SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
---------------------
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 0R 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER 0-17292
ACCUHEALTH, INC.
(Exact name of registrant as specified in its charter)
New York 13-3176233
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1575 Bronx River Avenue
Bronx, New York 10460
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (718) 518-9511
Indicate by check mark (X) whether the registrant 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. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding At August 14, 1998
Common stock, par value $.01 per share 3,644,498 Shares
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
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Item 1. Condensed Consolidated Financial Statements.
Condensed Consolidated Balance Sheets at
June 30, 1998 and March 31, 1998.......................................... 3
Condensed Consolidated Statements of Operations
for the three months ended June 30, 1998 and 1997......................... 4
Condensed Consolidated Statements of Cash Flows
for the three months ended June 30, 1998 and 1997......................... 5
Notes to Condensed Consolidated Financial
Statements................................................................ 6 -10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................. 11
Item 3 Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable............................................................ 12
PART II. OTHER INFORMATION......................................................... 13
SIGNATURES........................................................................... 13
</TABLE>
2
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1998 March 31, 1998
------------- --------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 84,581 $ 248,657
Accounts receivable, net 11,530,146 10,299,482
Inventories 1,719,256 1,740,056
Prepaid expenses and other current assets 485,249 295,340
------------ ------------
Total Current Assets 13,819,232 12,883,535
Revenue producing equipment, net 761,196 493,365
Fixed assets, net 2,054,575 2,059,459
Goodwill, net 1,389,636 1,401,304
Other assets 53,390 528,748
------------ ------------
Total Assets $ 18,078,029 $ 17,066,411
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current Liabilities:
Notes payable - revolving credit facility $ 6,268,680 $ 4,736,563
Notes payable - term loan -- --
Notes payable - other 1,020,945 470,325
Accounts payable 4,923,033 6,122,572
Accrued expenses and other current liabilities 2,403,604 2,153,550
Current portion of capital lease - Facility 286,000 71,500
Current portion of other capital lease obligations 274,402 175,891
------------ ------------
Total Current Liabilities 15,176,664 13,730,401
Notes payable - term loan 750,000 500,000
Notes payable - other 324,555 1,070,370
Capital lease - Facility, less current portion -- 232,375
Other capital lease obligations, less current portion 158,976 314,661
------------ ------------
Total Liabilities 16,410,195 15,847,807
------------ ------------
Stockholders' Equity:
Preferred stock, $.01 par value; authorized 3,650,000
shares; no shares issued and outstanding --
6% Redeemable cumulative convertible preferred stock
$.01 par value; $2,713,500 liquidation preference, authorized,
issued and outstanding 1,350,000 shares 13,500 13,500
Common stock, $.01 par value; authorized 15,000,000
shares; issued 3,644,498 and 3,598,000 shares, respectively 36,445 35,980
Additional paid-in capital 7,459,624 7,385,590
Accumulated Deficit (5,217,415) (5,592,146)
------------ ------------
2,292,154 1,842,924
Less treasury stock (308,004 shares) at cost 624,320 624,320
------------ ------------
Total Stockholders' Equity 1,667,834 1,218,604
------------ ------------
Total Liabilities and Stockholders' Equity $ 18,078,029 $ 17,066,411
============ ============
</TABLE>
3
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30,
---------------------------
1998 1997
---------- ----------
Net sales $8,623,017 $7,581,993
Cost of goods sold 5,138,602 4,182,638
---------- ----------
Gross profit 3,484,415 3,399,355
Selling, general and administrative expenses 2,980,437 3,199,184
---------- ----------
Operating income 503,978 200,171
Interest expense 257,072 182,748
---------- ----------
Net income $ 246,906 $ 17,423
========== ==========
Net income per common share applicable to common
shareholders
Basic $ .07 $ (.01)
---------- ----------
Diluted $ .07 $ (.01)
---------- ----------
Weighted number of common shares and equivalents
