<PAGE> 1
FORM 10-Q/A
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, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-17401
OPTIMUMCARE CORPORATION
(Exact name of registrant specified in its charter)
Delaware 33-0218003
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30011 Ivy Glenn Drive, Ste 219
Laguna Niguel, CA 92677
(714) 495-1100
(Registrants telephone number, including area code)
Not Applicable
(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.
Number of Shares Outstanding
Class at June 30, 1996
- ----------------------------- -----------------------------
Common Stock, $.001 par value 4,986,036
-1-
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INDEX
OPTIMUMCARE CORPORATION
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Balance Sheets as of June 30, 1996 and 3
December 31, 1995
Statements of Income for the Three Months and Six Months 4
Ended June 30, 1996 and 1995
Statements of Cash Flows for the Three Months and Six 5
Months Ended June 30, 1996 and 1995
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
-2-
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<TABLE>
<CAPTION>
OPTIMUMCARE CORPORATION
BALANCE SHEETS JUNE 30 DECEMBER 31
(UNAUDITED) 1996 1995
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH $113,313 $170,932
ACCOUNTS RECEIVABLE, NET 2,079,221 1,536,693
PREPAID EXPENSES 61,274 31,487
------------ -----------
TOTAL CURRENT ASSETS 2,253,808 1,739,112
NOTES RECEIVABLE FROM OFFICER 155,000 155,000
FURNITURE AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $40,380 AT JUNE 30, 1996
AND $34,382 AT DECEMBER 31, 1995 23,325 25,617
DEFERRED ACQUISITION COSTS 63,063 138,753
INTANGIBLES, LESS ACCUMULATED AMORTIZATION 202,878 0
OF $5,000 AT JUNE 30, 1996 AND $0 AT
DECEMBER 31, 1996
TRADENAME, LESS ACCUMULATED AMORTIZATION
OF $1,122 AT JUNE 30, 1996 AND $1,020 AT
DECEMBER 31, 1995 953 1,055
------------ -----------
TOTAL ASSETS $2,699,027 $2,059,537
============ ===========
CURRENT LIABILITIES
ACCOUNTS PAYABLE $267,300 $192,743
ACCRUED LIABILITIES 358,868 188,788
------------ -----------
TOTAL CURRENT LIABILITIES 626,168 381,531
NOTE PAYABLE TO BANK 240,334 166,000
MINORITY INTEREST (6,174) 0
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 PAR VALUE; AUTHORIZED
20,000,000 SHARES, 4,986,036 SHARES
ISSUED AND OUTSTANDING AT JUNE 30, 1996
AND 4,923,509 SHARES ISSUED AND
OUTSTANDING AT DECEMBER 31, 1995 4,989 4,924
PAID-IN-CAPITAL 2,989,966 2,927,593
ACCUMULATED DEFICIT (1,156,256) (1,420,511)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY $1,838,699 $1,512,006
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,699,027 $2,059,537
============ ===========
</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
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $2,765,795 $1,508,258 $4,986,240 $2,997,630
INTEREST INCOME 466 2,135 2,028 3,640
----------- ----------- ----------- -----------
$2,766,261 $1,510,393 $4,988,268 $3,001,270
----------- ----------- ----------- -----------
OPERATING EXPENSES:
COSTS OF SERVICES PROVIDED $2,135,674 $1,095,918 $4,071,599 $2,213,736
PROVISION FOR DOUBTFUL ACCOUNTS 0 87,000 0 87,000
GENERAL AND ADMINISTRATIVE 322,376 241,715 588,207 462,964
INTEREST 6,859 582 12,576 1,194
----------- ----------- ----------- -----------
2,464,909 1,425,215 4,672,382 2,764,894
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 301,352 85,178 315,886 236,376
INCOME TAXES 46,631 4,805 51,631 22,605
----------- ----------- ----------- -----------
NET INCOME $254,721 $80,373 $264,255 $213,771
=========== =========== =========== ===========
NET INCOME
PER COMMON SHARE $0.04 $0.01 $0.04 $0.03
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE> 5
OPTIMUMCARE CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDING
JUNE 30 JUNE 30
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $264,255 $213,770
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & Amortization 11,099 4,121
Minority Interest (6,174) 0
Changes in operating assets and liabilities:
(Increase) in accounts receivable, net (542,528) (144,386)
Decrease in notes receivable from officers 0 (22,800)
(Increase) in prepaid expenses (8,787) (3,382)
Increase/(Decrease) in accounts payable 74,557 (615)
Increase in accrued liabilities 170,079 21,201
------------ ------------
CASH AND CASH EQUIVALENTS (USED)/
PROVIDED BY OPERATING ACTIVITIES (37,499) 67,909
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of furniture & equipment (3,868) (5,416)
Proceeds from sale of furniture & equipment 162 0
Deferred acquisition costs (63,062) 0
Intangibles (69,125) 0
------------ ------------
CASH AND CASH EQUIVALENTS (USED)
IN INVESTING ACTIVITIES (135,892) (5,416)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 41,438 0
Note payable from bank 74,334 0
Payment of note receivable from officer 0 15,653
------------ ------------
CASH AND CASH EQUIVALENTS PROVIDED BY
FINANCING ACTIVITIES 115,772 15,653
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (57,619) 78,146
Cash and cash equivalents at beginning of period 170,932 36,657
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $113,313 $114,803
============ ============
</TABLE>
See notes to financial statements.
