<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1997
Commission File Number 0-17401
OPTIMUMCARE CORPORATION
(Exact name of registrant specified in its charter)
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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Zip Code
(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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Number of Shares Outstanding
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<S> <C>
Common Stock, $.001 par value 6,811,218
</TABLE>
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<PAGE> 2
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 March 31, 1997 and 3
December 31, 1996
Statements of Income for the Three Months 4
Ended March 31, 1997 and 1996
Statements of Cash Flows for the Three 5
Months Ended March 31, 1997 and 1996
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II OTHER INFORMATION 9
SIGNATURE 10
</TABLE>
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<PAGE> 3
OPTIMUMCARE CORPORATION
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
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<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH $ 776,663 $ 1,113,809
ACCOUNTS RECEIVABLE, NET 3,087,891 2,389,019
PREPAID EXPENSES 17,893 15,175
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TOTAL CURRENT ASSETS 3,882,447 3,518,003
NOTES RECEIVABLE FROM OFFICER 155,000 155,000
FURNITURE AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $60,475 AT MARCH 31, 1997
AND $52,135 AT DECEMBER 31, 1996 95,465 73,496
DEPOSITS AND OTHER ASSETS 29,922 29,922
INTANGIBLES LESS ACCUMULATED AMORTIZATION OF $37,193
AT MARCH 31, 1997 AND $27,050 AT DECEMBER 31, 1996 165,685 175,828
TRADENAME, LESS ACCUMULATED AMORTIZATION
OF $1,275 AT MARCH 31, 1997 AND $1,224 AT
DECEMBER 31, 1996 800 851
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TOTAL ASSETS $ 4,329,319 $ 3,953,100
=========== ===========
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 266,893 $ 227,289
ACCRUED LIABILITIES 506,694 371,808
LINE OF CREDIT 645,812 645,812
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TOTAL CURRENT LIABILITIES 1,419,399 1,244,909
MINORITY INTEREST (37,700) (27,207)
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 PAR VALUE; AUTHORIZED
20,000,000 SHARES, 6,811,218 SHARES
ISSUED AND OUTSTANDING AT MARCH 31, 1997
AND 6,786,218 SHARES ISSUED AND
OUTSTANDING AT DECEMBER 31, 1996 6,811 6,786
PAID-IN-CAPITAL 3,281,757 3,272,407
ACCUMULATED DEFICIT (340,948) (543,795)
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TOTAL STOCKHOLDERS' EQUITY $ 2,947,620 $ 2,735,398
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,329,319 $ 3,953,100
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 4
OPTIMUMCARE CORPORATION
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
1997 1996
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<S> <C> <C>
REVENUES $ 2,830,580 $2,220,445
INTEREST INCOME 1,532 1,562
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$ 2,832,112 $2,222,007
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OPERATING EXPENSES:
COSTS OF SERVICES PROVIDED $ 2,063,046 $1,935,925
PROVISION FOR DOUBTFUL ACCOUNTS 0 0
GENERAL AND ADMINISTRATIVE 411,578 265,831
INTEREST 16,627 5,717
MINORITY INTEREST (10,493) 0
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2,480,758 2,207,473
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INCOME BEFORE INCOME TAXES 351,354 14,534
INCOME TAXES 148,507 5,000
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NET INCOME $ 202,847 $ 9,534
=========== ==========
NET INCOME
PER COMMON SHARE $ 0.03 $ 0.00
=========== ==========
</TABLE>
See notes to financial statements.
