SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Period Ended June 30, 1996
-------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period from _____ to _____
Commission File Number 1-10966
HEALTH PROFESSIONALS, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 11-3076108
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 East Las Olas Boulevard, Suite 1600, Fort Lauderdale, Fl 33301
- --------------------------------------------------------------------------------
(Address of principal executive offices)
954-766-2552
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 ____.
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 July 31, 1996
- ---------------------------- ----------------------------
Common Stock, $.02 par value 4,425,000
<PAGE>
HEALTH PROFESSIONALS, INC.
AND SUBSIDIARIES
I N D E X
---------
Page No.
--------
PART I - Financial Information
Condensed Consolidated Balance Sheets,
June 30, 1996 and September 30, 1995 3 - 4
Condensed Consolidated Statements of Operations,
Three and Nine Months Ended June 30, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows,
Nine Months Ended June 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7 - 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 -15
PART II - Other Information 16
2
<PAGE>
HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
-------- -------------
Assets 1996 1995
- ------ ---- ----
Current assets:
Cash $ 407,000 $ 20,000
Accounts receivable, net 1,814,000 1,947,000
Accounts receivable, related
parties,net 2,214,000 2,119,000
Inventory 109,000 106,000
Note receivable held for sale
- Premier Medical Services, Inc.,
current portion 300,000 330,000
Prepaid expenses consulting fees,
current portion 233,000 --
Prepaid expenses - other 65,000 15,000
----------- -----------
Total current assets 5,142,000 4,537,000
Note receivable - Premier Medical
Services, less current portion 150,000 375,000
Equipment, furniture & fixtures
and leasehold improvements, net 1,289,000 1,459,000
Prepaid Expenses - consulting fees,
less current portion 386,000 --
Costs in excess of net assets
of business acquired, net - CSI 2,885,000 2,995,000
Costs in excess of net assets of
business acquired net -
Chicago practice 1,757,000 --
Other assets 339,000 268,000
----------- -----------
Total $11,948,000 $ 9,634,000
=========== ===========
See notes to condensed consolidated financial statements.
3
<PAGE>
HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
-------- -------------
Liabilities and Stockholders' 1996 1995
- ----------------------------- ---- ----
Equity
- ------
Current liabilities:
Accounts payable and accrued
expenses $3,413,000 $2,866,000
Accrued salaries and payroll taxes 207,000 228,000
Factoring line of credit 329,000 718,000
Current portion of long term debt 387,000 427,000
---------- ----------
Total current liabilities 4,336,000 4,239,000
---------- ----------
Long term debt, less current portion 2,423,000 4,365,000
---------- ----------
Stockholders' equity:
Serial preferred stock, $1 par value;
Authorized 100,000 shares; issued - none
Common Stock - $.02 par value; authorized
25,000,000 shares; issued and
outstanding 4,425,000 and
2,189,000 respectively 486,000 440,000
Additional paid-in capital 40,250,000 35,694,000
Less: 40,000 shares of Treasury
Stock at cost (42,000) (42,000)
Accumulated deficit (35,505,000) (35,062,000)
------------ ------------
Total stockholders' equity 5,189,000 1,030,000
------------ ------------
$ 11,948,000 $ 9,634,000
============ ============
See notes to condensed consolidated financial statements.
