<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended September 30, 1997 Commission file number 0-17821
THE CARE GROUP, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-2962027
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
257 PARK AVENUE SOUTH, NEW YORK, NEW YORK 10010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-614-9220
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ONE HOLLOW LANE, LAKE SUCCESS, NEW YORK 11042
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(Former name, former address and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant (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.
YES [X] NO [ ]
As of November 3, 1997, the registrant had 14,197,053 shares of common
stock, $.001 par value per share, outstanding.
PAGE 1 OF 15 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
----
3-7 FINANCIAL INFORMATION
8-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11-13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
14 OTHER INFORMATION
15 SIGNATURE PAGE
PAGE 2 OF 15 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
THREE MONTHS & NINE MONTHS ENDED SEPTEMBER 30, 1997
PART I - FINANCIAL INFORMATION
PAGE 3 OF 15 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA) SEPTEMBER 30, DECEMBER 31,
1997 1996
(UNAUDITED) (AUDITED)
----------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 92 $ 24
Marketable securities 14 21
Accounts receivable, net of allowances
of $5,682 at September 30, 1997 and
$5,637 at December 31, 1996 10,920 12,163
Inventories 774 887
Recoverable income taxes -- 1,875
Prepaid expenses and other current assets 355 366
-------- --------
Total Current Assets 12,155 15,336
-------- --------
PROPERTY AND EQUIPMENT - at cost 5,650 5,457
LESS - Accumulated depreciation 2,958 2,424
-------- --------
Net property and equipment 2,692 3,033
-------- --------
INTANGIBLES - Net 11,823 12,249
-------- --------
OTHER ASSETS 293 190
-------- --------
TOTAL ASSETS $ 26,963 $ 30,808
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 1,005 $ 1,546
Accounts payable 1,264 1,673
Accrued expenses 451 1,103
Income taxes payable 611 --
Other short-term debt 394 891
Note payable to bank -- 5,192
-------- --------
Total Current Liabilities 3,725 10,405
NOTE PAYABLE TO BANK 5,297 --
MINORITY INTEREST 50 --
LONG-TERM DEBT, excluding current portion 1,863 1,974
-------- --------
TOTAL LIABILITIES 10,935 12,379
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value
per share, 1,000 shares authorized;
no shares issued and outstanding --
Common stock, $.001 par value per share,
20,000 shares authorized; 14,197 shares
and 12,998 shares issued and outstanding
at September 30, 1997 at December 31, 1996,
respectively 14 13
Additional paid-in capital 25,815 23,905
Accumulated deficit (9,660) (5,348)
-------- --------
16,169 18,570
Common stock held in treasury, at cost -
(40 and 40 shares at September 30, 1997
and December 31, 1996, respectively) (141) (141)
-------- --------
Total Stockholders' Equity 16,078 18,429
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,963 $ 30,808
======== ========
See notes to consolidated financial statements.
PAGE 4 OF 15 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
(In thousands, except per share data) (Unaudited) (Unaudited)
----------- -----------
Net revenues $ 20,836 $ 27,478
Cost of revenues 11,671 14,371
-------- --------
Gross Profit 9,165 13,107
Operating expenses:
Selling, general and administrative
expenses 9,804 11,213
Provision for doubtful accounts 3,544 7,207
Write-off of intangible and certain
other assets -- 2,975
-------- --------
Total operating expenses 13,348 21,395
-------- --------
Operating loss (4,183) (8,288)
Other income (expense):
Gain on sale of Atlanta 1,006 --
Net interest expense (641) (525)
-------- --------
Total other income (expense) 365 (525)
-------- --------
Loss before provision
(benefit) for income taxes (3,818) (8,813)
Provision (benefit)
for income taxes 494 (2,797)
-------- --------
Net loss $ (4,312) $ (6,016)
======== ========
Net loss per common share $ (.32) $ (.69)
======== ========
Weighted average common share 13,631 8,702
======== ========
See notes to Consolidated Financial Statement
PAGE 5 OF 15 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
(In thousands, except per share data) (Unaudited) (Unaudited)
----------- -----------
Net revenues $ 6,823 $ 9,549
Cost of revenues 3,966 4,589
-------- --------
Gross profit 2,857 4,960
Operating expenses:
Selling, general and administrative
expenses 3,504 3,525
Provision for doubtful accounts 2,446 1,497
-------- --------
Total operating expenses 5,950 5,022
-------- --------
Operating loss (3,093) (62)
Net interest expense (261) (200)
-------- --------
Loss before provision for income taxes (3,354) (262)
Provision for income taxes 494 --
-------- --------
Net loss $ (3,848) $ (262)
======== ========
Net loss per common share $ (.27) $ (.03)
======== ========