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<PAGE> 5
OPTIMUMCARE CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
MARCH 31 MARCH 31
1997 1996
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 202,847 $ 9,534
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & Amortization 18,535 3,005
Minority Interest (10,493) 0
Changes in operating assets and liabilities:
(Increase) in accounts receivable, net (698,872) (239,282)
(Increase) in prepaid expenses (2,718) 3,293
Increase in accounts payable 39,604 1,718
Increase in accrued liabilities 134,886 90,117
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CASH AND CASH EQUIVALENTS
(USED) BY OPERATING ACTIVITIES (316,211) (131,615)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of furniture & equipment (30,310) 0
Proceeds from sale of furniture & equipment 0 163
Deferred acquisition costs 0 (37,309)
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CASH AND CASH EQUIVALENTS (USED)
IN INVESTING ACTIVITIES (30,310) (37,146)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 9,375 25,500
Note payable from bank 0 74,334
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CASH AND CASH EQUIVALENTS PROVIDED BY
FINANCING ACTIVITIES 9,375 99,834
(DECREASE) IN CASH AND CASH EQUIVALENTS (337,146) (68,927)
Cash and cash equivalents at beginning of period 1,113,809 170,932
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 776,663 $ 102,005
=========== =========
</TABLE>
See notes to financial statements.
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<PAGE> 6
OPTIMUMCARE CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements for the three month period ended
March 31, 1997 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 month period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. 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, 1996.
NOTE B -- INCOME TAXES
The provision for income taxes represent current Federal and State income taxes.
At March 31, 1997, the Company has unused Federal net operating loss
carryforwards of approximately $95,000 which begin to expire in 2003. The
provision for Federal and State income taxes is computed on annualized taxable
income at current rates after giving effect to the Federal net operating loss
carryforward. At March 31, 1996 the Company had unused Federal & State net
operating loss carryforwards of approximately $1,179,000 and $16,000
respectively.
NOTE C -- NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common
shares outstanding (giving effect to common stock equivalents arising from stock
options) of 7,123,249 and 6,557,019 for the three months ended March 31, 1997
and March 31, 1996, respectively. The weighted average number of common shares
outstanding has been retroactively restated for the three months ended March 31,
1996 to reflect the 20% stock dividend issued in October 1996. Common share
equivalents arising from stock options were not restated as anti-dilution rights
were not granted to the option holders.
NOTE D -- NEW BUSINESS
Effective May 1, 1997 the Company entered into a 90 day consulting agreement
with Galaxy Health Care, Inc. for the operation of a partial hospitalization
psych program in Tampa, Florida.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains statements which are forward-looking in time and involve
risks and uncertainties, including the risks associated with plans, the effects
of changing economic and competitive conditions, government regulation which may
affect facilities, licensing, healthcare reform which may affect payment amounts
and timing, availability of sufficient working capital, Program development
efforts and timing and market acceptance of new Programs which may affect future
sales growth and/or costs of operations.
MATERIAL CHANGES IN FINANCIAL CONDITION
At March 31, 1997 and December 31, 1996, the Company's working capital was
$2,463,048 and $2,273,094 respectively. 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. Moreover,
because each of the existing contracts represents a significant portion of the
Company's business, the inability to collect any of the accounts receivable
could materially and adversely affect the Company's liquidity.
Cash flows from operations were ($316,211) and ($131,615) for the periods ended
March 31, 1997 and 1996, respectively. The decrease was attributable to an
increase in four programs accounts receivable from two hospitals. This
receivable increase is due to both an increase in sales volume and an increase
in the age of receivables outstanding from these two hospitals. The Company
believes that the receivables from these two hospitals are fully collectible and
warrant no reserve for uncollectibility at March 31, 1997.
Cash flows used in investing activities were ($30,310) and ($37,146) for the
periods ended March 31, 1997 and 1996, respectively. Funds used for the period
ending March 31, 1997 were expended for office furniture and equipment. Funds
used for the period ending March 31, 1996 were expended for acquisition costs
incurred in connection with the acquisition of Professional Care Source, Inc.
which was consummated on April 24, 1996.