4
<PAGE>
HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues $ 1,100,000 $ 1,560,000 $ 3,246,000 $ 3,664,000
Operating revenue -
related parties 773,000 737,000 2,358,000 3,082,000
Conversion and Sale
of Securities -- -- 166,000 --
Interest and other income 14,000 30,000 43,000 201,000
----------- ----------- ----------- -----------
1,887,000 2,327,000 5,813,000 6,947,000
Costs and expenses:
Direct service expense 1,214,000 916,000 3,015,000 3,095,000
Selling, general and
administrative expense 1,161,000 1,428,000 3,820,000 4,367,000
Professional Association
Reserves (234,000) -- (1,129,000) --
Interest and Factoring Fees 95,000 153,000 385,000 376,000
Costs incurred in connection
with litigation 20,000 -- 20,000 --
Research and development 23,000 (27,000) 145,000 (21,000)
----------- ----------- ----------- -----------
2,279,000 2,470,000 6,256,000 7,817,,000
----------- ----------- ----------- -----------
Net Loss $ (392,000) $ (143,000) ($ 443,000) $ (870,000)
=========== =========== =========== ===========
Net (loss)
per share $ (.11) $ (.07) $ (.16) $ (.40)
=========== =========== =========== ===========
Weighted average number
of common and common
equivalent shares
outstanding 3,695,000 2,171,000 2,692,000 2,160,100
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended June
----------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (443,000) $ (870,000)
Adjustments to reconcile net
(loss) to net cash used in operating
activities:
Depreciation and amortization 537,000 433,000
Provision for bad debts (744,000) 15,000
Securities issued for services 739,000 --
Lease obligations (402,000) 84,000
Change in assets and liabilities:
Decrease (increase) in
accounts receivable 782,000 (1,436,000)
(Increase) decrease in inventory (3,000) 36,000
(Increase) decrease prepaid expenses (669,000) 64,000
Decrease (increase) in other assets (71,000) 90,000
Increase in accounts payable
and accrued expenses 451,000 242,000
(Decrease) increase in accrued
salaries and payroll taxes (21,000) 83,000
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 156,000 (1,259,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Physician Association (2,954,000) --
Capital expenditures, net (239,000) (60,000)
Collection of Notes Receivable 255,000 1,469,000
----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (2,938,000) 1,409,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 2,000,000 --
Repayments of long term debt and
current maturities (3,520,000) (448,000)
Conversion of Debt to Equity 3,000,000 --
Additions to long-term debt 2,036,000 --
Cash received from (paid to) Factor (389,000) 324,000
Discount for Notes Payable 42,000 --
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES: 3,169,000 (124,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH 387,000 26,000
CASH AT BEGINNING OF PERIOD 20,000 40,000
----------- -----------
CASH AT END OF PERIOD $ 407,000 $ 66,000
=========== ===========
See notes to condensed consolidated financial statements
6
<PAGE>
HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. General
-------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and 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 considered necessary for a fair presentation have been included.
Operating results for the nine months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending September 30,
1996. These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1995.
2. Litigation and Other Contingencies
----------------------------------
(a) In 1993, three shareholder class action suits were filed against the
Company and its current offices, certain of whom are also directors, as a result
of the decline in the market value of the common stock. The class plaintiffs
agreed to a dismissal of their suit in exchange for an extension of the statute
of limitations until September 30, 1996.
(b) In 1993, the SEC advised the Company that it had commenced a formal
investigation of potential securities law violations in connection with certain
trading activity in the Company's securities and has requested certain
information from the Company and certain of its officers in connection with that
investigation. The Company, and the officers have complied with these requests.
3. Related Parties
---------------
Related party receivables arise from advances made to medical practices
owned by one of the former CSI shareholders who is also a director of the
Company. The advances were made in order to expand existing practices and
develop new practices to be customers of the Company. The two practices that
were developed by the Chairman on the Company's behalf have been sold and
related-party receivables were paid in full to the Company. One practice was
sold to an unrelated party in August of 1994. The purchaser remained affiliated
with the Company until February 29, 1996. The Company then started a new
practice at this site on March 1, 1996, with both the practice and the site now
owned by the Company. The other practice that was developed by the Chairman on
the Company's behalf was sold directly to CSI, effective January 1, 1996.
7
<PAGE>
4. Purchase of Medical Practice
----------------------------
Effective April 1, 1996, the Company purchased a medical practice in
Chicago, Illinois. The medical practice had been previously utilized as a
Company owned facility in Chicago under an independent practice affiliation
agreement with the Company.
5. Lease Reserves
--------------
In April of 1996, the Company determined that it would combine its Ft.
Lauderdale medical clinic, research department, clinical laboratory and
executive offices into a single new facility with a target date on or before
December 31, 1996. Under the terms of the existing lease, the Company has
limited financial exposure in the event of a relocation prior to expiration of
the lease term in 2003. As a result of the planned relocation, the Company was
able to reduce lease reserves for the quarter ending June 30, 1996 by $381,000
with a corresponding increase in depreciation of leasehold improvements of
$116,000.
6. Prepaid Expenses-Consulting
---------------------------
The Company has entered into consulting agreements with Rubin Consultants
and Logica Overseas, S.A., pursuant to which the Company agreed to issue 160,000
Shares and 80,000 Shares (post- split) of Common Stock of the Company
respectively, in consideration for consulting services to provided over an
anticipated three-year period for both agreements. Under the terms of the Rubin
Consulting Agreement, Rubin is to consult with the Company concerning
management, marketing, strategic planning, corporate organization and structure,
expansion of services and shall review and advise the Company regarding its
overall progress, needs and condition. Under the terms of the Logica Overseas,
S.A. Consulting Agreement, Logica is to consult with the Company concerning
management, marketing, strategic planning, corporate organization and structure,
financial matters including stockholder relations, and evaluating and
structuring business acquisitions.
