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, 1998
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 Boulevard, Suite 700, Clearwater, FL 346204
(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 August 14, 1998 was 4,966,620 (exclusive of Treasury Shares).
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
June 30 March 31
1998 1997
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 146,599 $ 59,725
Cash deposits securing contractual 1,301,000 1,275,980
---------- ----------
1,447,599 1,335,705
Accounts receivable, net of allowance
for doubtful accounts of $304,796 4,155,298 4,343,476
Prepaids, inventories, and other current 245,908 335,825
---------- ----------
Total current assets 5,848,805 6,015,006
Property and equipment, net 348,308 382,928
Goodwill, net of amortization of $1,185,248
and $1,098,913, respectively 3,994,887 4,081,222
Other intangibles assets, net of
accumulated amortization of
$1,925,599 and $1,912,826, respectively 226,052 242,563
Deferred tax and other 34,185 34,185
---------- ----------
Total assets $10,452,237 $10,755,904
========== ==========
LIABILITES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 139,702 $ 289,850
Accrued salaries and payroll related 1,017,831 1,291,419
Accrued expenses 230,485 278,055
Estimated amounts due to third party
payors 21,345 21,345
Short-term borrowings 2,118,562 1,596,424
Current portion of long-term obligations 51,025 97,053
---------- ----------
Total current liabilities 3,578,950 3,574,146
Long-term obligations, less current portion 913,991 917,427
---------- ----------
Total liabilities 4,492,941 4,491,573
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 10,653,754 10,653,754
Treasury stock, 43,599 and 67,075 shares
of common stock at cost, respectively (87,634) (87,634)
Accumulated deficit (4,611,834) (4,306,799)
---------- ----------
Total stockholders' equity 5,959,296 6,264,331
---------- ----------
Total liabilities and stockholders' equity $10,452,237 $10,755,904
========== ==========
</TABLE>
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NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended June 30,
1998 1997
----------- ----------
Revenues $ 4,746,164 $ 5,633,693
Direct expenses 3,543,703 4,243,631
---------- ----------
Gross profit 1,202,461 1,390,062
General and administrative
expenses:
Salaries and benefits 813,552 845,831
Operating expenses 224,178 138,463
Professional fees 55,460 33,925
Legal fees 10,093 5,410
Occupancy expenses 184,718 144,228
Insurance 56,574 63,783
Amortization and depreciation 135,055 144,166
Bad debt expense 0 0
---------- ----------
Total general and administrative 1,479,630 1,375,806
---------- ----------
Operating income (loss) (277,169) 14,256
Other revenues (expenses):
Interest income 42,157 31,659
Interest expense (70,023) (30,624)
Other expense 0
---------- ----------
Total other revenues (expenses) (27,866) 1,035
---------- ----------
Profit (Loss) before income tax
expense (benefit) (305,035) 15,291
Income tax expense (benefit) 6,730
---------- ----------
Net profit (loss) $ (305,035) $ 8,561
========== ==========
Net income (loss) per share-basic
and diluted $ (0.06) $ 0.00
========== ==========
Weighted average shares
outstanding-basic and diluted 4,950,845 4,943,144
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Three Months Ended June 30, 1998 and Year Ended March 31, 1998
<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 April 1, 1997 5,010,219 $ 5,010 $ 10,679,113 $ (2,342,321) (67,075) $ (134,821) $ 8,206,981
Net loss (1,964,478) (1,964,478)
Shares issued under
employee stock
purchase plan (25,359) 23,476 47,187 21,828
---------------------------------------------------------------------------------------------------
Balance at March 31, 1998 5,010,219 5,010 10,653,754 (4,306,799) (43,599) (87,634) 6,264,331
Net loss (305,035) (305,035)
---------------------------------------------------------------------------------------------------
Balance at June 30, 1998 5,010,219 $ 5,010 $ 10,653,754 (4,611,834) (43,599) $ (87,634) 5,959,296
===================================================================================================
</TABLE>
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
<CAPTION>
June 30 March 31
1998 1997
------- --------
<S> <C> <C>
Cash flows from operating activities
Net Income loss $ (305,035) $ (1,964,478)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 135,055 604,479
