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 December 31, 1997
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.)
5770 Roosevelt Blvd., Suite, 700, Clearwater, FL 34620
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (813) 524-3227
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 January 31, 1997 was 4,958,502 (exclusive of Treasury Shares).
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, March 31,
1997 1997
ASSETS
Current assets:
Cash and cash equivalents $231,210 $797,440
Cash deposits securing
contractual arrangements 1,316,287 1,875,000
--------- ---------
1,547,497 2,672,440
Accounts receivable, net of
allowance of $314,911
and $364,911, respectively 4,654,216 3,545,782
Inventories 22,129 25,126
Prepaids and other current
assets 288,948 256,967
--------- ---------
Total current assets 6,512,790 6,500,315
Property and equipment, net of
accumulated depreciation
of $335,472 and $248,579,
respectively 434,023 389,017
Goodwill, net of amortization of
$926,242 and $753,571,
respectively 4,167,557 4,426,563
Other intangibles assets, net
of accumulated amortization
of $2,914,519 and $1,796,412,
respectively 274,759 348,958
Other 784,030 551,447
---------- ----------
Total assets $12,173,159 $12,216,300
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Trade accounts payable $126,213 $289,844
Accrued salaries and payroll
related 1,101,543 1,421,538
Accrued expenses 153,826 412,517
Estimated amount due third
parties 344,597 158,282
Current portion of notes
payable 296,655 614,331
---------- ----------
Total current liabilities 2,022,834 2,896,512
Long term obligations:
Other 0 0
Notes payable- less current
portion 2,208,501 1,112,807
---------- ----------
Total long term obligations 2,208,501 1,112,807
---------- ----------
Total liabilities 4,231,335 4,009,319
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 10,662,522 10,679,113
Treasury stock, 51,717 at cost (103,951) (134,821)
Accumulated deficit (2,621,757) (2,342,321)
---------- ----------
Total stockholders' equity 7,941,824 8,206,981
---------- ----------
Total liabilities and
stockholders' equity $12,173,159 $12,216,300
========== ===========
Note: The balance sheet at March 31, 1997 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.
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Operations
Nine Months Ended
December 31,
1997 1996
Net revenues $17,066,544 $18,875,323
Direct expenses 12,868,030 14,678,754
---------- ----------
Gross profit 4,198,514 4,196,569
General and administrative
expenses:
Salaries and benefits 2,639,756 2,571,166
Operating expenses 601,699 589,638
Professional fees 147,781 137,725
Legal fees 58,588 192,256
Occupancy expenses 548,879 582,362
Insurance 197,794 192,386
Amortization and depreciation 449,675 453,298
Bad debt expense 382 37,514
Other contractual adjustments 0 765,000
---------- ----------
Total general and administrative 4,644,554 5,521,345
---------- ----------
Operating income (loss) (446,040) (1,324,776)
Other revenues (expenses):
Interest income 94,162 72,969
Interest expense (147,115) (60,871)
Other 0 11,636
--------- ---------
Total other revenues (expenses),
net (52,953) 23,734
--------- ---------
Income (loss) before income
taxes (498,993) (1,301,042)
Income tax (benefit) expense (219,557) 31,183
--------- ---------
Net income (loss) after income
taxes ($279,436) ($1,332,225)
========= =========
Per share:
Net income (loss) after income
taxes ($0.06) ($0.27)
====== ======
Shares used in computing per
share information 4,948,301 4,950,130
See notes to consolidated financial statements.
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended
December 31,
1997 1996
Net revenues $5,720,465 $6,309,810
Direct expenses 4,446,852 4,941,846
---------- ----------
Gross profit 1,273,613 1,367,964
General and administrative
expenses:
Salaries and benefits 854,699 839,254
Operating expenses 239,851 204,883
Professional fees 74,707 (7,050)
Legal fees 37,844 78,094
Occupancy expenses 216,588 191,591
Insurance 68,501 21,468
Amortization and depreciation 142,233 150,687
Bad debt expense 0 4,966
Other contractual adjustments 0 0
---------- ----------
Total general and administrative 1,634,423 1,483,893
---------- ----------
Operating income (loss) (360,810) (115,929)
Other revenues (expenses):
Interest income 47,850 13,286
Interest expense (62,163) (22,085)
Other 0 4,762
--------- ----------
Total other revenues (expenses),
net (14,313) (4,037)
--------- ----------
Income (loss) before income
taxes (375,123) (119,966)
Income tax (benefit) expense (165,054) 19,422
--------- ----------
Net income (loss) after income
taxes ($210,069) ($139,388)
========= ==========
Per share:
Net income (loss) after income
taxes ($0.04) ($0.03)
======= =======
Shares used in computing per
share information 4,958,502 4,918,705
See notes to consolidated financial statements.