The Company has also entered into a Joint Venture Agreement with BioCoral,
Inc. through the efforts of Brompton Asset Management, S.A. (Brompton), pursuant
to which the Company agreed to perform clinical testing services necessary to
obtain the FDA approval of BioCoral's bone replacement products at cost or
exchange for a 45% equity interest in the joint venture. BioCoral has agreed to
fund the joint venture with $2,000,000 in cash and a license to commercialize
its project in the United States. In consideration for introducing BioCoral and
other potential venturers to the Company and for the assistance of Brompton with
respect to identification of such parties assistance in negotiations, evaluation
and structuring strategic alliances and joint ventures, the Company agreed to
issue Brompton 40,000 (post- split) shares of its Common Stock.
Each of these agreements is for a three year period. The consideration paid to
Rubin Consultants, Inc., Logica, and Brompton, is being amortized over the three
year period.
8
<PAGE>
7. Conversion of Debt to Equity
----------------------------
In February 1996, the Company's Board of Directors approved an agreement
to immediately convert, $3,000,000 of the $3,193,000 convertible debt owed to
the former CSI shareholders into 1,200,000 (post-split) shares of the Company's
common stock valued at $2.50 a share (post-split). The conversion had the effect
at March 31, 1996 of decreasing long-term debt by $3,000,000 to $1,455,000 and
the debt to equity ratio on the consolidated balance sheet improved from 868% at
December 31, 1995 to 234%. Conversion of this debt also eliminated interest
expense of approximately $70,000 per quarter and released the security interest
that the former CSI shareholders held in CSI, the Company's only operating
subsidiary.
8. Subsequent Events
-----------------
In July, 1996, the Company received $369,000 in cash from Premier Medical
Services, which was payment in full for the note receivable owed to the Company.
The Company intends to use most of the proceeds to meet its full obligation with
the State of New York ahead of schedule.
9
<PAGE>
HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
BACKGROUND AND BUSINESS PLAN DEVELOPMENT
- ----------------------------------------
CSI currently owns and operates five medical clinic and research sites
located in Florida (Fort Lauderdale, Miami Beach), California (Irvine, San
Diego) and Illinois (Chicago). Additional physician practices located in
Florida, Illinois, California, Kansas, Oklahoma, Virginia, Texas, Pennsylvania
and New York are affiliated with the CSI network and utilize CSI services to
varying degrees.
The Company's principal business objective is to extend the full
capabilities of its Information Technologies System (ITS) to all its currently
affiliated sites and to expand the number of owned and affiliated sites.
Management believes that this will increase its revenue base to meet its central
operating and development expenses and will then generate substantial operating
profits. The extension of the ITS to all affiliated sites will allow the Company
to provide more comprehensive services to these sites, thereby increasing the
revenue earned from each. The expansion of owned and affiliated sites will
create further market outlets for the Company's services and allow greater
market capture of the underlying populations requiring those services. The
expanded network will be positioned to capture health services contracts as a
national managed care disease-specific provider, will provide larger economies
of scale, will provide more clinical data for medical and financial analysis and
will allow CSI to conduct larger clinical trials.
The Company continues to focus further on the implementation of its
business plan by entering into independent practice affiliations with
established medical practices, purchases of established practices, obtaining new
clinical trials contracts, contracting for the sale of its historical outcomes
data while also attempting to locate additional sources of cash. The
infrastructure continues to be developed to service a greater number of
facilities. On December 31, 1995 and on February 13, 1996, the Company closed on
two loans and securities purchase agreement from which the Company received net
proceeds of $700,000 in loans. The Company used $100,000 of the proceeds from
the loans to acquire a non-exclusive seven year, unlimited user license for
Clinitec International, Inc.'s NextGenTM electronic medical records software.
