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
September 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 33760
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (727) 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 November 20, 1998 was 4,966,620 (exclusive of Treasury Shares).
Form 10-QSB
1
<PAGE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Balance Sheets
Sept 30 March 31
1998 1998
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $118,836 $59,725
Cash deposits securing contractual arrangements 1,176,000 1,275,980
----------- -----------
1,294,836 1,335,705
Accounts receivable, net of allowance for
doubtful accounts of $304,796 4,330,848 4,343,476
Prepaids, inventories, and other current assets 198,102 335,825
----------- -----------
Total current assets 5,823,786 6,015,006
Property and equipment, net 311,696 382,928
Goodwill, net of amortization of $1,185,248
and $1,271,584 respectively 3,908,551 4,081,222
Other intangibles assets, net of accumulated
amortization of $1,938,301 and $1,912,826
respectively 213,350 242,563
Deferred tax and other 34,185 34,185
----------- -----------
Total assets $ 10,291,568 $ 10,755,904
=========== ===========
LIABILITES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 281,506 $ 289,850
Accrued salaries and payroll related 903,981 1,291,419
Accrued expenses 105,899 278,055
Estimated amounts due to third party payors 0 21,345
Short-term borrowings 2,081,371 1,596,424
Current portion of long-term obligations 13,396 97,053
----------- -----------
Total current liabilities 3,386,153 3,574,146
Long-term obligations, less current portion 910,466 917,427
----------- -----------
Total liabilities 4,296,619 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 (4,576,181) (4,306,799)
----------- -----------
Total stockholders' equity 5,994,949 6,264,331
=========== ===========
Total liabilities and stockholders' equity $ 10,291,568 $ 10,755,904
=========== ===========
See notes to consolidated financial statements.
Form 10-QSB
2
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
Six Months Ended September 30,
1998 1997
----------------- ---------------
<S> <C> <C>
Revenues $9,379,647 $ 11,346,079
Direct expenses 6,917,841 8,421,177
Gross profit 2,461,806 2,924,902
General and administrative expenses:
Salaries and benefits 1,613,572 1,785,057
Operating expenses 466,268 361,848
Professional fees 107,599 73,074
Legal fees 74,054 20,745
Occupancy expenses 450,592 332,291
Insurance 121,627 129,292
Amortization and depreciation 276,172 307,441
Bad debt expense 125 382
----------------- ---------------
3,110,009 3,010,130
----------------- ---------------
Operating income (loss) (648,203) (85,228)
Other revenues (expenses):
Interest income 26,009 31,659
Interest expense (142,644) (30,624)
Other Income (Expense) 500,337 0
----------------- ---------------
Total other revenues (expenses) 383,702 1,035
----------------- ---------------
Profit (Loss) before income tax expense (benefit) (264,501) (84,193)
Income tax expense (benefit) 4,881 6,730
================= ===============
Net profit (loss) $ (269,382) $ (90,923)
================= ===============
Net income (loss) per share-basic and diluted $ (0.05) $ (0.02)
================= ===============
Weighted average shares outstanding-basic and diluted 4,950,845 4,943,144
</TABLE>
See notes to consolidated financial statements
Form 10-QSB
3
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
Three Months Ended September 30,
1998 1997
----------------- --------------
<S> <C> <C>
Revenues $4,633,483 $ 5,712,386
Direct expenses $3,374,138 4,177,546
----------------- --------------
Gross profit 1,259,345 1,534,840
General and administrative expenses:
Salaries and benefits $800,020 939,228
Operating expenses $242,090 223,385
Professional fees $52,139 39,149
Legal fees $63,961 15,335
Occupancy expenses $265,874 188,063
Insurance $65,053 65,509
Amortization and depreciation $141,117 163,275
Bad debt expense $125 381
----------------- --------------
Total general and administrative 1,630,379 1,634,325
----------------- --------------
Operating income (loss) (371,034) (99,485)
Other revenues (expenses):
Interest income ($16,148) 14,654
Interest expense ($72,621) (54,329)
Other Income $500,337 0
------------------ --------------
Total other revenues (expenses) 411,568 (39,675)
------------------ --------------
Profit (Loss) before income tax expense (benefit) 40,534 (139,160)
Income tax expense (benefit)
------------------ --------------
Net profit (loss) $ 40,534 $ (139,160)
================== ==============
Net income (loss) per share-basic and diluted $ 0.01 $ (0.03)
================== ==============
Weighted average shares outstanding-basic and diluted 4,950,845 4,943,144
