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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 19, 1998
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OptimumCare Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-17401 33-0218003
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
30011 Ivy Glenn Drive, Suite 219, Laguna Niguel, CA 92677
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 495-1100
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
Termination of Galaxy Health Care Alliance. On March 19, 1998, the
Company entered into an agreement with Galaxy Health Care, Inc. to terminate the
Community Mental Health Center Agreement pursuant to which the Company provided
management services for the treatment of patients with psychiatric disorders at
a partial hospitalization program located in Long Beach, California effective
April 15, 1998 or earlier as the Company is able to arrange for a transfer of
the Galaxy provider license for the program. The agreements pursuant to which
the Company was to provide management services for programs in Las Vegas, Nevada
and Portland, Oregon were also terminated effective immediately. The Company
terminated its alliance with Galaxy as a result of the delay in reimbursement
for services performed at the Long Beach, California program which has resulted
from Galaxy's extended audit by its major insurer, delays in acquiring provider
numbers for treatment sites and delays in billing for services already
performed.
Funds due to the Company from Galaxy through December 31, 1997
approximate $600,000. Since January 1998, the Company has invested approximately
$100,000 per month to maintain the Long Beach, California program.
Galaxy has agreed to complete the billing to Blue Cross and Medi-Cal for
all services performed through February 28, 1998 on or before March 31, 1998 and
to bill for all remaining services within thirty (30) days following termination
of the agreement with Galaxy for management of the Long Beach, California
program. In the event Galaxy fails to do so, Galaxy has agreed that the
Company may take all necessary steps to be reimbursed for billings related to
the Long Beach, California program.
Charge to Earnings. The Company anticipates a charge to fourth quarter
operating results of approximately five to seven cents per share for funds owed
to the Company by Galaxy resulting in a loss for the final quarter of 1997 of
two to three cents, but a profitable year overall. Further, a delay in
reimbursement for the services at the Long Beach, California program since
January 1998 will likely mean operating results yielding only a small profit for
the first quarter of 1998.
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In addition to the charges related to the Galaxy alliance, the Company's
auditors have determined that $135,000 of costs related to the acquisition of
OptimumCare Source, a 70% owned subsidiary acquired in April 1996 must be
written off rather than amortized over future years. OptimumCare Source, which
focuses primarily on providing behavioral healthcare services at long term care
facilities, is generating relatively insignificant revenues at this time and is
not expected to grow substantially in the future.
Stock Repurchase Program. On March 19, 1998, Board of Directors of the
Company approved a plan whereby the Company may purchase through open market
transactions up to 500,000 shares of its common stock over the next twelve
months. The Company intends to commence purchasing shares of its common stock on
or after April 1, 1998. All such purchases are intended to be in compliance with
Rule 10b-18 under the Securities Exchange Act of 1934, as amended.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibits.
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99.1 Press Release dated March 19, 1998
99.2 Press Release dated March 23, 1998
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable.
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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 hereunto duly authorized.
OptimumCare Corporation
(Registrant)
Date: March 23, 1998 By: /s/ Edward A. Johnson
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Edward A. Johnson, President
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EXHIBIT 99.1
OPTIMUMCARE
CORPORATION
COMPANY CONTACT: MEDIA & INVESTOR RELATIONS CONTACT:
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ED JOHNSON, PRESIDENT & CEO FINANCIAL MARKETING RESOURCES
1-888-448-1848 1-800-995-4410 OR (714) 622-6050
FOR IMMEDIATE RELEASE
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OPTIMUMCARE ENDS ALLIANCE WITH GALAXY,
WILL TAKE WRITEOFF IN 1997 FOURTH QUARTER
Laguna Niguel, CA.: March 19, 1998 - OPTIMUMCARE CORPORATION (OTC:BB-OPMC)
today ended its alliance with Miami-based Galaxy Health Care, Inc., and said
1997 fourth quarter and full year financial results, to be announced next week,
will reflect this action.
We'll probably see a charge to fourth quarter operating results of
approximately five to seven cents per share, resulting in a loss for the final
quarter of 1997 of two to three cents, but a profitable year overall," said
Edward A. Johnson, OptimumCare's president and CEO.
"Moreover," he said, "a delay in reimbursement for work done in the
alliance since January of this year will likely mean operating results yielding
only a small profit for the first quarter for 1998."
"When, and if, these fees are reimbursed, they will be treated as
income. While our accounting firm is still reviewing full 1997 financial
results, I asked our Board of Directors to approve this step for two very
important reasons," Johnson said.
"First, our shareholders have been very patient during this period of
uncertainty. While we wish the management and employees of Galaxy every good
fortune, the alliance clearly had lost its momentum. Delays in acquiring
provider numbers for treatment sites, delays in billing for the site already
being worked, and the continuing delay caused by the extended audit of Galaxy by
its major insurer became untenable," the CEO continued. "We needed to move on."
"Second, our research suggests that the behavioral healthcare
marketplace is growing strongly nationwide. We felt it was time to expand upon
those partnerships we've created over the years, and develop similar programs on
a national level. It clearly makes more sense for us to grow through a network
of providers across an increasingly larger geographic spread, rather than a
program with only one partner and a bi-coastal focus," Johnson observed.
Accordingly, Johnson said, OptimumCare and Galaxy have agreed to
terminate agreements covering the Long Beach treatment site and the proposed Las
Vegas, Nevada and Portland, Oregon sites. Termination of the latter two is
effective immediately.