outstanding
Basic 3,193,975 1,548,205
---------- ----------
Diluted 3,332,605 1,837,481
---------- ----------
4
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30
--------------------------
1998 1997
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OPERATING ACTIVITIES
Net income $ 246,906 $ 17,423
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 176,403 136,229
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable (1,230,664) (530,270)
Inventories 20,800 5,439
Prepaid expenses and other assets (189,909) 128,380
Other assets 475,358 (45,028)
Accounts payable (1,199,539) 614,347
Accrued expenses and other current liabilities 223,054 (68,681)
----------- -----------
Cash provided by operating activities (1,477,591) 395,201
----------- -----------
INVESTING ACTIVITIES
Purchase of fixed assets (147,219) (38,952)
Net change in goodwill (67,838) --
Cash (used in) provided by investing activities (215,057) (38,952)
----------- -----------
FINANCING ACTIVITIES
Proceeds from note payable - revolving credit facility 7,460,000 (3,915,540)
Proceeds from notes payable - other 657,041 (4,306,400)
Proceeds from term loan 250,000 --
Payments on note payable - revolving credit facility (5,927,883) 569,599
Payments on notes payable - other (852,236) (604,620)
Principal payments on capital lease - Facility (17,875) --
Proceeds from issuance of capital stock 74,499 10,600
Payments on other capital lease obligations (114,974) 59,341
----------- -----------
Cash provided by (used in) financing activities 1,528,572 (474,622)
----------- -----------
Net increase (decrease) in cash (164,076) (118,373)
Cash at beginning of period 248,657 309,381
----------- -----------
Cash at end of period $ 84,581 $ 191,008
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 243,982 $ 176,717
----------- -----------
NONCASH INVESTING AND FINANCING ACTIVITIES
Additions to capital leases $ 57,800 $ 73,135
----------- -----------
Accrued dividends and accretion on redeemable
preferred stock $ 27,000 $ 40,500
----------- -----------
See notes to condensed consolidated financial statements.
5
</TABLE>
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Accuhealth, Inc. and its subsidiaries, all of which are wholly owned (the
"Company"). Significant intercompany accounts and transactions have been
eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and principally with the instructions to Form 10-Q and
Article 10 of Regulation S-X. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the periods reported have been included. Operating results for
the three-month period ended June 30, 1998 may not be indicative of the results
for the full fiscal year.
These financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Form 10-K for the fiscal
year ended March 31, 1998 filed with the Securities and Exchange Commission. The
balance sheet at March 31, 1998 has been derived from the audited financial
statements at that date.
ACCOUNTS RECEIVABLE
Accounts receivable are principally due from third party payors, primarily
governmental agencies (Medicare and Medicaid), managed care organizations and
private insurance companies.
INVENTORIES
Inventories consist of over-the-counter and prescriptions drugs, infusion
products and supplies, and home health care equipment and supplies and are
priced at the lower of cost or market using the first-in, first-out ("FIFO")
method.
EARNINGS PER SHARE
For the quarters ended June 30, 1998 and 1997, basic income (loss) per share has
been calculated by dividing the net income (loss) applicable to common stock by
the weighted average of common stock and common stock equivalents outstanding
during the period. Dividends attributable to the redeemable preferred stock were
$27,000 and $40,500, respectively, for the three months ended June 30, 1998 and
1997. Net income (loss) applicable to common stockholders for the three months
ended June 30, 1998 and 1997, respectively were $219,906 and $(23,077). On a
fully diluted basis, both net income (loss) and shares outstanding, if
applicable, are adjusted to assume the conversion of convertible preferred stock
from the date of issue and for the incremental option shares for fully diluted
purposes. (see note 4). For the period ended June 30, 1998 the effect of
converting the convertible preferred stock was anti-dilutive and not included in
the calculation.
6
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
During the year ended March 31, 1998, the Company adopted the provision of
statements of accounting standards No. 128 Earnings per Share ("SFAS No. 128").
