SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter Ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-12992
NuMED HOME HEALTH CARE, INC.
(Exact name of small business issuer as specified in its charter)
STATE OF NEVADA 34-1711764
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
6505 Rockside Road Suite 400, Independence, OH 44131
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (216) 447-6066
Indicate by check mark whether the issuer (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 period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [ X ] Yes
[ ] No
The number of shares outstanding of the Issuer's common stock at $.001 par
value as of August 2, 1996 was 4,974,196 (exclusive of Treasury Shares).
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, March 31,
1996 1996
ASSETS
Current assets:
Cash and cash equivalents $1,260,766 $1,494,860
Cash deposits securing contractual
arrangements 1,417,014 1,417,014
--------- ---------
2,677,780 2,911,874
Accounts receivable 4,838,352 4,788,715
Notes receivable 0 106,966
Inventories 26,274 26,274
Prepaids and other current assets 242,203 201,224
--------- ---------
Total current assets 7,784,609 8,035,053
Property and equipment, net of
accumulated depreciation
of $139,966 and $117,459,
respectively 245,008 259,138
Goodwill, net of amortization of
$1,200,189 in and $1,103,018
in 1995 4,946,946 4,991,154
Other intangibles assets, net of
accumulated amortization of
$ 961,551 and $926,187 respectively 168,261 203,627
Other 32,235 32,109
---------- ----------
Total assets $13,177,059 $13,521,081
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $405,410 $550,117
Accrued expenses 1,954,034 1,943,306
Short term notes payable 0 20,000
Current portion of notes payable-
acquisitions 142,207 167,852
--------- ---------
Total current liabilities 2,501,651 2,681,275
Long term obligations:
Other 18,869 21,999
Notes payable-acquisitions, less current
portion 617,787 637,028
--------- ---------
Total long term obligations 636,656 659,027
--------- ---------
Total liabilities 3,138,307 3,340,302
Stockholders' equity:
Preferred stock, authorized 2,000,000,
no shares issued or outstanding 0 0
Common stock, $.001 par value,
authorized 48,000,000 shares,
5,010,219 shares issued 5,010 5,010
Additional paid-in capital 10,708,347 10,708,176
Treasury stock, 36,023 and 46,023
shares, respectively, at cost (56,108) (68,138)
Accumulated deficit (618,497) (464,269)
---------- ----------
Total stockholders' equity 10,038,752 10,180,779
---------- ----------
Total liabilities and stockholders'
equity $13,177,059 $13,521,081
========== ==========
Note: The balance sheet at March 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to consolidated financial statements.
Form 10-QSB
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended June 30,
1996 1995
Net Revenues $6,424,675 $5,526,192
Direct expenses 4,868,006 4,113,885
--------- ---------
Gross profit 1,556,669 1,412,307
General and administrative expenses:
Salaries and benefits 892,882 753,613
Operating expenses 189,407 154,640
Professional fees 103,018 23,599
Legal fees 103,971 27,096
Occupancy expenses 194,754 162,560
Insurance 76,424 62,620
Amortization and depreciation 152,669 149,846
Bad debt expense 14,398 5,583
--------- ---------
Total general and administrative 1,727,523 1,339,557
--------- ---------
Operating income (170,854) 72,750
Other revenues (expenses):
Interest income 32,842 25,660
Interest expense (12,639) (7,713)
Other (268) (3,800)
--------- ---------
Total other revenues (expenses) 19,935 14,147
--------- ---------
Income before income taxes (150,919) 86,897
Income tax expense 3,309 14,103
--------- ---------
Net income after income taxes $(154,228) $ 72,794
========= =========
Per share:
Net income after income taxes $ (0.03) $ 0.01
========= =========
Shares used in computing per
share information 4,967,712 4,885,828
See notes to consolidated financial statements.
Form 10-QSB
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Three Months Ended June 30, 1996 and Year Ended March 31, 1996
<CAPTION>
Unrealized
Gain
Additional (Loss) on
Common Stock Paid-in Accumulated Marketable Treasury Stock
Shares Dollars Capital (Deficit) Securities Shares Dollars Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
March 31, 1995 5,010,219 $5,010 $10,665,403 ($573,764) ($51,686) (409,020) ($492,000) $9,552,963
Net income (loss)
for the Year 109,495 109,495
Unrealized Gain on
Marketable Securities 51,686 51,686
Other 6,000 6,000
Acquisition of
assets from Rehab
America, Inc. 32,637 297,715 358,114 390,751
Shares issued under
Employee Stock
Purchase Plan 3,275 81,282 97,772 101,047
Purchase Treasury
shares (21,000) (38,038) (38,038)
Private Placement of
Restricted Stock for
Consulting Services 861 5,000 6,014 6,875
--------- ------ ---------- -------- --------- --------- ---------- ----------
Balance at
March 31, 1996 5,010,219 $5,010 $10,708,176 ($464,269) $0 (46,023) ($68,138) $10,180,780
Net income (loss)
for quarter (154,228) (154,228)
Exercise of Options 171 10,000 12,030 12,201
--------- ------ ---------- -------- --------- --------- ---------- ----------
Balance at
June 30, 1996 5,010,219 $5,010 $10,708,347 ($618,497) $0 (36,023) ($56,108) $10,038,753
========= ====== ========== ======== ========= ========= ========== ==========
</TABLE>
See notes to consolidated financial statements.