<PAGE> 6
OPTIMUMCARE CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements for the three month period ended
June 30, 1996 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, 1996 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1996. 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, 1995.
NOTE B -- INCOME TAXES
The provision for income taxes represent current Federal and State income taxes.
At June 30, 1996, the Company has unused Federal and State net operating loss
carryforwards of approximately $1,179,000 and 16,000 respectively 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 C -- 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 6,603,654 and 6,323,974 for the three months ended June 30, 1996
and June 30, 1995 and 6,580,337 and 6,312,718 for the six months ended June 30,
1996 and June 30, 1995 respectively. The weighted average number of common
shares outstanding has been retroactively restated for a 20% stock dividend
issued in October 1996. Common share equivalents arise from stock options have
not been restated as anti-dilution rights have not been granted to the option
holders.
NOTE D -- DEFERRED ACQUISITION COSTS
On April 19, 1996, the Company completed the acquisition of a 70% interest in
certain contracts of Professional Care Source, Inc. through the formation of
OptimumCare Source, LLC (the "LLC"). The Company acquired a 70% ownership
interest in the LLC and Professional Care Source, Inc. holds a 30% ownership
interest in the LLC. The company considers the LLC to be
6
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a 70% owned subsidiary of the Company. The Company paid $11,000 in cash to each
of the three principals of Professional Care Source, Inc. and made an initial
contribution of $50,000 to the LLC for working capital.
The Company is required to purchase all of Professional CareSource, Inc.'s
interest in the LLC by April 29, 2001, but may elect to purchase the interest at
any time after April 29, 2000 at a specified price, which approximates
Professional Caresource's ownership percentage in the LLC multiplied by five (5)
times the LLC's net profit after taxes as reflected on its most recent Form 1065
after agreed upon taxes.
Three principals of Professional CareSource, Inc. were each given one year
employment contracts with the LLC. In connection with the employment agreement,
the Company granted non-qualified stock options to purchase 33,000 shares of
common stock at $.92 per share, which vest over five years, to each of the
principals of Professional Care Source, Inc. Optimum Care Source, LLC,
headquartered in Southern California, provides mental health services at long
term care facilities.
The purchase method of accounting has been used to record the transaction. The
deferred acquisition costs associated with the purchase are amortized under the
straight line method of over five years.
The Company intends to acquire certain assets of Giem, Guerra & Myers, Inc.
(previously referred to as Psychological HealthCare, Inc., in the Company's 1995
10-K). The Company and Giem, Guerra & Myers, Inc. are working together to
determine the most appropriate structure of the acquisition. It is anticipated
that the transaction will be consummated during the fourth quarter of 1996 or
the first quarter of 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
MATERIAL CHANGES IN FINANCIAL CONDITION
At June 30, 1996 and December 31, 1995, the Company's working capital was
$1,627,641 and $1,357,581 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 ($37,499) and $67,909 for the periods ended June
30, 1996 and 1995, respectively. The decrease was attributable to increased
accounts receivable from five programs which the Company began managing from
September 1995 through April 1996. The increase in accounts receivables is a
result of an increase in patient census volume as well as an increase in the
rates earned by the Company for programs which existed at June 30, 1996 versus
June 30, 1995.
7
<PAGE> 8
Cash flows used in investing activities were ($135,892) and $5,416 for the
periods ended June 30, 1996 and 1995, respectively. The decrease in cash was
primarily attributable to deferred acquisition costs incurred in connection with
the proposed acquisitions contract of assets and businesses performing
complimentary mental health services, one of which was consummated on April 24,
1996.
