase in program volume.
The provision for doubtful accounts at September 30, 1995 pertains to three
Programs licensed under one hospital which were terminated in April 1995. The
provision for doubtful accounts at September 30, 1994 pertained to two programs
with one hospital which were terminated on June 30, 1994.
The increase in general and administrative expenses is primarily attributable
to increased corporate marketing activities, and the various professional fees
incurred in connection with the Company's expansion efforts.
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The Company does not know of any events which are likely to materially change
the costs of operating its Programs; however, if revenues increase
significantly, gross profits should rise favorably and disproportionately to
the increase in cost for such Programs. Conversely, if the patient census
decreases (especially below the minimum break even level) costs will be
disproportionately high in relation thereto, which would adversely impact the
results of operations and the Company's available resources.
The Company's revenue base is expected to increase during the remainder of
1995 due to the addition of new Programs expected to be operational in the
fourth quarter of 1995. Due to the Company's dependency on a relatively small
customer base presently consisting of seven (7) hospitals, the inability to
collect any outstanding accounts receivable or the loss of any of its customers
could have a significant adverse effect on the Company's operations.
Comparison of the Nine Months Ended September 30, 1995 to the Nine Months Ended
- -------------------------------------------------------------------------------
September 30, 1994
- ------------------
Net revenues increased 6% for the nine months ended September 30, 1995 over
the comparable period ending September 30, 1994.
The Company had sixteen (16) operational programs during the nine month period
ended September 30, 1995 and fifteen (15) operation programs during the nine
month period ended September 30, 1994. The increase in net revenues is due to
the increase in operating programs among comparative periods.
Where there was an increase in revenue among periods, there has also been a
corresponding inrease in the cost of services provided. These increases
primarily stem from the increase in program volume.
The provision for doubtful accounts at September 30, 1995 pertains to three
programs licensed under one hospital which were terminated in April of 1995.
The provision for doubtful accounts at September 30, 1994 pertained to two
programs with one hospital which were terminated on June 30, 1994.
The increase in general and administrative expenses is primarily attributable
to corporate marketing activities and the various professional fees incurred in
connection with the Company's expansion efforts.
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PART II
OTHER INFORMATION
-----------------
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedule
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SIGNATURE
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 authorized.
OPTIMUMCARE CORPORATION
A Delaware Corporation
Dated November 13, 1995 By: /s/ EDWARD A. JOHNSON
-----------------------------------
Edward A. Johnson President &
Principal Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 249,844
<SECURITIES> 0
<RECEIVABLES> 1,818,623
<ALLOWANCES> 120,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,166,610
<PP&E> 17,748
<DEPRECIATION> 31,709
<TOTAL-ASSETS> 2,305,264
<CURRENT-LIABILITIES> 327,171
<BONDS> 0
<COMMON> 4,939
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,305,264
<SALES> 1,516,130
<TOTAL-REVENUES> 1,519,462
<CGS> 1,172,967
<TOTAL-COSTS> 1,418,931
<OTHER-EXPENSES> 209,537
<LOSS-PROVISION> 33,000
<INTEREST-EXPENSE> 3,427
<INCOME-PRETAX> 100,531
<INCOME-TAX> 11,352
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,179
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
