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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: JUNE 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)
Delaware 33-0218003
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(State or 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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(Registrant's 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.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING
CLASS AT JUNE 30, 1995
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<S> <C>
Common Stock, $.001 par value 4,903,009
</TABLE>
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w
INDEX
OPTIMUMCARE CORPORATION
PART I FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Item 1. Financial Statements (Unaudited)
Balance Sheets as of June 30, 1995 and Six Months Ended 3
December 31, 1994
Statements of Income for the Three Months and Six Months 4
Ended June 30, 1995 and 1994
Statements of Cash Flows for the Three Months and Six 5
Months Ended June 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
</TABLE>
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OPTIMUMCARE CORPORATION
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1995 1994
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<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH $ 114,803 $ 36,657
ACCOUNTS RECEIVABLE LESS ALLOWANCES FOR
DOUBTFUL ACCOUNTS OF $87,000 AT JUNE 30,
1995 AND $0 AT DECEMBER 31, 1994 1,786,426 1,642,040
PREPAID EXPENSES 24,486 21,104
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TOTAL CURRENT ASSETS 1,925,715 1,699,801
NOTES RECEIVABLE FROM OFFICERS 119,800 97,000
FURNITURE AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $29,482 AT JUNE 30, 1995
AND $25,463 AT DECEMBER 31, 1994 17,490 16,093
TRADENAME, LESS ACCUMULATED AMORTIZATION
OF $918 AT JUNE 30, 1995 AND $816 AT
DECEMBER 31, 1994 1,157 1,259
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TOTAL ASSETS $ 2,064,162 $ 1,814,153
=========== ===========
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 151,920 $ 152,535
ACCRUED LIABILITIES 197,696 180,674
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TOTAL CURRENT LIABILITIES 349,616 333,209
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 PAR VALUE; AUTHORIZED
20,000,000 SHARES, 4,904,509 SHARES ISSUED
AND 4,903,009 SHARES OUTSTANDING AT JUNE 30,
1995 AND 4,904,509 SHARES ISSUED AND 4,896,009
SHARES OUTSTANDING AT DECEMBER 31, 1994 4,905 4,905
PAID-IN-CAPITAL 2,919,348 2,919,348
ACCUMULATED DEFICIT (1,208,811) (1,422,581)
LESS COST OF 1,500 SHARES IN TREASURY AT JUNE
30, 1995 AND 8,500 SHARES AT DECEMBER 31, 1994 (896) (5,075)
NOTE RECEIVABLE FROM OFFICER 0 (15,653)
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TOTAL STOCKHOLDERS' EQUITY $ 1,714,546 $ 1,480,944
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,064,162 $ 1,814,153
=========== ===========
</TABLE>
See notes to financial statements.
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OPTIMUMCARE CORPORATION
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
REVENUES $1,508,258 $1,559,761 $2,997,630 $2,926,927
INTEREST INCOME 2,135 1,322 3,640 1,994
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$1,510,392 $1,561,083 $3,001,269 $2,928,921
---------- ---------- ---------- ----------
OPERATING EXPENSES:
COSTS OF SERVICES PROVIDED $1,095,918 $1,043,528 $2,213,736 $2,025,969
PROVISION FOR DOUBTFUL ACCOUNTS 87,000 229,412 87,000 229,412
GENERAL AND ADMINISTRATIVE 241,715 186,653 462,964 356,677
INTEREST 582 945 1,194 2,122
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1,425,215 1,460,538 2,764,894 2,614,180
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 85,177 100,545 236,375 314,741
INCOME TAXES 4,805 (1,295) 22,605 11,905
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NET INCOME $ 80,372 $ 101,840 $ 213,770 $ 302,836
========== ========== ========== ==========
NET INCOME
PER COMMON SHARE $ 0.02 $ 0.02 $ 0.04 $ 0.06
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
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OPTIMUMCARE CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDING
JUNE 30 JUNE 30
1995 1994
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 213,770 $ 302,836
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & Amortization 4,121 2,668
Changes in operating assets and liabilities:
(Increase) in accounts receivable, net (144,386) (304,817)
(Increase) in notes receivable from officers (22,800) (26,400)
(Increase)/Decrease in prepaid expenses (3,382) 151,936
(Decrease) in accounts payable (615) (20,880)
Increase/(Decrease) in accrued liabilities 21,201 (27,012)
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CASH AND CASH EQUIVALENTS
PROVIDED BY OPERATING ACTIVITIES 67,909 78,331
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of furniture & equipment (5,416) 0
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CASH AND CASH EQUIVALENTS (USED) IN
INVESTING ACTIVITIES (5,416) 0
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 0 1,680
Payment of note receivable from officer 15,653 0
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CASH AND CASH EQUIVALENTS PROVIDED BY
FINANCING ACTIVITIES 15,653 1,680
INCREASE IN CASH AND CASH EQUIVALENTS 78,146 80,011
Cash and cash equivalents at beginning of period 36,657 302,631
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 114,803 $ 382,642
========= =========
</TABLE>
See notes to financial statements.