SFAS No. 128 eliminates the presentation of primary and fully diluted earnings
per share ("EPS") and requires presentation of basic and diluted EPS. Basic EPS
is computed by dividing income (loss) available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
is computed by dividing the weighted average number of common shares and common
stock equivalents outstanding at year-end. Common stock equivalents have been
excluded from the weighted-average shares for 1998, 1997 and 1996, as inclusion
is anti-dilutive. Potentially diluted securities, which consist of stock options
and warrants, may be potentially diluted in the future. All prior period EPS
data has been restated to conform to the new pronouncement.
INCOME TAXES
The Company files consolidated Federal, combined New York State and combined New
York City income tax returns. The Company's method of accounting for income
taxes is the liability method required by FASB Statement No. 109 "Accounting for
Income Taxes."
MAJOR CUSTOMER
The Company's revenues from one customer accounted for 7.7% and 9.6% of the
Company's net sales for the three months ended June 30, 1998 and 1997,
respectively. At June 30, 1998, this customer represented approximately 4.2% of
the Company's gross receivables.
BUSINESS COMBINATION
On April 9, 1998, the Company completed a merger with Healix Healthcare, Inc.
("Healix") whereby 1,488,850 shares of the Company's common stock were exchanged
for all of the outstanding common stock of Healix. Each share of Healix common
stock was exchanged for .740721 shares of the Company's common stock. The merger
constituted a tax-free organization and has been accounted for as a pooling of
interests. Accordingly, all prior period consolidated financial statements
presented have been restated to include the combined results of operations,
financial position and cash flows of Healix as though it had always been a part
of the Company.
The results operations for the separate companies and the combined amounts
presented in the consolidated financial statements are as follows:
Three Months Ended Three Months Ended
June 30, 1998 June 30, 1997
------------- -------------
Net sales
Accuhealth $5,140,573 $4,284,502
Healix 3,482,444 3,297,491
---------- ----------
Combined $8,623,017 $7,581,993
========== ==========
Net income (loss)
Accuhealth $ 341,981 $ 76,661
Healix (95,075) (59,238)
---------- ----------
Combined $ 246,906 $ 17,423
========== ==========
7
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 2 - NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Long-term debt at June 30, 1998 consists of the following:
<TABLE>
<S> <C>
Note payable to Rye Beach Pharmacy, Inc. bearing interest at 8% with
monthly payments of principal and interest of $8,022, until September
30, 1998 $23,749
Notes payable to vendors bearing interest ranging from 10.5% to 12% with monthly
payments totaling $18,509 until July 2000. 643,494
Notes payable bearing interest ranging from 10% to 14.5% with monthly payments
totaling $40,714 until February 2000. 470,111
Notes payable to a Bank bearing interest at rates ranging from 2.9% to 10.25%
with monthly payments totaling $3,418 due through August 1999. 39,268
Note payable to a stockholder bearing interest at 9.75%. There are no
scheduled repayment terms and payments are made monthly for interest only. 53,500
Note payable bearing interest at 10.95%, monthly payment of $6,484,
from March 1997 to December 1998. 49,804
Note payable bearing interest at 10.375%, monthly payment of $925, from February
1997 to December 2000. The loan is personally guaranteed by the Company's
stockholders. 25,171
Note payable bearing interest at 10.375%, monthly payment of $1,491 from
February 1997 to December 2000. The loan is personally guaranteed by the Company's
stockholders. 40,403
----------
Total Long Term Debt 1,345,500
Less: current maturities 1,020945
----------
Long Term Debt, net of current maturities $ 324,555
==========
</TABLE>
8
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTES PAYABLE - REVOLVING CREDIT FACILITY AND TERM LOAN
In April 1994, the Company entered into a Loan and Security Agreement (the
"Agreement") with Rosenthal and Rosenthal ("Rosenthal") to borrow, under certain
conditions and terms, up to $2,500,000 at an interest rate of prime plus 4-7/8%.