Weighted average common shares 14,197 9,446
======== ========
See notes to Consolidated Financial Statement
PAGE 6 OF 15 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
(IN THOUSANDS) 1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(4,312) $(6,016)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 802 1,412
Provision for doubtful accounts 3,589 8,539
Provision for obsolete inventory and equipment -- 559
Write-off of intangible and certain other assets -- 2,654
Deferred income tax expense -- 62
Unrealized gain on marketable securities 7 (32)
Gain on sale of marketable securities -- 38
Changes in assets and liabilities:
Marketable securities -- 469
Accounts receivable (2,346) (5,349)
Inventories 63 219
Recoverable income taxes 1,993 (3,121)
Prepaid expenses and other current assets 7 105
Other assets (103) (180)
Accounts payable (409) 909
Accrued expenses (652) (298)
Income taxes payable 493 --
Minority Interest 50 --
Net purchases of rental equipment (295) (507)
------- -------
Net cash used in operating activities (1,113) (537)
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment (43) (288)
Payments for intangible assets acquired -- (112)
Organization costs (42) (14)
Sale of assets 377 --
Disposal of Equipment 22 --
Investment in certified home health agency -- (90)
------- -------
Net cash provided by (used in) investing activities 314 (504)
------- -------
FINANCING ACTIVITIES:
Proceeds from bank loan 1,258 150
Repayments of bank loan (1,153) (1,450)
Proceeds from other short-term debt 556 --
Repayment of other short-term debt (1,154) --
Proceeds from long-term debt -- 1,553
Repayment of long-term debt (551) (924)
Proceeds from issuance of common stock 1,911 1,863
Purchases of treasury stock -- (1,119)
Sale of treasury stock -- 600
------- -------
Net cash provided by financing activities 867 673
------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 68 (368)
CASH AND CASH EQUIVALENTS, beginning of period 24 561
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 92 $ 193
======= =======
Supplemental disclosure of cash flow information:
Interest Paid $ 660 $ 515
======= =======
Taxes Paid $ 57 $ 157
======= =======
</TABLE>
See notes to consolidated financial statements.
PAGE 7 OF 15 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The principal business of The Care Group, Inc. and its wholly-owned
subsidiaries (the "Company") is providing home health care, including infusion,
respiratory and other therapies, to patients with HIV (Human Immunodeficiency
Virus) Disease, AIDS (Acquired Immune Deficiency Syndrome), cancer, and other
diseases requiring high-technology, intermittent therapies. The Company engages
in mail order distribution of pharmaceuticals through Mail Order Meds, Inc., a
wholly owned subsidiary.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q 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. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of The Care Group,
Inc. and all subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the rules and regulations of the Securities and Exchange
Commission. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1996 Annual Report on Form 10-K.
(A) USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(B) REVENUE RECOGNITION
Revenues are recognized at the time the service is provided to the patient. A
substantial majority of the Company's revenues are billed to third-party
payors. These revenues are recognized net of known contractual adjustments.
Payment from third-party payors is dependent upon the specific benefits
included in the patient's policy. The Company provides an allowance to cover
the difference between the Company's billable charges and expected collections
from third-party payors and patients.
(C) INCOME TAXES
The Company's deferred tax provision is determined under the liability method.
Under this method, deferred tax assets and liabilities are recognized based on
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which differences
are expected to reverse. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax
assets or liabilities.
PAGE 8 OF 15 PAGES
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(D) NET LOSS PER COMMON SHARE
Net loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding.
(E) RECLASSIFICATIONS
Certain amounts in the 1996 consolidated financial statements have been
reclassified to conform to the 1997 presentation.
(F) FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist primarily of investments in cash and cash
equivalents, short-term investments, trade accounts receivable, accounts
payable and debt obligations. At September 30, 1997 and December 31, 1996, the
fair value of the Company's financial instruments approximated the carrying
value.
(G) CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term highly liquid investments which are
readily convertible into cash, and have maturities of three months or less.
