<PAGE>
UNITED STATES
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
/ / TRANSACTION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998
Commission file number 0-19031
National Quality Care, Inc.
(EXACT NAME OF REGISTRANT)
Delaware 84-1215959
(State of Incorporation) (IRS Employer ID No.)
1835 South La Cienega Boulevard, Suite 235
Los Angeles, CA 90035
(Address of Principal Executive Offices) (Zip Code)
(310) 280-2758
(Telephone Number)
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
------ ------
The number of shares of common stock
outstanding as of August 12, 1998 is 9,814,878.
1
<PAGE>
National Quality Care, Inc.
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I. Financial Information 3
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 4
Consolidated Statements of Operations
for the Three Months Ended June 30, 1998
and 1997 5
Consolidated Statements of Operations
for the Six Months Ended June 30, 1998
and 1997 6
Consolidated Statements of Stockholders'
Equity for the Six Months Ended June 30, 1998 7
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
3
<PAGE>
NATIONAL QUALITY CARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
ASSETS (NOTE 5)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- ---------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 41,184 $ 39,220
Accounts receivable, net of allowances for
doubtful accounts of $75,000 488,992 340,497
Note receivable-related parties (note 2) 641,790 -----
Supplies inventory 64,564 46,723
Other current assets 72,617 30,537
-------------- ---------------
Total current assets 1,309,147 456,977
Property and equipment, net (note 2) 2,520,604 2,561,510
Note receivable - related parties ----- 641,790
Deposits and other long-term assets 51,145 54,231
-------------- ---------------
Total assets $ 3,880,896 $ 3,714,508
-------------- ---------------
-------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 765,099 595,380
Accrued expenses 188,683 192,718
Note payable (note 3) 45,000 -----
Current portion of long-term debt (note 4) 85,465 63,483
-------------- ---------------
Total current liabilities 1,084,247 851,581
Long-term debt, net of current portion (note 4) 1,903,026 1,870,194
-------------- ---------------
Total liabilities 2,987,273 2,721,775
Stockholders' equity
Preferred stock, $.01 par value: 5,000,000 shares
authorized, no shares issued and outstanding ----- -----
Common stock, $.01 par value: 50,000,000 shares
authorized, 9,814,878 and 9,555,710 shares
issued and outstanding 98,148 95,556
Additional paid-in capital 2,163,406 2,086,394
Notes receivable from stockholder (121,310) (116,622)
Accumulated deficit (1,246,621) (1,072,595)
-------------- ---------------
Total stockholders' equity 893,623 992,733
-------------- ---------------
Commitments and contingencies (note 4)
Total liabilities and stockholder's equity $ 3,880,896 $ 3,714,508
-------------- ---------------
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
NATIONAL QUALITY CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
Income
Medical service income $ 898,609 $ 786,778
Rental income 67,925 67,925
------------- --------------
Total income 966,534 854,703
------------- --------------
Operating expenses
Cost of medical services 663,148 492,185
Selling, general, and administrative 337,929 256,322
Depreciation and amortization 17,040 16,120
Rent and other 21,860 22,042
------------- --------------
Total operating expenses 1,039,977 786,669
------------- --------------
Income (loss) from operations (73,443) 68,034
Other income (expense)
Interest expense (54,606) (57,191)
Interest income 2,388 37,046
Other income (expense) 5,719 (199)
------------- --------------
Total other expense (46,499) (20,344)
------------- --------------
Income (loss) before provision for income taxes (119,942) 47,690
Provision for income taxes 1,600 1,600
------------- --------------
Net income (loss) $ (121,542) $ 46,090
------------- --------------
------------- --------------
Basic and diluted income (loss) per share $ (0.01) $ 0.01
------------- --------------
------------- --------------
Weighted average shares outstanding 9,773,668 8,651,419
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NATIONAL QUALITY CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
Income
Medical service income $ 1,691,186 $ 1,635,374
Rental income 135,850 135,850
------------- --------------
Total income 1,827,036 1,771,224
------------- --------------
Operating expenses
Cost of medical services 1,210,635 986,115
Selling, general, and administrative 625,709 505,352
Depreciation and amortization 39,180 27,446
Rent and other 33,016 33,198
------------- --------------
Total operating expenses 1,908,540 1,552,111
------------- --------------
Income (loss) from operations (81,504) 219,113
Other income (expense)
Interest expense (103,038) (106,619)
Interest income 4,688 40,136
Other income (expense) 7,428 (28,263)
------------- --------------
Total other expense (90,922) (94,746)
------------- --------------