</TABLE>
See note to consolidated financial statements
Form 10-QSB
4
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Six Months Ended September 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 (269,382) (269,382)
----------------------------------------------------------------------------------
Balance at September
30, 1998 5,010,219 $ 5,010 $10,653,754 $ (4,576,181) (43,599) $ (87,634) $ 5,994,949
=================================================================================
</TABLE>
See notes to consolidated financial statements
Form 10-QSB
5
<PAGE>
<TABLE>
NuMED Home Health Care, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
<CAPTION>
September 30 March 31
1998 1998
---------------- ---------------
Cash flows from operating activities
<S> <C> <C>
Net Income loss $ (269,382) $ (1,964,478)
Adjustments to reconcile net income loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 276,172 604,479
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 12,628 (901,427)
Prepaids and other current assets 137,723 (53,732)
Accounts payable and accrued expenses (589,283) (401,512)
Deferred charges and other 0 499,897
---------------- ---------------
Net cash provided by (used in ) operating activities (432,142) (2,113,040)
Cash flows from investing activities
Purchase of property and equipment (3,056) (129,289)
Purchase of accounts receivable lists
---------------- ---------------
Net cash provided by (used in) investing activities (3,056) (129,289)
Cash flows from financing activities
Proceeds from borrowings 6,178,744 9,979,258
Payments from borrowings (5,784,415) (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 99,980 599,020
Purchase of treasury stock 0
Collection of note receivable 0
Net cash provided by (used in) financing activities 494,309 1,504,614
---------------- ---------------
Increase (decrease) in cash and cash equivalents 59,111 (737,715)
Cash and cash equivalents at beginning of year 59,725 797,440
---------------- ---------------
Cash and cash equivalents at end of year $ 118,836 $ 59,725
================ ===============
Supplemental Disclosure:
Interest paid during the year $ 142,644 $ 197,105
================ ===============
Income taxes paid during the year $ - $ -
================ ===============
</TABLE>
See notes to consolidated financial statements
Form 10-QSB
6
<PAGE>
NuMED Home Health Care Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 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 six month period
ended September 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 six months ended September 30, 1998, decreased by 17%
or $1,966,000 over the same period one year ago. The revenues in the
rehabilitation division, NuMED Rehabilitation, Inc. ("NuMED Rehab"), decreased
$465,000 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 major firm contributed $884,000 to the company's six month revenue ended
September 30, 1997. The company has replaced 47% of this revenue in the six
months ending September 30, 1998. The Home Health division's revenue decrease
$1,570,000 or 20% compared to the same period last year. The Company
strategically took a conservative stand with the new IPS (Interim Payment
System) regulations enacted by the federal government by successfully reducing
the number of visits per patient. The company developed a disease/treatment
program called Clinical Pathways to help achieve the goal. Additionally 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) and 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 the later quarters.
The Home Health Division now comprises 67% of the total revenues compared to 68%
for the six month period last year.
Form 10-QSB
7
<PAGE>
For the three month period ending September 30, 1998 direct expenses
declined $803,000 or 19%. For the six month period ending September 30, 1998
direct expenses decreased $1,503,000 or 18% compared to the same period last
year. As a percentage of net revenues, direct expenses remained constant at 74%
compared to the same six month period one year ago. The cost of sales for NuMED
Rehab is 82% and the cost of sales for the NuMED Home Health division is 69%.
Gross Profit has remained a constant 27% as a percentage of net revenues
for the three month period ending September 30, 1998 and September 30, 1997 and
26% as a percentage of net revenues for the six month period ending September
30, 1998 and September 30, 1997.
General and Administrative expenses for the three month period ending
September 30, 1998, decreased $4,000 while increasing as a percentage of net
revenue by 6% to $1,631,000 or 35% of net revenue from $1,634,000 or 29% of net
revenue for the same period one year ago. The decrease of $4,000 was over the
same period one year ago.