(H) MARKETABLE SECURITIES
At September 30, 1997 and December 31, 1996, marketable securities consisted of
equity securities. The provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"), requires a positive intent and ability to hold debt
securities to maturity as a precondition for reporting those securities at
amortized cost. Securities not meeting the condition are considered either
available-for-sale or trading, as defined, and are reported at fair value.
Trading securities are reported at fair value with adjustments recorded through
the consolidated statements of income. The investments owned by the Company are
considered trading securities as they are bought and held principally for the
purpose of selling them in the near term to generate a profit on short-term
differences in price.
(I) ACCOUNTS RECEIVABLE, NET
Accounts Receivable, net, is comprised principally of amounts expected to be
collected from insurance companies for services provided.
(J) INVENTORIES
Inventories, consisting of supplies, durable medical equipment and
pharmaceuticals, are stated at the lower of cost (first-in, first-out) or
market.
(K) PROPERTY AND EQUIPMENT
Leasehold improvements, furniture and equipment are stated at cost.
Depreciation is provided on a straight-line basis over the estimated useful
lives of the furniture and equipment. Leasehold improvements are amortized over
the period of the respective leases or the estimated useful lives of the
assets, whichever is shorter.
PAGE 9 OF 15 PAGES
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(L) INTANGIBLE
Intangible assets resulting from acquisitions primarily consist of the excess
of the acquisition cost over the fair value of the net assets acquired
(goodwill). Goodwill is amortized on a straight-line basis over periods ranging
from twenty to forty years. Other intangible assets are amortized over the
estimated life of the related asset.
NOTE 3 - BANK LOAN
On July 24, 1997, the Company entered into a two (2) year revolving term credit
agreement (the "Credit Agreement") with HealthCare Financial Partners, Inc.
("HCFP"). The Credit Agreement replaced the Company's credit facility with the
KeyBank of New York. The Credit Agreement provides for borrowings of up to $10
million. The borrowing base is equal to the lesser of $10 million or 80 percent
of eligible accounts receivable which as of September 30, 1997 equaled $6.1
million. Interest is computed at prime (8.50% at September 30, 1997) plus 2
percent. The Credit Agreement is secured by certain assets of the Company.
Pursuant to the terms of the Credit Agreement, the Company is required to pay a
monthly loan management fee equal to .2 percent of the average amount of the
outstanding principle balance of the revolving credit loans during the
preceding month.
NOTE 4 - LITIGATION
On March 5, 1997, the Company was served with a complaint from an investor
alleging breach of contract and breach of fiduciary duty. On or about June 19,
1996, the investor purchased 150,000 shares of the Company's common stock and
had a right to a demand registration 75 days after the purchase date. The
Company received a demand registration request on October 18, 1996. The
investor, among other things, is suing the Company for not registering the
shares in a timely manner. Management intends to vigorously defend such
litigation and believes that the outcome of such litigation will not have a
material adverse effect on the Company's financial position or results of
operations. The parties are concluding discovery and the court has indicated
that a trial will be held in February 1998.
The Company is a party to other litigation arising in the normal course of its
operations. It is the opinion of management of the Company that it has
meritorious defenses against all outstanding claims and that the outcome of
such litigation's will not have a material adverse effect on the Company's
financial position or results of operations. Further, management intends to
vigorously defend all such litigation's.
NOTE 5 - INTERNAL REVENUE SERVICE AUDIT
The Internal Revenue Service has completed an audit of the years ending
December 31, 1992 and 1993. The Company has agreed to the audit findings which
resulted in a net tax due for both years of approximately $494,000.
NOTE 6 - SUBSEQUENT EVENT
On October 31, 1997, the Company closed its California operation. The
California operation reported a loss for the three and nine months ended
September 30, 1997 of $228,000 and $254,000, respectively.
On November 11, 1997, the Company converted a balloon note due on November 17,
1997, in the amount of approximately $331,500 into a $200,500 two-year term
note with interest payable at 12 percent, for a cash payment of $130,750.
PAGE 10 OF 15 PAGES
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2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Quarterly Report contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and in other filings made by the
Company with the Securities and Exchange Commission, including without
limitation, the factors described in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, under the heading "Certain Factors
Affecting Operations and Market Price of Securities." The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements which are made pursuant to the Private Securities Litigation Reform
Act of 1995, and, as such, speak only as of the date made.
The Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three and nine months ended September 30, 1997, should be
read in conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations for the year ended December 31, 1996,
included in the Company's Annual Report on Form 10-K.
RESULTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1997
Net revenues from operations for the nine months ended September 30, 1997
decreased to $20,836,000 as compared to $27,478,000 for the comparable period
last year. The decrease of $6,642,000 or 24 percent is primarily attributable
to the decrease in net revenues in the Company's Dallas and New York operations
as well as the sale of the Company's Atlanta office. The reduction in sales in
Dallas, New York and Atlanta amounted to $3,268,000, $3,950,000 and $457,000,
respectively. These decreases were partially offset by an increase in revenues
in the Company's Mail Order Meds operation.
The Company's New York and Dallas offices experienced a decrease in net revenue
of over 40 percent compared to the same period a year ago. This decrease was
attributable to several factors. First, the Company's primary referral source,
physicians, reported less patient volume for the same period. Second, with the
growth of managed care, certain physicians who previously referred patients to
the Company are no longer able to do so because of the restrictions on their
patient's health plans. Managed care has not only had the effect of reducing
the Company's rates on a per therapy basis, but, more importantly, it has
changed referral patterns and has made it more difficult to obtain qualified
referrals from the Company's physician base. The Company is pursuing contracts
with health maintenance organizations ("HMOs"), preferred provider
organizations ("PPOs"), hospital discharge planners and other case management
entities. If successfully negotiated, these contracts will enable the Company
to receive referrals directly from these entities as well as from its physician
base.
The Company's selling, general and administrative (SG&A) expenses were
$9,804,000 or 47 percent of net revenues for the nine months ended September
30, 1997 as compared to $11,213,000 or 41 percent of net revenues for the same
period last year. SG&A expenses increased as a percentage of net revenues due
primarily to the decrease in net revenues as discussed above. The Company is
continuing its effort to reduce operating expenses and has reduced these
expenses by $1.4 million for the nine months ended September 30, 1997.
The net loss for the nine months ended September 30, 1997 was $4,312,000 ($.32
per share) as compared with net loss of $6,016,000 ($.69 per share) for the
same period in 1996.
PAGE 11 OF 15 PAGES
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RESULTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1997
Net revenues for the three months ended September 30, 1997 decreased to
$6,823,000 as compared to $9,549,000 for the comparable period last year. The
decrease of $2,726,000 or 29 percent is principally attributable to a decrease
in business in the Company's Dallas and New York City operations
The New York office experienced a decrease in net revenues of almost 50 percent
this quarter as compared to the same period a year ago. This decrease was
attributable to several factors. First, the Company's primary referral source,
physicians reported less patient volume for the same period. Second, with the
growth of managed care, certain physicians who previously referred patients to
the Company are no longer able to do so because of the restrictions on their
patient's health plans. Managed care has not only had the effect of reducing
our rates on a per therapy basis, but, more importantly, it has changed
referral patterns and has made it more difficult to obtain qualified referrals
from the Company physician base. The Company is pursuing contracts with health
maintenance organizations ("HMOs"), preferred provider organizations ("PPOs"),
hospital discharge planners and other case management entities. If successfully
negotiated, these contracts will enable the Company to receive referrals
directly from these entities as well as receive referrals from its physician
base.
The rate of loss in the Company's Dallas office was slowed by the start of
operations of the Physician Practice Management Company, an entity in which the
Company holds a 75 % interest, which resulted in greater referrals to the
Dallas office.
Cost of revenues for the three months ended September 30, 1997, as a percentage
of net revenues was 58 percent as compared to 48 percent for the same period in
1996. The increase in cost of revenues as a percentage of net revenues is due
to the fact that a greater portion of the Company's revenue is derived from
managed care and negotiated rate contracts, which provide for rates that are
lower than those realized, during the same period last year.
The Company's selling general and administrative expense were $3,504,000 or 51
percent of net revenues for the quarter ended September 30, 1997 as compared to
$3,525,000 or 37 percent of net revenues for the same period last year. Even
though selling general and administrative expense decreased down $33,000 as a
percentage of sales, it increased dramatically due primarily to the decreased
net revenues.
The net loss for the three months ended September 30, 1997 was $3,848,000 ($.27
per share) as compared with a net loss of $262,000 ($.03 per share) for the
same period in 1996. The increased loss is attributable to the decrease in
sales plus the increase in the provision for doubtful accounts related to the
sale of the Georgia office and the discontinued operation in California.