Income (loss) before provision for income taxes (172,426) 124,367
Provision for income taxes 1,600 1,600
------------- --------------
Net income (loss) $ (174,026) $ 122,767
------------- --------------
------------- --------------
Basic and diluted income (loss) per share $ (0.02) $ 0.01
------------- --------------
------------- --------------
Weighted average shares outstanding 9,683,661 8,327,036
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
NATIONAL QUALITY CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Receivable Accumulated Total
Shares Amount Paid-In From Deficit
Capital Stockholder
--------- ----------- ------------ ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 9,555,710 $ 95,556 $ 2,086,394 $ (116,622) $ (1,072,595) 992,733
Options exercised
For services rendered 196,668 1,967 62,512 64,479
For cash 62,500 625 14,500 15,125
Increase in receivable from
stockholder (interest) (4,688) (4,688)
Net loss (174,026) (174,026)
--------- ----------- ------------ ------------- ------------- ----------
Balance, June 30, 1998 9,814,878 $ 98,148 $ 2,163,406 $ (121,310) $ (1,246,621) $ 893,623
--------- ----------- ------------ ------------- ------------- ----------
--------- ----------- ------------ ------------- ------------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
NATIONAL QUALITY CARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
--------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (174,026) $ 122,767
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization 61,492 49,759
Issuance of common stock and stock options for services 64,479 179,922
(Increase) decrease in
Accounts receivable (148,494) 74,054
Supplies inventory (17,841) 25
Other current assets (42,080) (36,209)
Increase (decrease) in
Accounts payable 169,719 75,518
Accrued expenses (4,036) (135,942)
--------------- -------------
Net cash (used) provided by operating activities (90,787) 329,894
--------------- -------------
Cash flows from investing activities
Increase in deposits (40) (1,300)
Increase in receivable from stockholder (interest) (4,688) (4,549)
Purchase of building and equipment (17,460) (319,404)
--------------- -------------
Net cash used in investing activities (22,188) (325,253)
Cash flows from financing activities
Repayments of capital lease obligations (16,300) (3,798)
Repayment of debt (28,886) (188,462)
Proceeds from debt 145,000 198,051
Proceeds from exercise of stock options 15,125 4,140
--------------- -------------
Net cash provided by financing activities 114,939 9,931
--------------- -------------
Net increase in cash during period 1,964 14,572
--------------- -------------
Cash and equivalents, beginning of period 39,220 121,812
--------------- -------------
Cash and equivalents, end of period $ 41,184 $ 136,384
--------------- -------------
--------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NATIONAL QUALITY CARE
June 30, 1998
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB. They do not
include all information and footnotes necessary for a fair presentation of
financial position and results of operations and cash flows in conformity
with generally accepted accounting principles. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes contained in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997. In the opinion of Management,
all adjustments considered necessary for a fair presentation have been
included in the interim period. Operating results for the six months ended
June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998.
(2) PROPERTY AND EQUIPMENT
Property and equipment as of June 30, 1998 consist of the following:
<TABLE>
<S> <C>
Land $ 855,897
Building 1,338,710
Medical equipment 503,795
Leasehold improvement 158,372
Office furniture and equipment 58,228
-------------
2,915,002
Less accumulated depreciation and
amortization 394,398
-------------
Total $ 2,520,604
-------------
-------------
</TABLE>
(3) NOTE PAYABLE
During the quarter ended June 30, 1998, the Company secured a note
payable as follows:
<TABLE>
<S> <C>
Revolving line of credit is secured by accounts receivable and personal
guarantees by the Company's stockholders. The note is payable in
interest only at 1.50% over the bank's index rate (10.0% at
June 30, 1998). Principal is due on April 30, 1999. 45,000
</TABLE>
9
<PAGE>
(4) LONG-TERM DEBT
Long-term debt at June 30, 1998 consists of the following:
<TABLE>
<S> <C>
Notes payable in monthly installments of $20,293, including
interest at prime plus 2% (10.25% at June 30, 1998) per annum,
through May 2006, collateralized by land, building and
equipment and assignment of $2,000,000 in life insurance of,
and guaranteed by, two majority stockholders $ 1,734,704
Note payable, due in monthly installments of $858,
including interest at 10% with the unpaid balance
due August 2000, secured by equipment 19,989
During the quarter ended June 30, 1998, the Company secured an
Installment loan of $100,000, which is secured by accounts
receivable and personal guarantees by the Company's stockholders.