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Nine Months Ended December 31, 1997 and Year Ended March 31, 1997
<CAPTION>
Additional
Common Stock Paid-in Accumulated Treasury Stock
Shares Dollars Capital (Deficit) Shares Dollars Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 5,010,219 $5,010 $10,708,176 ($464,269) (46,023) ($68,138) $10,180,779
Net (loss) (1,878,052) (1,878,052)
Exercise of options (1,684) 20,000 30,885 29,201
Purchase of treasury shares (100,000) (201,000) (201,000)
Shares issued under
employee stock purchase plan (27,379) 58,948 103,432 76,053
--------- ------ ---------- ---------- -------- -------- ----------
Balance at March 31, 1997 5,010,219 5,010 10,679,113 (2,342,321) (67,075) (134,821) 8,206,981
Net (loss) (279,436) (279,436)
Shares issued under
employee stock purchase plan (16,591) 15,358 30,870 14,279
--------- ------ ---------- ---------- -------- -------- ----------
Balance at December 31, 1997 5,010,219 $5,010 $10,662,522 ($2,621,757) (51,717) ($103,951) $7,941,824
</TABLE>
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
Nine Months Ended
December 31
1997 1996
Cash flows from operating activities
Net Income (loss) (279,436) ($1,332,225)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 449,675 453,297
Loss on sale or disposal of property,
plant and equipment 0 268
(Decrease) increase in cash due to net
changes in operating assets and
liabilities:
Accounts receivable - trade (1,108,433) 69,634
Prepaid expenses and other assets (28,987) (20,472)
Deferred charges or other long
term assets (232,584) (132,094)
Accounts payable and accrued
expenses (554,245) 9,329
--------- --------
Net cash provided by (used in)
operating activities (1,754,010) (952,263)
Cash flows from investing activities
(Purchase) of property and equipment, net (131,900) (165,690)
--------- --------
Net cash (used in) investing activities (131,900) (165,690)
Cash flows from financing activities
Proceeds from borrowings 5,910,442 2,162,483
Payments on borrowings (5,132,424) (1,355,496)
Capitalized loan costs (31,330) 0
Cash deposits securing contractual
arrangements 558,713 (500,000)
Proceeds from issuance of stock 14,279 44,998
Purchase of treasury stock 0 (201,000)
Proceeds from exercise of options 0 29,201
Collection of note receivable 0 106,966
--------- --------
Net cash (used in) provided by financing
activities 1,319,680 287,152
--------- --------
Increase (Decrease) in cash and
cash equivalents (566,230) (830,801)
Cash and cash equivalents at beginning
of year 797,440 1,494,860
--------- --------
Cash and cash equivalents at end of
period $231,210 $664,059
========= ========
See notes to consolidated financial statements.
<PAGE>
NuMED Home Health Care Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
December 31, 1997
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 and nine
month periods ended December 31, 1997 are not necessarily indicative of
the results that may be expected for the year ending March 31, 1998. 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, 1997.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net revenues for the three and nine months ended December 31, 1997
decreased by 9% or $589,000 and 10% or $1,809,000, respectively, over the
same periods one year ago. The revenues in the rehabilitation division,
NuMED Rehabilitation, Inc. ("NuMED Rehab"), experienced a 34% decline or
$2.9 million for the nine months ended December 31, 1997. The revenue
declines is attributed to the major client who elected to develop their
in-house therapy programs. NuMED Rehab continues to sign new contracts to
offset this decline. Meanwhile, the Home Health division revenue
continues to grow, increasing 5% or $225,000 the quarter ending December
31, 1997 and 10% or $1,043,000 for nine-months ending December 31, 1997.
With this shift in revenue, the Home Health division now comprises 68% of
the total revenues compared to 56% for the nine-month period last year.
Direct Expenses decreased approximately 10% and 12%, respectively,
for the three and nine months ended December 31, 1997. As a percentage of
net revenues, direct expenses decreased from 79% to 78% for the three-
month period ending December 31, 1997 and from 78% to 75% for the nine
months period ending December 31, 1997.
For the Home Health division, direct expenses, as a percentage of net
revenues decreased from 73% to 72%, while direct expenses for NuMED
Rehabilitation increased from 85% to 86% of its net revenues for the three
months ending December 31, 1997. For the nine months ended December 31,
1997, direct expenses as a percentage of net revenues for the Home Health
Division, decreased 73% to 71% of its net revenues while direct expenses
for NuMED Rehabilitation remained the same at 84% of its net revenues.
The Company's gross profit margins for the three months and nine
months ending December 31, 1997, was 22% and 25%, respectively. This
compares favorable with the same periods of the previous year of 22% for
both the three-month and nine-month periods.