The remainder of the funds was used in operations. On April 30, 1996, the
Company executed a selling agreement for the sale of 500,000 shares of its stock
from which the Company received net proceeds of $2,000,000. The Company is using
the proceeds to open a new affiliate center, reduce existing trade and vendor
debt and for working capital. The Company is still utilizing cash from
10
<PAGE>
operations and will require additional sources of cash. These sources of cash
include the cash received from new clinical trials contracts, cash from
anticipated increase in operating activities and the additional cash to be
received from certain strategic alliance contracts. No assurance can be made
that sufficient additional sources of cash will be available on terms reasonable
acceptable to the Company.
RESULTS OF OPERATIONS
The Company's facilities revenues are derived from practice management
services provided directly or from providing diagnostic laboratory, in-office
infusion care and oral pharmaceuticals to the patients of the medical
professional associations under contract with CSI. Home infusion revenues and
out patient infusion care results from services provided to patients of the
professional medical associations, primarily through sub-contracts with home
infusion companies. In addition, the Company earns revenues from performing
research studies for pharmaceutical and biomedical companies and form the sale
of its historical outcomes data.
Three Months Ended Nine Months Ended
------------------ -----------------
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ----- ----
Total facilities revenues $1,652,000 $1,678,000 $4,529,000 $5,236,000
Home health 152,000 332,000 719,000 967,000
Other revenue 69,000 287,000 356,000 543,000
---------- ---------- ---------- ----------
$1,873,000 $2,297,000 $5,604,000 $6,746,000
========== ========== ========== ==========
Total facilities revenues decreased by $26,000 and $707,000 for the three
and nine months ended June 30, 1996, as compared to the same periods in 1995.
The decrease in total facilities revenues is due in part to facilities whose
contracts were not renewed, which provided revenues of $436,000 and $1,635,000,
a decrease in facilities management revenue of $214,000 and $60,000 due to
purchases of physician practices, offset by an increase in patient revenues of
$173,000 and $218,000, and an increase in infusion and research revenue of
$451,000 and $770,000 during the quarter and nine months ended June 30, 1996.
The decrease in home health revenue of $180,000 and $248,000 for the three and
nine months ended June 30, 1996, is primarily due to the cyclical nature of the
services required to care for these patients in an integrated health care
setting and a shifting of service locations to the physician's office. The
decrease in other revenue of $218,000 and $187,000 for the three and nine months
ended June 30, 1996 is due to the conclusion of certain contracts and the
initiation of new contracts.
The increased revenue from the conversion and sale of securities for the
nine months ending June 30, 1996 of $166,000 is due to the Company exercising
11
<PAGE>
warrants previously issued to the Company to purchase 50,000 shares of stock in
a former subsidiary of the Company and the exchange of the shares to 9,735
shares of unregistered stock in a publicly traded company. The Company sold its
interest in 8,705 shares of the publicly traded company to an unrelated party
for $145,000. The Company still holds an additional 1,030 shares of the publicly
traded Company, which it has valued at $21,000.
Interest and other income decreased by $16,000 and $158,000 for the three
and nine months ended June 30, 1996, as compared to the three and nine months
ended June 30, 1995. The decrease due to a decrease in the note receivable from
the sale of the discontinued operations.
Direct service expense as a percentage of operating revenues was 65% and
54% for the three and nine months ended June 30, 1996, as compared to 40% and
46% for the three and nine months ended June 30, 1995. This increase for the
three months and nine months ending June 30, 1996 is primarily due to the
purchase of physician practices which increased the Company's salary cost,
increasing cost for new research affiliations and by a decrease in facilities
revenue, since the cost associated with those revenues are relatively fixed.
This was offset by facilities no longer dispensing oral pharmaceutical as the
expense was greater than the resulting revenues. In addition for the nine months
ending June 30, 1996 expenses were offset by facilities in 1995, whose contracts
were not renewed, and a decrease in Home Infusion.
Selling, general and administrative expenses decreased by $267,000 (19%)
and $547,000 (13%) for the three and nine months ended June 30, 1996 as compared
to the three and nine months ended June 30, 1995. The decrease for the quarter
and nine months ending June 30, 1996 relates to a one time reduction in lease
reserves of $381,000, a decrease in wages of $72,000 and $397,000, a decrease in
other selling, general and administrative expenses of $61,000 and $237,000
offset primarily by a one time increase in depreciation and amortization
expenses of $116,000 an increase in the use of consulting and professional fees
of $90,000 and $301,000, and to recruiting and relocation expenses of $41,000
and $51,000.