The note is payable in monthly principal payments of $1,667 plus
interest at 1.50% over the bank's index rate (10.00% at June 30,
1998). Final installment is due on April 30, 2003 96,666
Capital lease obligations, due in aggregate monthly
installments of $3,488, including interest at 12%,
due December 2001, collateralized by equipment $ 137,132
-----------
$ 1,988,491
Less current portion 85,465
-----------
Long-term portion $ 1,903,026
-----------
-----------
</TABLE>
(5) COMMITMENTS AND CONTINGENCIES
ASSET PURCHASE AGREEMENT
In December 1997, the Company entered into an asset purchase agreement,
whereby the Company agreed to purchase substantially all the assets other
than land and building of an organization engaged in a similar line of
business. As consideration for the asset purchase, the Company will pay
$875,000 in cash and assume liabilities of $375,000. It is the intent of the
selling organization to retain the rights to the land and the building and
lease such facilities to the Company. The expected closing date is August
1998.
10
<PAGE>
(6) EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (EPS) (SFAS No.
128). SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been restated to conform to SFAS No. 128 requirements.
Weighted average shares outstanding for both basic and diluted income (loss)
per share for the three months ended June 30, 1998 and June 30, 1997 were
9,774,000 and 8,651,000, respectively. For the first six months of 1998 and
1997 the shares were 9,684,000 and 8,327,000, respectively. The Company has
not included the effect of assumed conversions and exercises of stock options
and warrants for June 30, 1998 and June 30, 1997 since the effect of such an
inclusion would be antidilutive due to the Company's net loss in 1998, and
would remain unchanged for 1997.
Had the Company included the dilutive effect of assumed conversions and
exercises of stock options and warrants on the weighted average shares
outstanding, approximately 225,000 and 70,000 shares would have been included
for the three months ended June 30, 1998 and 1997, respectively. For the
first six months of 1998 and 1997, the shares added would have been 483,000
and 315,000, respectively. Excluded from these totals were warrants to
purchase 500,000 shares of common stock at $1.75 that were granted on May 12,
1996. These options and warrants were not included in the computation because
their exercise price was greater than the average market price of the common
shares and, therefore, the effect would be antidilutive.
(7) RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued SFAS No. 130,
"Reporting Comprehensive Income," which is required to be adopted for
financial statements issued for periods beginning after December 15, 1997.
This statement establishes standards for the reporting and display of
comprehensive income and its components. Comprehensive income is defined as
revenue, expenses, gains and losses that under generally accepted accounting
principles are included in comprehensive but excluded from net income. SFAS
No. 130 requires that items of other comprehensive income be classified
separately in the financial statements. SFAS No. 130 also requires that the
accumulated balance of other comprehensive income items be reported
separately from retained earnings and paid-in capital in the equity section
of the balance sheet. The adoption of SFAS No. 130 did not require additional
reporting from that stated on the Company's financial position or results of
operations.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued and is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. SFAS No. 133 established
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. SFAS No. 133 requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
11
<PAGE>
measure those instruments at fair value. The Company is currently evaluating
the impact SFAS No. 133 will have on its financial statements, if any.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW OF PRESENTATION. Since approximately May 1996, the focus of
the Company's principal business operation has been to provide high-quality
integrated dialysis services for patients suffering from End Stage Renal
Disease ("ESRD").
The Company conducts its business through its wholly-owned operating
subsidiary, Los Angeles Community Dialysis, Inc. For purposes of clarity in
this section, the term "Company" reflects the financial condition and results
of operations of Los Angeles Community Dialysis, Inc. and the combined
operations of the parent holding company and Los Angeles Community Dialysis,
Inc.
This report, including the disclosures below, contains certain
forward-looking statements that involve substantial risks and/or
uncertainties. When used herein, the terms "anticipates," "expects,"
"estimates," "believes" and similar expressions, as they relate to the
Company or its management, are intended to identify such forward-looking
statements. The Company's actual results, performance or achievements may
differ materially from those expressed or implied by such forward-looking
statements.