General and administrative operating expenses increased by $150,500
or 10% of net revenues for the quarter ending December 31, 1997. For the
nine months ending the same date, expenses are $112,000 less than the
prior year. [For comparison purposes, the 1996 expenses and percentages
were adjusted by the $765,000 estimated settlement of a major NuMED Rehab
client.]
The Company is positioning itself to reduce any negative impact of
the Balanced Budget Act of 1997 and its adverse effect on reimbursement
and strategically accesses the advent of prospective payment in Medicare
skilled nursing facilities and the recently issued Health Care Financing
Administration (HCFA) reimbursement guidelines (salary equivalency) for
occupational and speech therapy. The Company continues to review the
management organization and all the resources in efforts to increase
efficiency through combination of physical facilities and operations.
As a result of the foregoing, the Company experienced a net loss of
approximately $210,000 for the three months ended December 31, 1997 and
$279,000 for the nine months ended December 31, 1997 as compared to net
loss of $139,000 and $1,332,000, respectively for the same periods one
year ago. Excluding the effect of the estimated contractual settlement of
$765,000, the Company would have incurred a loss of $567,000 for the nine-
month period ending December 31, 1996.
Liquidity and Capital Resources
The Company's working capital and current ratio were $4.5 million and
4.0, respectively as of December 31, 1997 as compared to $3.6 million or
3.2 as of March 31, 1997. The outstanding account receivables have
increased this quarter by $464,000 or 10% to $4.6 million and the long
and short-term borrowings under the lines of credit have increased
$551,000 to $2.5 million for the three months ending December 31, 1997.
The company's short-term cash need has been temporarily met by
borrowings under the lines of credit. The billing and collection process
has been critically reviewed by senior management in efforts to accelerate
the cash flows and reduce the outstanding account receivables.
The Company signed a new $5.0 million credit facility on August 14,
1997. This credit facility is secured by 120 days account receivables and
accrues interest at the prime rate plus 2%. The prime rate is currently
8.5%. The line matures on August 14, 1999. As of December 31, 1997, $1.3
million was outstanding under this line.
The Company renegotiated the existing line of credit of $1.5 million
on July 28, 1997. Interest on this line accrues at a rate equal to the
lender's certificate of deposit rate plus 1.75%. As of December 31, 1997
a total of $901,000 was outstanding under this arrangement secured by
$941,000 in certificates of deposit. Advances are limited to the
certificates of deposit pledged.
The company entered into another short-term credit facility on
December 5,1997 in the amount of $275,000 secured by a certificate of
deposit of the same amount with the same institution. It matured on
January 5, 1998 and was renewed for another 30 days. Interest accrued at a
rate equal to the lender's certificate of deposit rate on the certificate
of deposit which was 4.85% during the renewal period. As of December 31,
1997, $150,000 was outstanding under this line.
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 December 31,1997, net goodwill
and intangible assets of the Company were approximately $4.2 million.
With its current financing in place, cash reserves, and the projected
cash flow, the Company believes it can meet all it working capital needs
for the next 12 months provided Medicare and Medicaid pays in a reasonable
amount of time.
The Company is currently undergoing a routine Medicare audit of the
home office and one of the Florida subsidiaries for the fiscal year ended
March 31, 1996. The audit is still in progress and any cost report
adjustments and their financial impact are unknown at this time. A
liability of $344,000 is currently on the balance sheet for any net
estimated repayments to the Medicare program for prior years.
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. In
response, the Plaintiff filed a subsequent motion to alter or amend the
judgment granting the Company's motion to dismiss. The Court has not yet
ruled on this motion. Management believes that the action is frivolous
and without merit and intends to vigorously contest any restated
allegations.
Items 2 through 5. -Not applicable
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 December 31, 1997.
<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: February 13, 1998 By: /s/Jugal K. Taneja
Jugal K. Taneja
Chairman of the Board,
Chief Executive 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 NINE MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 1547
<SECURITIES> 0
<RECEIVABLES> 4969
<ALLOWANCES> 315
<INVENTORY> 22
<CURRENT-ASSETS> 6513
<PP&E> 769
<DEPRECIATION> 335
<TOTAL-ASSETS> 12173
<CURRENT-LIABILITIES> 2023
<BONDS> 2209
0
0
<COMMON> 5
<OTHER-SE> 7937
<TOTAL-LIABILITY-AND-EQUITY> 12173
<SALES> 0
<TOTAL-REVENUES> 17067
<CGS> 0
<TOTAL-COSTS> 12868
<OTHER-EXPENSES> 4645
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> (147)
<INCOME-TAX> (220)
<INCOME-CONTINUING> (499)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (279)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