Borrowings under the Agreement are collateralized by certain assets of the
Company, including accounts receivables, inventories, equipment and fixtures.
The Company's ability to use this revolving credit facility is dependent upon
the level of its eligible receivables, as defined in the Agreement. In addition,
the Company granted Rosenthal warrants to purchase 70,000 shares of the
Company's common stock.
Effective February 1, 1996, the Company and Rosenthal amended the Loan and
Security Agreement (the "Amendment"). The Amendment extended the Agreement
through April 28, 1997 and allowed the Company to borrow, under certain
conditions and terms up to $3,500,000 (based on eligible accounts receivable, as
defined) at an interest rate of prime plus 3-7/8%. Effective February 1, 1997,
the Company and Rosenthal amended the Loan and Security Agreement ("Amendment
No. 2") to extend the Agreement through April 1, 1998 and reduce the interest
rate to prime (8 1/2% at March 31, 1997) plus 2 7/8%. In addition, the Company
granted Rosenthal warrants to purchase an additional 30,000 shares of the
Company's common stock Commencing April 28, 1996, the Company was required to
pay a facility fee of $35,000 per annum, which Amendment No. 2 has increased to
$40,000 per annum.
Amendment No. 2 also provided a $500,000 term loan to the Company due on April
1, 1998 with interest payable monthly at a rate of prime plus 5%.
Effective April 3, 1998, the Company agreed to an amendment of the Loan and
Security Agreement. The amendment extended the agreement through April 1, 2000
and allows the Company to borrow, under certain conditions and terms, up to $9
million under a revolving loan agreement at an interest rate of prime plus 1
1/2%, as well as an overdraft line of $1,000,000 at prime plus 3%. The amendment
also increased the term loan available to the Company to $750,000. In addition,
the Company granted Rosenthal warrants to purchase 50,000 shares of the
Company's common stock.
9
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
CAPITAL LEASE OBLIGATIONS
The Company leases its principal offices and warehouse facility and certain
equipment, furniture and fixtures, rental equipment and leasehold improvements
under capital lease agreements which extend through April 2000.
CAPITAL LEASE - FACILITY
The Company occupies a pharmacy warehouse and office facility (the "Facility")
which was obtained under a ten-year lease (the "Lease Agreement") with the New
York City Industrial Development Agency (the "Agency") as lessor. The Agency
issued to National Westminster Bank, USA (now "Fleet") $1,072,500 principal
amount of its Industrial Development bonds (the "Bonds") pursuant to an
Indenture of Mortgage and Agreement dated April 1, 1989 (the "Indenture") which
created a lien on the facility. The Company also paid $227,500 in order for the
Agency to purchase the warehouse. This amount and other acquisition costs are
capitalized as land and building under capital lease.
At the end of the term of the lease, the Company may purchase the Facility for
one dollar so long as all terms and conditions of the lease have been met. The
Lease Agreement and Guaranty Agreement require the Company and its subsidiaries
to comply with certain covenants, including but not limited to, maximum debt to
worth ratio, maximum allowable losses and debt service coverage ratio. The
Company's non-compliance with such covenants was waived by Fleet through April
1, 1999.
In lieu of rent the Company pays principal on the Bonds in quarterly
installments of $17,875, plus interest at the rate of prime (8 1/4% at June 30,
1998) plus 1%. On April 28, 1994, in conjunction with the Rosenthal financing
the Company made an additional principal payment of $143,000. A final balloon
payment of $232,375 plus interest thereon is due on April 1, 1999. Each of the
Company's wholly owned subsidiaries has guaranteed the Company's obligations
under the lease. The Lease Agreement and Guaranty Agreement also restrict the
payment of cash dividends in any one year to an aggregate amount not to exceed
25% of the Company's net income for the immediately preceding year.