Cash securing contractual arrangements 103,733
Loss on sale or disposal of property,
plant and equipment
Increase (decrease) in cash due to
net changes in operating assets
and liabilities:
Accounts receivable 188,178 (901,427)
Prepaids and other current 89,917 (53,732)
Accounts payable and accrued expenses (150,148) (401,512)
Deferred charges and other (318,747) 499,897
--------- -----------
Net cash provided by (used in) operating
activities (360,780) (2,113,040)
Cash flows from investing activities
Purchase of property and equipment (129,289)
Purchase of accounts receivable lists
--------- -----------
Net cash provided by (used in) investing
activities 0 (129,289)
Cash flows from financing activities
Proceeds from borrowings 3,231,782 9,979,258
Payments from borrowings (2,759,108) (9,095,492)
Proceeds from issuance of stock through
employee purchase plan 21,828
Proceeds from the issuance of stock
through exercise of stock options 0
Cash securing letters of credit (25,020) 599,020
Purchase of treasury stock 0
Collection of note receivable 0
Net cash provided by (used in) financing
activities 447,654 1,504,614
--------- -----------
Increase (decrease) in cash and cash 86,874 (737,715)
Cash and cash equivalents at beginning of year 59,725 797,440
--------- -----------
Cash and cash equivalents at end of year $ 146,599 $ 59,725
========= ===========
Supplemental Disclosure:
Interest paid during the year $ 70,023 $ 197,105
========= ===========
Income taxes paid during the year $ - $ -
========= ===========
</TABLE>
<PAGE>
NuMED Home Health Care Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1998
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, 1998 are not necessarily indicative of the results
that may be expected for the year ending March 31, 1999 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, 1998.
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, 1998, decreased by
16% or $888,000 over the same period one year ago. The revenues in the
rehabilitation division, NuMED Rehabilitation, Inc. ("NuMED Rehab"),
decreased $251,000 or 13% compared to the same period last year. The
cause was the completion of the transition of a major rehab client's in-
house therapy program. The Home Health division's revenue decreased
$637,000 or 17% compared to the same period last year. While the company's
patient referrals increased, the length of stay has decreased. The firm
has now completed a complete review of the potential impact of Interim
Payment System (IPS) after calculating the per beneficiary cap (per
client). The firm has developed a statistical ratio of shorter term client
diagnosis vs longer term client diagnosis. Because of the compilation, the
firm believes it can accept a greater number of longer term clients which
is expected in later quarters.
Direct expenses as a percentage of net revenue remained the same at
75% of net revenues compared to the same period one year ago. The cost of
sales for NuMED Rehab is 84% and the cost of sales for the NuMED Home
Health division is 71%.
Gross Profit as a percentage of net revenue for the three month
period ending June 30, 1998, remained the same at 25% as compared to the
same period a year ago.
General and Administrative expenses for the three months ended June
30, 1998, increased by 8% to $1,480,000 or 31% of net revenue from
$1,376,000 or 24% of net revenue for the same period one year ago. The
increase was $104,000 over the same period one year ago. The increase was
due primarily to merger related professional costs and one-time occupancy
expense for the overlapping of leases in order to consolidate offices.
The company's revenue is expected to increase in the latter quarters,
therefore eliminating the need for reduction of general and administrative
costs at this time.
As a result of the foregoing, the Company experienced a net loss
of $305,000 for the three months ended June 30, 1998, as compared to net
profit of $9,000 for the same period one year ago.
Liquidity and Capital Resources
-------------------------------
The Company's working capital and current ratio remained steady at
$2,270,000 and 1.6, respectively, as of June 30, 1998, as compared to
$2,441,000 and 1.7, respectively, as of March 31, 1998. Cash increased
$112,000 for the three months ended June 30, 1998, as compared to March
31, 1998. The increase in cash was primarily attributable to the new
credit facility cash advance procedure.