As a result of the foregoing, the Company experienced a net profit of
$41,000 for the three months ended September 30, 1998, as compared to a net loss
of $139,000 for the same period one year ago. For the six month period ending
September 30, 1998 the Company experienced a net loss of $269,000 as compared to
a net loss of $91,000 for the same period one year ago.
Management has and is taking specific steps to control costs such as
consolidation of offices and monitoring productivity. NuMED Rehabilitation has
been consolidated with the Parke Home Health Care site in Cincinnati Ohio
resulting in annual savings of over $30,000. July 1, 1998 Florida Nursing
Services and Total Professional Health Care offices were combined in St.
Petersburg Florida and the Total Professional Health Care Clearwater Florida
office was combined with Countryside Health Services. Each consolidation
resulted in the savings of an Assistant Administrator in addition to occupancy
expenses. Consolidation of the back office processes and monitoring of field
personnel efficiencies is expected to assist in managing future cost. A full
review of present contracts is underway to evaluate profitability in light of
the IPS and PPS industry changes.
During the third quarter of fiscal 1997, NuMED paid a total of $568,000 to
a key rehab customer, representing disallowed costs for the client's fiscal year
ending June 30, 1996, The Company was successful in its pursuit and $525,000 was
accepted as recovery of the disallowed costs in the appeal process. The entire
disallowed cost was expensed and the $525,000 was included in other income.
Form 10-QSB
8
<PAGE>
Liquidity and Capital Resources
The Company's working capital and current ratio remained steady at
$2,437,000 and 1.7, respectively, as of September 30, 1998, as compared to
$2,441,000 and 1.7, respectively, as of March 31, 1998. Cash decreased $41,000
for the six months ended September 30, 1998, as compared to March 31, 1998. The
decrease in cash was primarily attributable to normal operations.
The Company has established a $3,000,000 credit facility 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 outstanding
balance as of September 30, 1998 was $1,806,370.
The Company has two additional lines of credit in the amount of $1,500,000
and $275,000. The credit lines are fully secured by certificates of deposits.
There was $901,000 and $275,000 outstanding as of September 30, 1998.
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 September 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 funded its cash flow requirements through borrowings. The
Company believes that its current cash reserves, current cash flow and the funds
available under its credit facilities will allow the Company to continue to meet
its expected operating expenses and working capital needs for at least the next
12 months.
Form 10-QSB
9
<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 was subject to satisfactory completion of due diligence, Mednu's
receipt of an acceptable financing commitment and shareholder approval. On
October 14, 1998 after the satisfactory completion of due diligence, Mednu
terminated the agreement because of Mednu's failure to secure financing or
commitments on terms satisfactory to Mednu. Mednu cited current unfavorable
financial market conditions. However the Company and Mednu continue to discuss
alternative structures which could be mutually beneficial to the shareholders of
each respective company.
On November 12, 1998 a Preliminary Proxy Statement was filed pursuant to
section 14(a) of the Securities Exchange Act of 1934 to change control of the
company's management. On November 24, 1998 the Company filed a lawsuit due to
the violation of the Section 13(D) filing.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. There are no exhibits filed with this report
Form 10-QSB
10
<PAGE>
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during
the quarter ended June 30, 1998.
Form 10-QSB
11
<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: November 20, 1998 By: /s/Jugal K. Taneja
-------------------
Jugal K. Taneja
Chairman of the Board,
Chief Executive Officer
Date: November 20, 1998 By: /s/ Marilyn K. Maginnes
-----------------------
Marilyn K. Maginnes
Corporate Controller
Principal Accounting Officer
Form 10-QSB
12
<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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1294
<SECURITIES> 0
<RECEIVABLES> 4636
<ALLOWANCES> 305
<INVENTORY> 23
<CURRENT-ASSETS> 5824
<PP&E> 783
<DEPRECIATION> 471
<TOTAL-ASSETS> 10292
<CURRENT-LIABILITIES> 3386
<BONDS> 910
0
0
<COMMON> 5
<OTHER-SE> 5990
<TOTAL-LIABILITY-AND-EQUITY> 10292
<SALES> 0
<TOTAL-REVENUES> 9380
<CGS> 0
<TOTAL-COSTS> 6918
<OTHER-EXPENSES> 3110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 143
<INCOME-PRETAX> (269)
<INCOME-TAX> 0
<INCOME-CONTINUING> (269)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (269)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