The decrease in PA reserves of $234,000 and $1,129,000 for the three and
nine months ending June 30, 1996 principally resulted from the repayment of
advances and an increase in collateralization of the receivables provided by one
of the former CSI shareholders who is now a director of the Company and from the
repayment of the advance and other receivables resulting from the sale of the
Chicago practice to the Company. The remaining reduction was due to the
repayment of the advance made by the Company to the Professional Association
owned by the Chairman of the Company. The reserve balance is reviewed by the
Company on a quarterly basis. Any increases or decreases to such balances by the
12
<PAGE>
Company could materially impact reporting results. The portion of the Company's
reserve balance related to the affiliated Professional Assocations at June 30,
1996 has been substantially eliminated.
Interest and factoring fees decreased by $58,000 and increased by $9,000
for the three and nine months ended June 30, 1996, as compared to the three and
nine months ended June 30, 1995. The decrease for the three months ended June
30, 1996 was primarily related to the to the termination on February 21, 1996 of
the obligation due the former CSI shareholders, due to the conversion of the
obligation due the former CSI shareholders to stock.
The Company incurred research and development expenses of $23,000 and
$145,000 for the three and nine months ended June 30, 1996, primarily in
connection with its Immune Reconstitution Cell- Transfer Therapy for late stage
AIDS patients.
Based upon the above reasons, the Company reported losses from continuing
operations of $392,000 and $443,000 for the three and nine months ended June 30,
1996, respectively compared to losses of $143,000 and $870,000 for the three and
nine months ended June 30, 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of June 30, 1996, the Company had stockholders' equity of $5,189,000
and working capital of $806,000 as compared to stockholders' equity of
$1,151,000 and working capital deficit of $887,000 at June 30, 1995.
The Company provided cash in its operating activities of $156,000 for the
nine months ended June 30, 1996 and used cash in its operating activities of
$1,259,000 for the nine months ended June 30, 1995. Cash was provided in 1996
primarily from a decrease in accounts receivable, securities issued for
services, and an increase in accounts payable and accrued expenses resulting
from the Company being unable to pay for goods and services in the normal course
of operations. This was offset by the decrease in the provision for bad debts,
which relates to the receivables due from the physician associations, a decrease
in lease obligations, and an increase in prepaid consulting expenses. Investing
activities used cash in 1996 as a result of the purchase of physician
associations, and the purchase of capital items, offset by the payments on notes
receivable. Financing activities provided cash from the sale of common stock,
the conversion of debt to equity and the additions to long-term debt, which were
due to the purchase of a medical practice in Chicago and the proceeds of two
loans discussed below. This was offset by the repayment of debt and the
repayment to the factor. The Company anticipates that cash will continue to be
used in its operating activities during the remainder of fiscal 1996.
CSI and certain medical professional associations under contract with
13
<PAGE>
subsidiaries of CSI are a party to a $2,500,000 factoring agreement. The
agreement provides for factoring of eligible receivables of which approximately
$531,000 was available for borrowing at June 30, 1996 and $257,000 had been
drawn at June 30, 1995. Fees charged by the factor for factoring was amended in
June, 1996 from an initial 1% of all eligible receivables to an initial 1% of
eligible receivables up to $5,000,000 a year. The fee then progressively
decreases to .75% for eligible receivables in excess of $10,000,000 a year.
Funds are advances by the factor at 2% over prime. Management believes that
available cash, including available borrowings from the factoring agreement will
be sufficient to satisfy the Company's working capital requirements for fiscal
1996.
On December 28, 1995 and February 13, 1996, the Company closed on two
loans and securities purchase agreements with SunDance Venture Partners, Ltd.
(SunDance), from which the Company received net proceeds of $700,000 in loans.
Both notes provide for payment of interest at 12% per annum for the first
twenty-four months followed by payment of interest at 13% for the next twelve
months. Commencing April 1999, the principal for both loans will be paid in
eight equal quarterly payments which will include interest at the rate of 15%
per annum, with payment in full made on or before December 2000. In connection
with the loans, the Company issued SunDance a Common Stock Purchase Warrant for
the purchase of 1,400,000 shares of the Company's common stock for each of the
two loans at an exercise price of $0.25 per share, which post-split converts to
140,000 warrants at an exercise price of $2.50 per share. HPI common stock was
trading at $.31 when the first loan terms were concluded and at $.28 when the
second loan terms were concluded. The warrants will expire if not exercised on
or before January 1, 2001, and is callable by the Company after thirty months,
if HPI's common stock trades above $10.00 for twenty consecutive trading days.