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE
30, 1998 AND JUNE 30, 1997. Total income for the three months ended June 30,
1998 increased approximately 13% to $966,534 from $854,703 for the three
months ended June 30, 1997. For the first six months of 1998, total income
increased approximately 3% to $1,827,036 from $1,771,224 for the first six
months of 1997. Medical service revenue for the three months ended June 30,
1998 increased approximately 14% to $898,609 from $786,778 for the three
months ended June 30, 1997. For the first six months of 1998 medical service
revenue increased approximately 3% to $1,691,186 from $1,635,374 for the
first six months of 1997. This increase primarily resulted from an increase
in volume of hemodialysis offset by a decrease in the number of inpatient
treatments.
Total operating expenses during the three months ended June 30, 1998
increased 32% to $1,039,977 from $786,669 during the three months ended June
30, 1997. For the first six months of 1998, total operating expenses
increased 23% to $1,908,540 from $1,552,111 for the first six months of 1997.
Total operating expenses include (i) Cost of medical services, (ii) Selling,
general and administrative expenses, and (iii) Rental expense, as follows:
Cost of medical services during the three months ended June 30, 1998
increased 35% to $663,148 from $492,185 during the three months ended June
30, 1997. For the first six months of 1998, cost of medical services
increased 23% to $1,210,635 from $986,115 for the first six months of 1997.
Cost of medical services primarily consists of two (2) categories: (i)
Medical services and supplies, and (ii) Outside services. Medical services
and supplies for the three months ended June 30, 1998 increased approximately
21% to $467,971 from $385,807 for the three months ended June 30,
12
<PAGE>
1997. For the first six months of 1998, Medical services and supplies
increased 22% to $922,598 from $754,558 for the first six months of 1997. The
increase was primarily due to (i) medical equipment operating leases required
for the new dialysis center of $45,310; (ii) nursing home operations start up
and operating costs of $65,000 and; (iii) rising usage of medical supplies
prescribed, which in turn resulted in higher revenues. Outside services for
the three months ended June 30, 1998 was $87,508 and $87,378 for the three
months ended June 30, 1997. For the first six months of 1998, outside
services decreased 20% to $165,180 from $197,851 for the first six months of
1997. This decrease was directly attributable to the decreased volume of
inpatient services.
Selling, general and administrative expenses during the three months
ended June 30, 1998 increased to $337,929 from $256,322 during the three
months ended June 30, 1997. For the first six months of 1998, Selling,
general and administrative expenses increased 24% to $625,709 from $505,352
for the first six months of 1997. This increase is primarily related to two
items: (i) Rent expenses of $117,642 for the first six months of 1998 as
compared with $51,070 in 1997 (this expense is primarily related to the new
dialysis center, which opened in the second half of 1997); and (ii)
Approximately $45,000 in higher accounting fees, representing the major
portion of these expenses for fiscal year 1998.
Depreciation and amortization expenses during the six months ended
June 30, 1998 increased to $39,180 from $27,446 during the six months ended
June 30, 1997. This increase in expenses is a result of capitalized medical
equipment leases acquired in the latter part of the second quarter of 1997.
Other expenses increased from $20,344 to $46,499 for the three
months ended June 30, 1998 and June 30, 1997. Other expenses decreased during
the six months ended June 30, 1998 to $90,922 from $94,746 during the six
months ended June 30, 1997. The primary reasons for these changes were
certain non-recurring expenses of $42,750 in 1997 related to the Company's
prior business operations, which were partially offset by $34,635 of interest
income on a note receivable.
As a result of the foregoing, the Company experienced a net loss of
$121,542 during the three months ended June 30, 1998, as compared to net
income of $46,090 during the three months ended June 30, 1997. For the first
six months of 1998, the Company experienced net loss of $174,026 as compared
to net income of $122,767 for the first six months of 1997. The Company
experienced a loss from operations during the three months ended June 30,
1998 of $73,443 compared to income from operations of $68,034 during the
three months ended June 30, 1997. For the first six months of 1998, the
Company experienced a loss from operations of $81,504 compared to income from
operations of $219,113 for the first six months of 1997. Management believes
that this loss from operations primarily resulted from the decline in
inpatient services and reduced profit margins for inpatient services, which
took effect in the second half of 1997, and the costs associated with the
ramp up of the new dialysis facility.