Form 10-QSB
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
Three Months Ended June 30,
1996 1995
Cash flows from operating activities
Net Income (loss) $(154,228) $ 72,794
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 152,669 149,846
Cash deposits securing contractual
arrangements 0 (142,646)
Loss on sale of marketable securities 0 2,450
Loss on sale or disposal of property,
plant and equipment 268 0
(Decrease) increase in cash due to
net changes in operating assets
and liabilities:
Accounts receivable - trade (65,743) (153,468)
Prepaid expenses and other assets (40,979) (171,837)
Deferred charges or other long
term assets (125) 41,272
Accounts payable and accrued
expenses (170,839) 758,229
--------- ---------
Net cash provided by (used in)
operating activities (278,977) 556,640
Cash flows from investing activities
Sale of marketable securities held
for sale 0 10,100
(Purchase) of property and equipment,
net (6,272) (70,564)
Acquisition of assets from Rehab America,
Inc., net of cash acquired 0 (5,124,818)
Other 0 1,000
Exercise of options 12,201 0
Note Receivable 106,966 0
Purchase of accounts receivable from
factor 0 (242,327)
--------- ----------
Net cash (used in) investing activities 112,895 (5,426,609)
Cash flows from financing activities
Proceeds from short-term borrowings 0 1,384
Payments of short-term borrowings (45,641) (74,314)
Other (3,126) 0
Payments of long-term borrowings (19,245) (3,254)
--------- ----------
Net cash (used in) provided by financing
activities (68,012) (76,184)
--------- ----------
Increase (Decrease) in cash and
cash equivalents (234,094) (4,946,153)
Cash and cash equivalents at beginning
of year 1,494,860 7,406,142
--------- ----------
Cash and cash equivalents at end of
period $1,260,766 $2,459,989
========= =========
Non cash transactions:
Common stock issued for acquisition of
assets from Rehab America, Inc.
(275,000 shares) $ - $ 360,938
Common stock issued for consulting
services (22,715 shares) $ - $ 29,813
--------- ---------
$ - $ 390,751
========= =========
See notes to consolidated financial statements.
Form 10-QSB
<PAGE>
NuMED Home Health Care Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1996
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and 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 June 30, 1996 are not
necessarily indicative of the results that may be expected for the year
ending March 31, 1997. For further information, refer to the consolidated
financial statements and footnotes included in the Company's and
Subsidiaries' Form 10-KSB for the year ended March 31, 1996.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net Revenues for the three months ended June 30, 1996 increased by
16% or $898,000 over the same period one year ago. The acquisition of
Parke Home health Care, Inc. ("Parke") effective January 1, 1996 accounted
for $534,000 of the increase. The remaining increase of $364,000 was
primarily attributable to increased visits in the home health care
division. Home health care net revenue for the quarter increased $868,000
or 33% over the same period one year ago, of which 12.7% was attributable
to Parke. Net revenues for the Company's rehabilitation therapy division
conducted through the Company's subsidiary NuMED Rehabilitation, Inc.
("NuMED Rehab") increased $30,000 or 1% over the same period one year ago.
Direct expenses as a percentage of net revenue increased 2% to 76% of
net revenues as compared to 74% for the same period one year ago. Direct
expenses for the home health care division remained stable at 72% of home
health care net revenues while direct expenses for NuMED Rehab increased
to 81% of its net revenues as compared to 77% for the same period one year
ago. The increase for NuMED Rehab was generally attributable to three
primary factors. First, during the fourth quarter of fiscal 1996 and
during the three months ended June 30, 1996, NuMED Rehab experienced the
loss of several long-term staffing contracts that were difficult to
replace prior to June 30, 1996 as a result of pending discussions and
consideration of an extraordinary transaction involving the potential sale
of the Company (see Part II, Item 5 - "Other Information"). NuMED Rehab
employees staffing terminated contracts were re-assigned to other
facilities pending the acquisition of new staffing agreements to replace
terminated contracts. Second, NuMED Rehab initiated efforts to hire
employees to replace more expensive contract staff currently necessary to
meet staffing demands. The aggregate effect of reassigning existing
employees and integrating new staff diminished overall efficiencies for
NuMED Rehab's professional therapists during the three months ended June
30, 1996. Third, the mix of revenue between occupational, physical and
speech therapy shifted during the three months ended June 30, 1996.