OTHER CAPITAL LEASES
The Company leases durable medical equipment under capital lease agreements that
extend through March 31, 2000.
NOTE 3 - CONTINGENCIES
The Company is not aware of any existing contingencies that would have an
adverse material effect on its consolidated financial position, results of
operations or cash flows.
NOTE 4 - 6% REDEEMABLE CUMULATIVE CONVERTIBLE
10
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 4 - 6% REDEEMABLE CUMULATIVE CONVERTIBLE PREFERRED STOCK
On December 14, 1994 and January 30, 1995, the Company completed the sale at
$2.00 per share of 1,325,000 shares of redeemable convertible preferred stock
("Preferred Stock") with a 6% per annum cumulative dividend. During the quarter
ended December 31, 1995, the Company sold at $2.50 per share 25,000 additional
shares of Preferred Stock to certain officers and directors of the Company. The
Preferred Stock is convertible at any time at the option of the holder, subject
to anti-dilution adjustments, into 1,350,000 shares of common stock. The Company
has reserved 1,350,000 shares of common stock for such conversion. At any time
on or after December 31, 1995, subject to certain conditions, such as the
registration of the underlying common stock under the Securities Act of 1933,
compliance with the terms of the Preferred Stock and any other agreement with
the holders of the Preferred Stock and the payment of all dividends that are
accrued and unpaid on the Preferred Stock as of the Redemption Date, the Company
may redeem all or any portion of the Preferred Stock then outstanding. For each
share that is called for redemption, the Company shall pay $3.00 per share from
December 31, 1995 through December 31, 1997 and $4.00 per share on or after
January 1, 1998. The holders of the Preferred Stock are entitled to voting
rights equivalent to that of the common stock. The Preferred Stock is senior to
the common stock in the event of a liquidation of the Company. The liquidation
preference is $2.00 per share plus accrued and unpaid dividends.
The Company is obligated to pay annual dividends of $.12 per share on its
1,350,000 outstanding shares of Preferred Stock. Such dividends accrue daily,
are payable each June 1 and December 1 and, at the election of the Company, may
be paid in shares of Common Stock valued in accordance with the terms of such
stock. Dividends on the Company's Preferred Stock are payable in preference and
priority to any payment of any dividends on the common stock.
The June 1, 1998 dividend will be paid out in 46,526 shares of common stock on
August 31, 1998. Accrued and unpaid dividends are included in accrued expenses
and other current liabilities at June 30, 1998.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Management's Discussion and Analysis should be read in conjunction with the
condensed consolidated financial statements of the Company and related notes
included elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
The results for the three months ended June 30, 1998 reflect the Company's
merger with Healix Healthcare, Inc. on April 9, 1998. As indicated in Note 1 of
this Form 10-Q, the merger has been accounted for as a pooling of interests.
Accordingly, the results for the three months ended June 30, 1997, have been
restated to include the combined results of operations of Healix as though it
had always been a part of the Company.
NET REVENUES. Net revenues increased approximately $1,041,024 or 13.7% from the
comparable 1997 quarter to $8,623,017 million for the three months ended June
30, 1998. The increase was primarily the result of increases in the Company's
institutional pharmacy business, oral medication, durable medical equipment and
respiratory revenues. The increase in the Company's institutional pharmacy
business was attributable to the commencement of a new pharmacy services
agreement with a major sub-acute HIV/AIDS health care facility in New York City.
GROSS PROFIT. Gross profit for the three months ended June 30, 1998 and 1997 was
approximately $3.5 and $3.4 million, respectively, representing approximately
40% of net sales for the three months ended June 30, 1998 as compared to 45% for
the comparable prior year period. Gross profit decreased primarily due to
decreased margins in our infusion services businesses. Although the number of
new patient referrals from managed care entities for infusion services grew
throughout the period, the Company continues to experience downward pressure on
its fees within this business segment. Compounding this downward pressure on
reimbursement rates has been a change in our managed care patient mix to lower
margin modalities as a result of the prolonged, reduced availability of
intravenous immune gamma globulin - a higher margin medication frequently
administered to our patients.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG &A") were approximately $3.0 and $3.2 million or
approximately 34% and 42% of net sales for the three months ended June 30, 1998
and 1997, respectively. The decrease was primarily due to the successful first
phase of the elimination of duplicate overhead costs in the merged companies.