The Long Beach agreement will be terminated effective April 15, 1998 or
earlier as OptimumCare is able to arrange for a transfer of the Galaxy provider
license. A major OptimumCare healthcare partner is currently evaluating
expansion of its relationship by taking over the Long Beach program, with
OptimumCare continuing to provide behavioral healthcare services.
"As part of the agreement, Galaxy is also required to transfer the
provider number for the Las Vegas facility without charge to OptimumCare, or any
party we designate," he said.
"Galaxy has agreed to complete the billing to Blue Cross and Medi-Cal
for services rendered from the inception of the program late last year through
the end of February, 1998, on or before March 31, 1998," Johnson reported.
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"In addition, it has agreed to complete the billing for services from
March 1, 1998, through termination of the program, within 30 days of the time
the program ends.
"If Galaxy doesn't complete the billing on or before March 31, under
the terms of our prior agreement OptimumCare is immediately empowered to take
all necessary steps to be reimbursed for billings related to Long Beach,
regardless of the outcome of the audit of Galaxy's Florida facilities," Johnson
explained.
Currently, funds due OptimumCare from Galaxy through 1997 amount to
almost $600,000. Approximately $400,000 is related to services for the final
months of 1997, and an additional $200,000 represents funds advanced by
OptimumCare to Galaxy as part of the alliance to fund the application for
provider numbers, including one for Galaxy in the Miami, Florida area. Since
January, 1998, OptimumCare's investment to maintain the Long Beach program has
approximated an additional $100,000 monthly.
"In light of the delay in receipt of the reimbursements, and termination
of the agreement, our exit strategy now includes an agreement by Galaxy that all
reimbursement checks received by it for Long Beach-related invoices will now be
payable to OptimumCare immediately on receipt, and up to the full amount we're
owed," the CEO said. The earlier agreement called for reimbursement of 50% of
all funds advanced by OptimumCare, with the balance payable over 12 months,
including an additional 10% profit on the unpaid balance.
"Moreover," he added, "should Galaxy fail to receive reimbursement as a
result of offsets due to Galaxy's audit, our agreement clearly states that we
still are owed every penny of funds advanced by OptimumCare related to this
program," Johnson continued.
In addition to the charges related to the Galaxy alliance, the CEO said,
OptimumCare's auditors have ruled that costs related to the acquisition of
OptimumCareSource, a 70% owned subsidiary purchased in April, 1996, must be
written off currently rather than being amortized over future years. This unit
focuses primarily on providing behavioral healthcare services at long term care
facilities. Because revenues at this unit are relatively insignificant, and are
not expected to grow substantially in the immediate future, a one-time charge of
approximately $135,000 will also be applied to fourth quarter results.
"We expect to move forward very aggressively in growing this company,"
the CEO stated. "We'll be reporting 1997 fourth quarter and full year financial
results before the end of this month. And there are other important actions that
have been initiated to enhance shareholder value that we'll be announcing over
the next several months.
"We appreciate the many expressions of support and friendship that have
been offered by our shareholders during this difficult period. On behalf of the
Board, I want to express our sincere belief that in taking these steps, many
positive things are unfolding. I sincerely believe the 'new' OptimumCare will
emerge stronger than ever," Johnson concluded.
Created in 1987 to respond to opportunities presented by increasing
utilization of behavioral health services, OptimumCare Corporation provides a
wide range of inpatient and outpatient behavioral health services through a
growing network of affiliated hospitals, medical centers and community health
centers.
Certain of the statements made herein constitute forward looking statements that
involve risk 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. Additional information
may be obtained by reviewing the company's reports filed from time to time with
the SEC.
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EXHIBIT 99.2
COMPANY CONTACT: MEDIA AND INVESTOR RELATIONS CONTACT:
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Ed Johnson, President & CEO Financial Marketing Resources
(888) 448-1848 (800) 995-4410 or (714) 622-6050
For immediate release
OPTIMUMCARE ANNOUNCES STOCK BUYBACK PROGRAM;
PLANS TO REPURCHASE UP TO 500,000 SHARES
Laguna Niguel, CA, March 23, 1998 -- OptimumCare Corporation (OTC:BB- OPMC)
today announced a stock buyback program, and said it would repurchase up to
500,000 shares in the open market at prevailing prices over the next 12 months,
commencing on or after April 1, 1998.
"Our Board of Directors approved this buyback program because the
fundamentals of our company are far stronger than the current range at which
our stock's being traded," said Edward A. Johnson, OptimumCare's president and
CEO.
"We clearly believe that OptimumCare has an outstanding future, and is a
buy at current trading prices" the CEO said. "This action underscored that
belief."
The company reported last week that it would take a writeoff of
approximately $700,000 in the fourth quarter of 1997, principally to cover
charges related to ending its alliance with Galaxy Health Care.
"Our fourth quarter and full year 1997 results, while still being
profitable, will reflect a charge of approximately five to seven cents per
share to cover year-end writeoffs," Johnson said. He also pointed out that
pending reimbursement from Galaxy Health Care, results for the 1998 first
quarter will produce only a modest profit. He indicated when, and if, the
secured funds are reimbursed they will be treated as income.
Created in 1987 to respond to opportunities presented by increasing
utilization of behavioral health services, OptimumCare Corporation provides a
wide range of inpatient and outpatient behavioral health services through a
network of affiliated hospitals, medical centers and community health centers.
Certain of the statements made herein constitute forward looking statements
that 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. Additional
information may be obtained by reviewing the company's reports filed from time
to time with the SEC.
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