If exercised, the consideration paid to the Company for the shares will in
itself repay their outstanding principal amount of the two loans. The funds are
being utilized for working capital.
On April 26, 1996, the Company entered into a selling agreement with
Societe Financier du Seujet, Ltd., a foreign investment banking concern, from
which the Company received $2,000,000 on May 3, 1996 from the sale of 500,000
shares of its post-split stock at $4.00 per share. The funds are being utilize
in part for working capital.
Due to the proceeds from the sale of 500,000 shares of the Company's
post-split stock and from the conversion of $3,000,000 of convertible debt into
$1,200,000 (post-split) share of the Company's common stock, the Company has
been able to improve its current ratio (ratio of current assets to current
liabilities) on the consolidated balance sheet to 1.19 at June 30, 1996 compared
to 1.07 at September 30, 1995 and the Company has been able to improve its debt
14
<PAGE>
to equity ratio on the consolidated balance sheet to 130% at June 30, 1996
compared to 835% at September 30, 1995.
On December 29, 1995, the Company closed on the acquisition of a
non-exclusive seven year unlimited user license for Clinitec International,
Inc.'s NextGenTM electronic medical records software. This software was selected
as the clinical user interface for the Company's integrated health care delivery
system and will facilitate the expansion of the Company's Center for Special
Immunology, Inc. (CSI) clinical network. The consideration paid for the license
was $250,000 of which $100,000 was paid at closing with the balance to be paid
over the next three years.
In order to continue as a going concern in 1996, the Company must, (1)
generate cash flow from operations; (2) produce additional revenues from the
completed contracts with certain strategic partners; or (3) generate revenues
form several new contracts with new medical facilities, which will result in
increased revenues. While these opportunities are being pursued, the Company
intends to continue reducing costs, working with vendors to obtain extended
credit terms and increasing revenues at existing facilities. No assurances can
be made that the Company can obtain additional sources of cash or that
operations can produce positive cash flow.
Other
-----
The Company does not anticipate making any material expenditures in
connection with environmental or occupational safety regulation compliance.
Although the Company anticipates opening additional facilities in the future, it
has not made any material capital expenditure commitments as of this date in
connection with those potential facilities.
15
<PAGE>
HEALTH PROFESSIONALS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
-----------------------------------------------------
On April 19, 1996, the stockholders approved the following Directors of
the Company for a term that expires at the next annual meeting of the Company's
stockholders or until the election and qualification of their successors:
Shares Shares
(Pre-Split) (Pre-Split)
Name of Director In Favor Withheld
---------------- ---------- ---------
William M. Reiter, MD 18,659,290 311,058
Fred Roa 18,863,399 106,949
Paul Cimoch 18,863,365 106,983
John Marsh 18,863,365 106,983
Gregory S. Anderson 18,863,726 106,622
In addition, the stockholders approved a one-for-ten reverse stock split
during the Company's Annual Meeting and approved the ratification of BDO
Seidman, LLP as the external auditors for the current year. The effective date
for the stock split was the close of business on Friday, April 26, 1996. The
vote in favor of the stock split and the ratification of the external auditors
was 96.4% and 99.3%, respectively of the 18,970,348 shares voting at the
meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Financial Data Schedule (Electronic filing only).
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.
HEALTH PROFESSIONALS, INC.
Registrant
August 26, 1996 /s/ William M. Reiter, M.D.
----------------------------
William M. Reiter, M.D.
President and Chief
Executive officer
August 26, 1996 /s/ W. Douglas Kahn
--------------------
W. Douglas Kahn
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HEALTH PROFESSIONALS, INC., FOR THE NINE MONTHS ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 407
<SECURITIES> 0
<RECEIVABLES> 4,986
<ALLOWANCES> 958
<INVENTORY> 109
<CURRENT-ASSETS> 5,142
<PP&E> 1,698
<DEPRECIATION> 409
<TOTAL-ASSETS> 11,948
<CURRENT-LIABILITIES> 4,336
<BONDS> 662
0
0
<COMMON> 486
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,948
<SALES> 5,604
<TOTAL-REVENUES> 5,813
<CGS> 3,015
<TOTAL-COSTS> 3,015
<OTHER-EXPENSES> 2,856
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 385
<INCOME-PRETAX> (443)
<INCOME-TAX> 0
<INCOME-CONTINUING> (443)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (443)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