Also included within Selling, General and Administrative Expenses are the direct
expenses related to the production of net revenues, primarily pharmacy and
nursing salaries and employee benefits. Direct expenses were approximately $1.3
million or 15% of net revenues for the three months ended June 30, 1998.
12
<PAGE>
INTEREST EXPENSE. Net interest increased by $74,000 for the three months ended
June 30, 1998, to $257,072. This increase is primarily a result of increased
borrowing under its line of credit, which is in accord with the growth in
accounts receivables.
PROVISION FOR INCOME TAXES. No provision of income taxes has been reflected due
to the Company's federal and state net operating loss credits.
FINANCIAL CONDITION
As of June 30, 1998, the Company had a working capital deficit of approximately
$1,357,432.
The Company's cash provided by financing activities of approximately $1,528,572
was primarily attributable to the net proceeds of approximately $1,532,117 under
the Company's revolving credit facility and term loan offset by principal
payments on capital leases.
Accounts receivable include amounts due from third party payors, primarily
governmental agencies (Medicare and Medicaid). At June 30, 1998, gross Medicare
and Medicaid receivables aggregated $4,711,285.
Effective April 3, 1998, the Company agreed to an amendment of the Loan and
Security Agreement. The amendment extended the agreement through April 1, 2000
and allows the Company to borrow, under certain conditions and terms, up to $9
million under a revolving loan agreement at an interest rate of prime plus 1
1/2%, as well as an overdraft line of $1,000,000 at prime plus 3%. The amendment
also increased the term loan available to the Company to $750,000. In addition,
the Company granted Rosenthal warrants to purchase 50,000 shares of the
Company's common stock.
At its meeting of the Board of Directors on June 25, 1998, the Company approved
the issuance of 12% Cumulative Convertible Subordinated Notes in the face amount
of $6,250,000. As a further component of this financing, the Company's current
6% Cumulative Convertible Preferred Stock will be converted to common stock in
Accuhealth at a 15% discount to the original conversion price of $2.00.
Accordingly, an additional 202,500 shares will be issued upon the conversion of
the 1,350,000 preferred shares currently outstanding.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward looking statements. Certain information in Items 1 and 2 of Part I
of this Form 10-Q include information that is forward looking, such as the
Company's plans to obtain additional financing. The matters referred to in
forward looking statements could be affected by the risks and uncertainties
involved in the Company's business. These risks and uncertainties include, but
are not limited to, the effect of economic and market conditions, the impact of
the cost containment efforts of third-party payors and the Company's ability to
obtain and maintain required licenses. Subsequent written and oral forward
looking statements attributable to the Company or persons acting on its behalf
13
<PAGE>
are expressly qualified in their entirety by the cautionary statements in this
paragraph and elsewhere in this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company's current report on Form 8-K, date of report
April 9, 1998 and filed on June 24, 1998, reporting on
Item 1 Note 1 to condensed consolidated financial
statements regarding the business combination.
(c) The Company's current report of Form 8-K, date of report
April 9, 1998 and filed on April 17, 1998, reporting on a
change of auditors for its fiscal year ending March 31,
1998
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ACCUHEALTH, INC.
Date: August 8, 1998 By: /s/ Glenn C. Davis
------------------------------------
Glenn C. Davis, as
President and Chief Executive Officer
Date: August , 1998 By: /s/ Prisco J. Demercurio
-------------------------------------
Senior Vice President - Finance
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000840401
<NAME> ACCUHEALTH, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
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0
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