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OPTIMUMCARE CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements for the three month period
ended June 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 six month periods ended June 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 $87,000 as of June
30, 1995 due to the termination of three partial hospitalization programs
licensed under (1) one hospital. All three programs have been relicensed
through another hospital effective July 1, 1995. The Company has filed a Form
UCC-1 Financing Statement against the hospitals receivables and is in the
process of negotiating a settlement agreement with the hospital for the payment
of fees due the Company for patient claims paid to the hospital through April
30, 1995.
The remaining receivable recoverable by the Company from this hospital is based
on preliminary estimates of patient claims paid to the hospital 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 -- INCOME TAXES
The provision for income taxes represent current Federal and State income
taxes. At June 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.
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NOTE D -- 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 5,344,368 and 5,281,012 at June 30, 1995 and June 30, 1994
respectively.
NOTE E -- CREDIT AGREEMENT
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 August 2, 1995, $100,000 had been borrowed under
the line of credit agreement.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
MATERIAL CHANGES IN FINANCIAL CONDITION
At June 30, 1995 and December 31, 1994, the Company's working capital was
$1,576,099 and $1,366,592 respectively. Overall liquidity is improving due to
continuing profitable operations. The increase in working capital at June 30,
1995 over December 31, 1994 is due to the increase in cash from collections on
Program accounts receivable and revenues, and an increase in Program accounts
receivable. 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 June 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 E 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 fiscal 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
Comparison of the Three Months Ended June 30, 1995 to Three Months Ended June
30, 1994
Net revenues decreased 3% for the quarter ended June 30, 1995 over the
comparable quarter ended June 30, 1994.
The Company had fourteen (14) operational Programs during the quarter ended
June 30, 1995 and twelve (12) operational Programs during the quarter ended
June 30, 1994. The slight decrease in net revenues among comparative quarters
is due to the different mix of operating Programs among comparative quarters.
The provision for doubtful accounts at June 30, 1995 pertains to three Programs
licensed under one hospital as described in Note B to the financial statements.
The provision for doubtful accounts at June 30, 1994 pertained to two contracts
with one hospital which were terminated on June 30, 1994.
While there was a decrease in revenue among comparative quarters, there has
also been a slight increase in the cost of services provided. This increase
primarily stems from the fact that the Company has become responsible for
procuring certain services such as rent, transportation,
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wages and fees at many of its Programs. These costs are fully reimbursed by
the host hospitals, but do not contribute to the Company's gross margin. The
Company's involvement exists due to its high level of expertise in these
specialized areas. General and administrative expenses have also increased
due to increased corporate marketing efforts and the wages, benefits and
various professional fees associated with the Company's expansion efforts.
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
second half of 1995. Due to the Company's dependency on a relatively small
customer base presently consisting of six (6) 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 Three Months Ended June 30, 1994 to Three Months Ended June
30, 1993
Operating revenues increased 93% for the quarter ended June 30, 1994 over the
quarter ended June 30, 1993.
The Company had twelve (12) operational Programs during the quarter ended June
30, 1994 and eight (8) operational Programs during the quarter ended June 30,
1993. The increase in net revenues among comparative quarters is due to the
increase in the number of Programs among comparative quarters.
While there was an increase in revenue among comparative quarters, there was
also a corresponding increase in the cost of services provided. These
increases primarily stem from the increase in Program volume. General and
administrative expenses have also increased due to increased wages, benefits,
and insurance associated with operating at higher volume, as well as an
executive bonus program based on corporate profits.
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PART II
OTHER INFORMATION
<TABLE>
<S> <C>
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.
</TABLE>
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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 August 8, 1995 By: /s/ Edward A. Johnson
------------------------------------
Edward A. Johnson
President & Principal
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000820474
<NAME> OPTIMUMCARE CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 114,803
<SECURITIES> 0
<RECEIVABLES> 1,786,426
<ALLOWANCES> 87,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,925,715
<PP&E> 17,490
<DEPRECIATION> 29,482
<TOTAL-ASSETS> 2,064,162
<CURRENT-LIABILITIES> 349,619
<BONDS> 0
<COMMON> 4,905
0
0
<OTHER-SE> 2,919,348
<TOTAL-LIABILITY-AND-EQUITY> 2,064,162
<SALES> 2,997,630
<TOTAL-REVENUES> 3,001,269
<CGS> 2,213,736
<TOTAL-COSTS> 2,764,894
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 87,000
<INTEREST-EXPENSE> 1,194
<INCOME-PRETAX> 236,375
<INCOME-TAX> 22,605
<INCOME-CONTINUING> 213,770
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 213,770
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