The cash flows from financing activities were $115,772 and $15,653 for the
periods ended June 30, 1996 and 1995, respectively. The increase was due to
draws on the Company's line of credit agreement with a bank and the exercise of
stock options by three employees. The credit agreement was increased to $750,000
and expires March 1, 1997, but is convertible into a one year term loan with a
five (5) year repayment schedule. As of July 29, 1996, approximately $500,000 is
available for future draws on the line of credit agreement. The Company's
principal sources of liquidity for the fiscal year 1996 are cash on hand,
accounts receivable, the line of credit and continuing revenues from programs.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 compared to Three Months Ended June 30, 1995
The Company operated fifteen (15) programs during the three months ended June
30, 1996 and fourteen (14) programs during the three months ended June 30, 1995.
Net revenues were $2,765,795 and $1,508,258 for the three months ended June 30,
1996 and 1995, respectively. The increase in revenues in 1996 over 1995 is due
to the different mix of operating programs among periods. The Company is
currently earning a larger fee for managing the programs which exist at June 30,
1996 versus those which existed at June 30, 1995. In addition, the volume of
patient days treated through programs at June 30, 1996 is greater than those
treated through programs which existed at June 30, 1995.
Cost of services provided were $2,135,674 and $1,095,918 for the three months
ended June 30, 1996 and 1995 respectively. The increase in the cost of services
provided among periods is primarily due to the increase in treating patient
volume among periods and an expanded scope of services provided in connection
with certain contracts such as nursing, transportation and lease costs. However,
the Company has achieved certain economics of scale in providing these services
and has begun to develop certain previously externally purchased services such
as marketing, in house, to contain these costs.
Selling, general and administrative expenses for the three months ending June
30, 1996 have increased over the three months ending June 30, 1995 due to
increased corporate marketing wages and activities, and various professional
fees incurred with the Company's contract, asset and business acquisition
efforts.
8
<PAGE> 9
Net income was $254,721 and $80,373 for the three months ending June 30, 1996
and 1995, respectively. The increase was primarily attributable to the different
mix of programs which currently exist that provide for a larger management fee
for the expanded scope of services the Company currently provides.
The Company does not know of any events which are likely to materially change
the costs of operating its Programs; however the gross profit on Programs which
have matured, are typically greater than those in the early stages of
development. Historically, Programs begin to reach their maturity within 90 to
120 days of initial operation. During the three months ending June 30, 1996 and
1995, the mix of programs changed significantly. As the newly obtained programs
continue to mature and the mix of individual operating programs begins to
stabilize, revenues should increase and gross profit should rise favorably and
disproportionately to the increase in cost for such Programs. Conversely, if the
patient census and the resulting revenue 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. In that event, the Company may not have enough operating
capital to continue operations.
The Company's revenue is expected to increase for the remainder of 1996 due to
higher census under existing contracts and a larger number of programs
operational for the entire year. Marketing plans for expanding the volume of the
business by obtaining new contracts for programs and expanding the scope of
mental health services offered by the acquisition of complementary contracts,
assets and businesses currently exist and are being implemented. It is uncertain
at this time to what extent the Company's fixed costs will be impacted by this
expansion. Due to the Company's dependence on a relatively small customer base
presently consisting of only seven (7) hospitals and one community mental health
center, the loss of any of its customers could have a significant adverse effect
on the Company's operations.
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. The provision for doubtful accounts at June 30,
1994 pertained to two contracts with one hospital which were terminated on June
30, 1994.
9
<PAGE> 10
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, 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.
10
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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
On July 22, 1996 the Company filed a Form S-8
Registration Statement to register 430,000 shares
issuable upon exercise of stock options which are a
part of the 1987 Stock Option Plan and 321,500 shares
issuable to employees of the Company upon exercise of
non-qualified stock options.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule
11
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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 January 21, 1997 By: /s/ EDWARD A. JOHNSON
---------------- ---------------------------
Edward A. Johnson
President & Principal
Financial Officer
12
<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-31-1996
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 113,313
<SECURITIES> 0
<RECEIVABLES> 2,079,221
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,253,808
<PP&E> 23,325
<DEPRECIATION> 40,380
<TOTAL-ASSETS> 2,699,027
<CURRENT-LIABILITIES> 626,167
<BONDS> 240,334
0
0
<COMMON> 4,989
<OTHER-SE> 2,989,966
<TOTAL-LIABILITY-AND-EQUITY> 2,699,027
<SALES> 2,765,795
<TOTAL-REVENUES> 2,766,261
<CGS> 2,135,674
<TOTAL-COSTS> 2,464,909
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,859
<INCOME-PRETAX> 301,352
<INCOME-TAX> 46,631
<INCOME-CONTINUING> 254,720
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254,720
<EPS-PRIMARY> $.04
<EPS-DILUTED> 0
</TABLE>