Physical therapy revenue, which generally yields lower gross margins than
either occupational or speech therapy, constituted a larger percentage of
net revenues during the first quarter of fiscal 1996 as compared to the
same period one year ago.
Gross Profit as a percentage of net revenue for the three month
period ending June 30, 1996 decreased to 24% as compared to 26% for the
same period a year ago. The decrease in gross profit margin was a result
of the increase in direct expenses attributable to diminished efficiencies
and revenue mix experienced by NuMED Rehab.
General and Administrative expenses for the three months ended June
30, 1996 increased 29% to $1,728,000 or 27% of net revenue from $1,340,000
or 24% of net revenue for the same period one year ago. The overall
increase is attributable to the acquisition of Parke in addition to
certain unusual and non-recurring legal and professional fees incurred in
connection with the defense of class action litigation (see Part II, Item
1 - "Legal Proceedings") and the proposed acquisition of the Company by
CCF Health Care Ventures, Inc. (see Part II, Item 5 - "Other
Information"). Salaries and benefits also increased as a result of the
addition of administrative positions to support the Company's growth
during fiscal 1996.
As a result of the foregoing, the Company experienced a net loss of
approximately $154,000 for the three months ended June 30, 1996 as
compared to net income of $72,000 for the same period one year ago.
Excluding the effect of $145,000 of unusual and non-recurring legal and
professional fees, the Company would have experienced a net loss of
approximately $9,000.
Liquidity and Capital Resources
The Company's working capital and current ratio remained consistent
at $5,283,000 and 3:1, respectively, as of June 30, 1996 as compared to
$5,354,000 and 3:0, respectively, as of March 31, 1996. Cash decreased
$234,000 for the three months ended June 30, 1996 as compared to March 31,
1996. The decrease in cash provided by or used in operations was
primarily attributable to the application of cash during fiscal 1997 to
accounts payable and accrued expenses. The decrease in cash was
accompanied by a corresponding decrease in trade accounts payable and
accrued expenses. During the three months ended June 30, 1995, the NuMED
Rehab acquisition was consummated. Current liabilities increased as a
result of the acquisition, but were paid subsequent to June 30, 1995. The
increase in current liabilities from March 31, 1995 to June 30, 1995 was
shown as providing cash from operations at June 30, 1995.
One of NuMED Rehab's key customers is currently undergoing a Medicare
audit in connection with professional contract therapy services provided
to its patients by NuMED Rehab. The customer's fiscal intermediary has
indicated its position that the cost of certain professional contract
therapy services provided by NuMED Rehab exceeded the limits mandated by
Medicare prudent buyer principles. Management believes that the position
taken by the auditing fiscal intermediary is erroneous and intends to
vigorously contest any determination that disallows any portion of the
fees paid to NuMED Rehab for professional services rendered in this case.
There can be no assurance that NuMED Rehab will prevail in its position on
this matter. An adverse determination by the fiscal intermediary could
require NuMED Rehab to reimburse a portion of the fees its received in
connection with the services in question which could have a material
adverse effect on the Company's financial position and results of
operations.
The Company has a line of credit in the amount of $1.0 million.
Interest on this line accrues at a rate equal to the lender's certificate
of deposit rate plus 1.75%. The line of credit is secured by a $1.0
million certificate of deposit. Approximately $359,000 of this line was
utilized to pay the cash portion of the purchase price of the outstanding
stock of Parke. The outstanding balance is due and payable no later
February 28, 1998. Pursuant to the terms of the loan agreement, management
intends to repay the loan during fiscal 1998. Also, in connection with
the Parke acquisition, the Company financed 50% of the acquisition with
two 30 month term loans payable to the previous owners of Parke. The
aggregate outstanding principal balance on the notes at June 30, 1996 was
approximately $323,000. Interest accrues on the Parke loans at the rate
of eight percent (8%) per annum and is secured by the outstanding stock of
Parke purchased by the Company.
The Company also has a $500,000 and a $150,000 line of credit.
Interest on the $500,000 line of credit accrues at a blended interest rate
equal to the lender's certificate of deposit rate plus 2% on the first
$275,000 and the prime lending rate plus 2% on the remaining $225,000.
Interest on the principal balance outstanding on the $150,000 line of
credit accrues at the prime rate of interest plus 1/2%. Any outstanding
balances existing under either of the foregoing lines of credit are
secured by accounts receivable or certificates of deposit and other cash
accounts. As of June 30, 1996, there was no principal balance outstanding
on either the $500,000 or the $150,000 line of credit. The Company is in
material compliance with all debt covenants under its lines of credit.