During the second and third quarter of fiscal 1997, NuMED paid a
total of $899,000 to this customer, representing disallowed costs for the
client's fiscal years ending June 30, 1995, and June 30, 1996. The Company
is optimistic that some of the disallowed costs will be recovered in the
appeal process. The entire disallowed cost was expensed. The Company has
reached an agreement with its client that the appeal of 1995 disallowed
costs will not be pursued. However, the Company intends to vigorously
pursue all avenues of appeal to recover disallowed costs for 1996. There
is no guarantee that intermediary negotiations or the appeals process will
result in a favorable determination. A hearing date has been established
for October 1998.
The Company has a credit facility in the amount of $3,000,000,
secured by NuMED Home Health Care, Inc., NuMED Rehabilitation, Inc.,
Silver Moves, Inc., Countryside Health Services, Inc., Pennsylvania
Medical Concepts, Inc. and Parke Home Health Care, Inc. The credit
advances are limited to the aggregate accounts receivable balances of
qualified accounts under 120 days. The line bears interest at 2% above the
prime rate as designated by Fleet National Bank. The outstanding balance
as of June 30, 1998 was $1,843,562.
The Company has two additional lines of credit in the amount of
$1,250,000 and $275,000. The credit lines are both collateralized by
certificates of deposits. The outstanding balance as of June 30, 1998 was
$901,000 and 275,000 respectfully.
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, 1998, net goodwill and
intangible assets of the Company were $4.0 million. The amortization of
goodwill and intangible assets in the future will decrease net income or
increase any net loss.
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
The Company maintains professional liability insurance in amounts
believed to be adequate by the Company based on its experience. Currently,
the Company maintains coverage on its home health care operations in the
amount of $1,000,000 per occurrence with a $3,000,000 annual limit. The
Company maintains coverage on its rehabilitation therapy operations in the
amount of $4,000,000 annual limit. The Company may be subject to liability
for the actions of its employees who provide medical services. There can
be no assurance that the Company's professional liability insurance will
cover all types of claims, that such insurance will continue to be
available to the Company on terms that are acceptable to it, or that the
amount of such insurance will be sufficient. allegations.
Items 2 through 4. - Not applicable
Item 5. OTHER INFORMATION
On August 20, 1998, the Company signed an Agreement and Plan of
Merger with Mednu Acquisition Corp ("Mednu") Mednu was organized by
certain investors residing in New Jersey to effect the acquisition of
synergistic health care companies to provide comprehensive home health
care services, back-office and management services.
The merger is subject to satisfactory completion of due diligence,
Mednu's receipt of an acceptable financing commitment and shareholder
approval. Each share of NuMED issued and outstanding stock immediately
prior to the merger will be exchanged for (I) one-tenth (.10) of one share
of new common stock, (ii) $1.40 in cash, and (iii) a subordinate debenture
of the Company in the principal amount of $0.3195 which shall bear
interest at a rate of 7% per annum with a term of three years.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the quarter ended June 30, 1998.
<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 24, 1997 By: /s/ Jugal K. Taneja
Jugal K. Taneja
Chairman of the Board,
Chief Executive Officer
Date: August 24, 1997 By: /s/ Marilyn K. Maginnes
Marilyn K. Maginnes
Corporate Controller
Principal Accounting Officer
<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 SIX MONTHS ENDED SEPTEMBER 30, 1998 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-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,448
<SECURITIES> 0
<RECEIVABLES> 4,460
<ALLOWANCES> 305
<INVENTORY> 23
<CURRENT-ASSETS> 5,849
<PP&E> 777
<DEPRECIATION> 4,29
<TOTAL-ASSETS> 10,452
<CURRENT-LIABILITIES> 3,579
<BONDS> 914
0
0
<COMMON> 5
<OTHER-SE> 5,954
<TOTAL-LIABILITY-AND-EQUITY> 10,452
<SALES> 0
<TOTAL-REVENUES> 4,746
<CGS> 0
<TOTAL-COSTS> 3,544
<OTHER-EXPENSES> 1,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70
<INCOME-PRETAX> (305)
<INCOME-TAX> 0
<INCOME-CONTINUING> (305)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (305)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