PAGE 12 OF 15 PAGES
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FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1997, working capital was $8,430,000 as compared to $4,931,000
at December 31, 1996. The increase in working capital is due to the
reclassification of bank debt from a current liability to long-term debt. The
comparative change in working capital after giving effect to the
reclassification of debt is actually a reduction in working capital of
$1,693,000. The reduction in working capital is caused primarily by operating
losses.
On July 24, 1997, the Company entered into a two (2) year revolving term credit
agreement with HealthCare Financial Partners, Inc. (the "Credit Agreement") and
terminated the Credit Agreement with KeyBank of New York, the Company's former
lender. The Credit Agreement provides for borrowing of up to $10 million. The
borrowing base is equal to the lesser of $10 million or 80 percent of eligible
accounts receivable. Interest is computed at prime (8.50% at July 24, 1997)
plus 2 percent. Pursuant to such formula, the Company may borrow, as of October
31,1997 a maximum of approximately $6.2 million, of which the Company has
already borrowed approximately $5.3 million. The Credit Agreement is secured by
certain assets of the Company. Pursuant to the terms of the Credit Agreement,
the Company is required to pay a monthly loan management fee. Management
believes that the credit projected to become available under the Credit
Agreement will be sufficient to meet the Company's cash needs for the remainder
of the fiscal year.
On November 7, 1997, the Company converted a balloon note that was due on
November 17, 1997 into a $200,500 two year term note with interest payable at
12 percent per annum.
Management believes that the sale of its Georgia's office and the
discontinuance of the Company's California operation will help reduce the
Company's losses. For the nine months ended September 30, 1997, the Atlanta
office and the Company's California operation generated losses of $1,111,000
and $254,000, respectively.
In addition, the Company has met with greater success in entering into
agreements with managed care organizations. Management believes that as a
result of such relationships the Company will be able to generate higher
revenues in its New York and Dallas operations in the near future. There can be
no assurance, however, that such contracts will result in increased revenues
for the Company or that the Company will be able to enter into additional
contracts with managed care organizations.
Based on the historic rate of introduction of oral medications, as well as the
number of such products awaiting final approval from the Food and Drug
Administration, the Company expects that additional oral medications will be
brought to the market. Such oral medications are replacing a number of
medications that are currently administered intravenously. As a result of this
trend, the Company has seen a decrease in net revenues from home infusion
therapies.
Although all of the Company's revenues are currently being used to fund its
operations, the Company will need to generate increased sales from the Dallas
and New York operations, as well as, continue to reduce operating expenses to
meet its future debt and cash flow requirements. It is the Company's belief
that, as outlined above, it will reduce costs and increase revenues in the
Dallas and New York offices.
PAGE 13 OF 15 PAGES
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 5, 1997, the Company was served with a complaint from an investor
alleging breach of contract and breach of fiduciary duty. On or about June 19,
1996, the investor purchased 150,000 shares of the Company's common stock and
had a right to a demand registration 75 days after June 19, 1996. The Company
received a demand registration request on October 18, 1996. The investor, among
other things, is suing the Company for not registering the shares in a timely
manner. Management intends to vigorously defend such litigation and believes
that the outcome of such litigation will not have a material adverse effect on
the Company's financial position or results of operations. The parties are
concluding discovery and the court has indicated that a trial will held in
February 1998.
The Company is a party to other litigation arising in the normal course of its
operations. It is the opinion of management of the Company that it has
meritorious defenses against all outstanding claims and that the outcome of
such litigation will not have a material adverse effect on the Company's
financial position or results of operations. Further, management intends to
vigorously defend all such litigation's.
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Mr Michael P. Moran was appointed President of the Company on September
15, 1997, filling a position that was vacated by Rick Jung in February
1997. Prior to joining the Company Mr Moran was Regional Vice
President of Coram Healthcare Corporation ("Coram") from 1996 to
September 1997. Prior to joining Coram, Mr. Moran was Vice President
of Chartwell Home Therapies.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
PAGE 14 OF 15 PAGES
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Care Group, Inc.
--------------------
(Registrant)
Dated: November 12, 1997
/s/ Pat H. Celli
-----------------------------------
Pat H. Celli
Chief Financial Officer
(Principal Financial Officer)
PAGE 15 OF 15 PAGES