The cash flows from financing activities were $9,375 and $99,834 for the periods
ended March 31, 1997 and 1996, respectively. The decrease was due to draws on
the Company's line of credit agreement with a bank during 1996, which were not
required during 1997. The line of credit expires June 1, 1997. The maximum
indebtedness is $750,000. As of April 22, 1997, approximately $204,188 is
available for future draws on the line of credit agreement. It is expected that
the line of credit will be renewed on similar terms. The Company's principal
sources of liquidity for the fiscal year 1997 are cash on hand, accounts
receivable, the line of credit with a bank and continuing revenues from
programs.
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<PAGE> 8
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 compared to Three Months Ended March 31, 1996
The Company operated thirteen (13) programs during the three months ended March
31, 1997 and 1996. Net Revenues were $2,830,580 and $2,220,445 for the three
months ended March 31, 1997 and 1996, respectively. The increase in revenues in
1997 over 1996 is due to the census increase at operating programs which existed
at both periods and the increase in revenues resulting from programs which the
Company began managing subsequent to March 31, 1996 versus those programs which
existed during the period ending March 31, 1996.
Cost of services provided were $2,063,046 and $1,935,925 for the three months
ended March 31, 1997 and 1996 respectively. The increase in the cost of services
provided among periods is primarily due to the increase in treating patient
volume among periods.
Selling, general and administrative expenses for the three months ending March
31, 1997 have increased over the three months ending March 31, 1996 primarily
due to increased executive wages based on profit orientated incentive bonus
programs.
Net income was $202,847 and $9,534 for the three months ending March 31, 1997
and 1996, respectively. The increase was primarily attributable to revenue
growth, generated by increased patient volume causing gross profit to rise
favorably, and disporportionately to the increase in the costs of services
provided.
The Company does not know of any events which are likely to materially change
the costs of operating its Programs individually; however, plans to expand the
number of operating programs do exist. During February 1997 the Company formed a
strategic alliance with Galaxy Health Care of Miami, Florida to develop
community mental health centers in the southwest, southeast and northeast
regions of the country over a three year period. In addition, the Company has
continued to provide a larger scope of services to its customers for a greater
management fee. Census increase due to the maturity of existing programs and
changes in fee services of programs have caused revenues to increase
significantly, and gross profit to rise favorably and disproportionately due to
the increase in costs for such programs. However, should patient census and the
resulting revenue decrease (especially below the minimum break even level) costs
could be disporportionately high which would adversely impact the results of
operations and the Company's available resources. Due to the Company's
dependence on a relatively small customer base presently consisting only four
(4) hospitals and two community mental health centers, the loss of any of its
customers could have a significant adverse effect on the Company's operations.
The Company's revenue is expected to increase during the remainder of 1997 due
to the expansion in the number of operational programs. Marketing plans for
expanding the volume of the business by obtaining new contracts for programs and
expanding the scope of mental health services offered currently exist. It is
uncertain at this time, to what extent the Company's fixed costs will be
impacted by this expansion.
The Company exhausted the majority of its net operating loss carryforwards
during 1996. Consequently in 1997, the Company is required to provide for all
federal and state income tax expense at the applicable statutory rates.
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<PAGE> 9
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
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Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K:
Not Applicable
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<PAGE> 10
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 April 30, 1997 By: EDWARD A. JOHNSON
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Edward A. Johnson
President & Principal
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 776,663
<SECURITIES> 0
<RECEIVABLES> 3,087,891
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,882,447
<PP&E> 95,465
<DEPRECIATION> 60,475
<TOTAL-ASSETS> 4,329,319
<CURRENT-LIABILITIES> 1,419,399
<BONDS> 0
0
0
<COMMON> 6,811
<OTHER-SE> 3,281,757
<TOTAL-LIABILITY-AND-EQUITY> 4,329,319
<SALES> 2,830,580
<TOTAL-REVENUES> 2,832,112
<CGS> 2,063,046
<TOTAL-COSTS> 2,480,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,627
<INCOME-PRETAX> 351,354
<INCOME-TAX> 148,507
<INCOME-CONTINUING> 202,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202,847
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