Parke Home Health Care currently has two lines of credit for $100,000
and $50,000. Interest accrues on each of the lines at the prime rate of
interest plus 1%. Any outstanding balances existing under either of the
foregoing lines of credit are secured by substantially all of Parke's
assets. As of June 30, 1996, there were no amounts outstanding under
either of Parke's lines of credit. Parke Home Health Care is in material
compliance with all debt covenants under its lines of credit.
The Company's net income has been and will continue to be impacted
significantly by the non-cash charge of amortization expense of goodwill
and intangible assets of the Company. At June 30, 1996, net goodwill and
intangible assets of the Company were $5.1 million. The amortization of
goodwill and intangible assets in the future will decrease net income or
increase any net loss.
The Company intends to implement a management information system for
its entire operation in fiscal 1997. The cost of the system is estimated
at $1.0 million of which $550,000 will be expended during the remainder of
fiscal 1997. Management intends to finance the system either with a lease
or with the use of existing cash over a period of 12-60 months.
The Company believes that its current cash reserves, projected cash
flow and the funds available under its credit facilities will allow the
Company to continue to meet its expected capital and operating expenses
and working capital needs for at least the next 12 months.
<PAGE>
Part II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On January 31, 1996, Robin Fernhoff, individually and on behalf of
all others similarly situated filed a class action in the United States
District Court for the Middle District of Florida, Tampa Division against
NuMED Home Health Care, Inc., Jugal K. Taneja and A.T. Brod & Co., Inc.
(Case No. 96-200-CIV-T-21C). The plaintiff alleged that failure to
disclose the net capital position of A.T. Brod & Co., Inc. caused the
disclosure in the Company's prospectus dated February 8, 1995, to be
materially misleading. The plaintiff also alleged violations of Section
11 and 12(2) of the Securities Act of 1933, 15 U.S.C. Sections 77k and 77l
respectively, and sought damages on behalf of the class.
In response to the complaint, the Company filed its answer and a
corresponding motion to dismiss. On July 25, 1996, the United States
District Court for the Middle District of Florida, Tampa Division, granted
the Company's motion dismissing the complaint in its entirety. While the
Court granted Plaintiff leave to amend the complaint, the Court indicated
its concern for Plaintiff's ability to overcome the complaint's
substantial deficiencies. Management believes that the action is
frivolous and without merit and intends to vigorously contest any restated
allegations.
On November 28, 1995, a complaint was filed in the Cuyahoga County
Ohio Court of Common Pleas by a former officer and director of the Company
in connection with a dispute arising from the plaintiff's resignation from
the Company. The complaint sought damages based upon an alleged a breach
of an alleged employment contract. The complaint sought $500,000 in
damages from the Company, $500,000 in damages from the CEO, and $500,000
in punitive damages. On June 27, 1996 the matter was dismissed following
settlement for an immaterial amount of all outstanding issues with the
plaintiff.
Items 2 through 4. - Not applicable
Item 5. OTHER INFORMATION
On May 30, 1996, the Company signed a non-binding letter of intent to
proceed with serious consideration of an unsolicited transaction under
which CCF Health Care Ventures, Inc., an affiliate of the Cleveland Clinic
Foundation, would acquire 80% of the outstanding shares of the Company at
a price of $4.00 per share. The total cost of the proposal to CCF Health
Care Ventures, Inc. would not exceed $17,400,000 including other payments
to shareholders who are members of management. Management shareholders are
parties to employment contracts requiring substantial payments in
connection with a change of control and have not yet committed to the
transaction. The Company has formed an independent committee of outside
directors and has hired a financial advisor to evaluate the proposed
transaction. Whether any transaction will, in fact, occur will depend on
various contingencies, including negotiation of a definitive agreement and
a fairness opinion from an outside financial advisor. There is no
assurance that any transaction will or will not occur.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. There are no exhibits filed with this report
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the quarter ended June 30, 1996.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NuMED Home Health Care, Inc.
Date: August 9, 1996 By: /s/Jugal K. Taneja
Jugal K. Taneja
Chairman of the Board,
Chief Executive Officer
Date: August 9, 1996 By: /s/ Cheryl B. McMillan
Cheryl B. McMillan
Controller,
Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NUMED HOME HEALTH CARE, INC. AS OF AND
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,261
<SECURITIES> 0
<RECEIVABLES> 4,838
<ALLOWANCES> (158)
<INVENTORY> 26
<CURRENT-ASSETS> 7,785
<PP&E> 245
<DEPRECIATION> (140)
<TOTAL-ASSETS> 13,177
<CURRENT-LIABILITIES> 2,502
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 10,034
<TOTAL-LIABILITY-AND-EQUITY> 13,177
<SALES> 0
<TOTAL-REVENUES> 6,425
<CGS> 0
<TOTAL-COSTS> 4,868
<OTHER-EXPENSES> 1,746
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (151)
<INCOME-TAX> 3
<INCOME-CONTINUING> (154)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (154)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