As of December 31, 1997, the Company had net operating loss
carryforwards totaling approximately $4,200,000 and $1,700,000 for federal
and state income tax purposes, respectively. Utilization of the Company's net
operating loss may be subject to limitations under certain circumstances.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES. At June 30, 1998, the ratio of
current assets to current liabilities was 1.21 to 1.00 compared to .54 at
December 31, 1997. The change was due to reclassification to current assets
of the net note receivable of $642,000 which matures in February 1999.
Inventory consists of medical supplies and medications.
The Company has historically financed its operations through the use
of working capital and loans to the Company. The Company's cash flow needs
for the six months ended June 30, 1998 were primarily provided from
operations and existing cash. The Company had working capital of
approximately $225,000 at June 30, 1998. The working capital deficit at June
30, 1997 was approximately $232,000. The Company obtained total debt
financing of $150,000 in the second quarter of 1998, and an additional
$15,000 in financing through the exercise of stock options.
The Company has incurred certain one-time expenses related to the
nursing home start up during the six months ended June 30, 1998. In addition,
cost cuts have been put into effect, which will impact the remainder of the
fiscal year. As a result, management believes that, as of June 30, 1998, and
for the foreseeable future, the Company will be able to finance costs of
current operating levels from cash flow generated from operations.
Cash and cash equivalents were $41,184 as of June 30, 1998, as
compared to $39,220 as of December 31, 1997. The Company is currently in
discussion with various financial intermediaries in order to raise debt and
equity.
As of June 30, 1998, the Company had long-term borrowings in the
aggregate amount of $1,988,491, the current portion of which was $85,485. As
of December 31, 1997, the Company had aggregate long-term borrowings of
$1,933,677.
The Company has a note receivable including accrued interest in the
amount of $121,310 from Medipace Medical Group, Inc., an affiliate of two of
the Company's four (4) directors and largest stockholders, bearing interest
at the rate of 8% PER ANNUM.
The Company's current business plan includes a strategy to expand as
a provider of dialysis services through the development of new dialysis
facilities and the acquisition of additional facilities and other
strategically related health care services in selected markets. The market
for such acquisition prospects is highly competitive and management expects
that certain potential acquirers will have significantly greater capital than
the Company. The Company currently experiences negative cash flow from
operations. Management believes this situation is temporary and expects to
continue expansion of the Company and to achieve profitable operations in the
future, however, there can be no assurances to that effect. The Company
experienced an unusually low number of treatments during the first six months
of 1998. However, the Company expects activity for the year to return to a
normal level. In order to finance expansion plans, including the Asset
Purchase Agreement executed in December 1997, the Company will require
financing from external sources. The Company does not have any commitment for
such financing and there can be no assurances that the Company will be able
to obtain any such financing on terms favorable to the Company or at all. In
14
<PAGE>
the event the Company cannot obtain such additional financing, the Company
may be unable to achieve its proposed expansion strategy.
Year 2000
The Company has developed plans to address issues related to the
impact on its computer systems of the year 2000. Financial and operational
systems have been assessed and plans have been developed to address systems
modification requirements. The financial impact of making the required
systems changes is not expected to be material to the Company's consolidated
financial position, liquidity and results of operations. Management has
communicated with third parties and does not expect any action or inaction by
third parties to have material effect on operations.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) REPORTS ON FORM 8-K
The Company filed no report on a Form 8-K during the Quarterly
Period ended June 30, 1998.
(b) Exhibit
27. Financial Data Schedule
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized on the dates indicated.
Dated: August 12, 1998 NATIONAL QUALITY CARE, INC.
By: /s/ Ron Berkowitz
---------------------------
Ron Berkowitz
Chief Financial Officer
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 563,992
<ALLOWANCES> 0
<INVENTORY> 64,564
<CURRENT-ASSETS> 1,309,147
<PP&E> 2,915,002
<DEPRECIATION> 394,398
<TOTAL-ASSETS> 3,880,896
<CURRENT-LIABILITIES> 1,084,247
<BONDS> 1,903,026
0
0
<COMMON> 98,148
<OTHER-SE> 795,475
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 1,827,036
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,896,424
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (172,426)
<INCOME-TAX> 1,600
<INCOME-CONTINUING> (174,026)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>