U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended
March 31, 1997
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 ___________
UNIVERSAL SELF CARE, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4228470
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11585 Farmington Road.
Livonia, Michigan 48150
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (313) 261-2988
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value
(Title of Class)
Check 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, and (2) has been subject to such filing requirements for
the past 90 days. Yes |X| No |_|
The number of shares outstanding of the registrant's Common Stock, $.0001
Par Value, as of March 31, 1997 was 7,889,706 shares.
<PAGE>
UNIVERSAL SELF CARE, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page
Number
------
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheet - March 31, 1997
and June 30, 1996 3
Consolidated Statement of Operations - For the three
months and the nine months ended March 31, 1997
and 1996 4
Consolidated Statement of Cash Flows - For the
nine months ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operation 10 - 13
PART II - OTHER INFORMATION 13
SIGNATURE 14
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<PAGE>
UNIVERSAL SELF CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 194,033 $ 91,066
Accounts receivable, net allowance for doubtful accounts
of $2,619,000 and $2,007,000, respectively 11,982,159 10,200,373
Inventories 502,162 551,154
Prepaid expenses 145,778 136,036
------------ ------------
TOTAL CURRENT ASSETS 12,824,132 10,978,629
PROPERTY AND EQUIPMENT
net of accumulated depreciation of $544,478 and $354,361, respectively 915,373 972,334
INTANGIBLE ASSETS
net of accumulated amortization of $796,116 and $532,771, respectively 5,938,556 6,201,901
DEPOSITS AND OTHER ASSETS 47,637 56,204
------------ ------------
$ 19,725,698 $ 18,209,068
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,599,042 $ 6,694,173
Notes payable - current portion 1,678,497 300,259
Related party loans 114,965 60,000
Accured liabilities 863,561 1,632,911
State audit reserves 1,400,000 1,400,000
Payroll taxes payable 212,341 594,318
Revolving credit loan 5,543,139 --
------------ ------------
TOTAL CURRENT LIABILITIES 14,411,545 10,681,661
LONG TERM NOTES PAYABLE, net of current portion 793,166 2,315,469
REDEEMABLE PREFERRED STOCK, Series A 1,923,329 2,246,209
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, Series B Cumulative Convertible, $.0001 par value,
10,000,000 shares authorized, 1,580,000 shares issued and outstanding 505,000 505,000
Common stock, $.0001 par value, 40,000,000 shares authorized, 7,889,706 shares
issued and outstanding as of March 31, 1997 789 788
Additional paid-in capital 10,623,796 10,623,796
Retained earnings/(deficit) (8,531,927) (8,163,855)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,597,658 2,965,729
------------ ------------
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,725,698 $ 18,209,068
============ ============
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31, Nine months ended March 31,
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 7,433,628 $ 8,662,337 $ 25,902,592 $ 27,119,887
COST OF GOODS SOLD 4,068,833 5,362,463 14,773,270 16,763,111
----------- ----------- ------------ ------------
GROSS PROFIT 3,364,795 3,299,874 11,129,322 10,356,776
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,442,899 3,755,940 10,726,684 10,527,977
----------- ----------- ------------ ------------
OPERATING INCOME/(LOSS) (78,104) (456,066) 402,638 (171,201)
OTHER EXPENSES:
Amortization and write-off of finance costs 36,878 90,959
Interest expense, net 225,045 2253,419 610,260 606,853
----------- ----------- ------------ ------------
NET INCOME/(LOSS) $ (303,149) $ (746,363) $ (207,622) (869,013)
=========== =========== ============ ============
NET INCOME/(LOSS) PER SHARE $ (0.06) $ (0.12) $ (0.05) (0.16)
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES USED IN COMPUTATION 7,889,706 6,669,280 7,889,706 6,501,724
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
UNIVERSAL SELF CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ (207,622) $ (869,013)
----------- -----------
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization 479,239 401,712
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivables (1,781,786) 6,962,108
(Increase) in receivable from accounts receivable sale -- (4,949,950)
Decrease in other accounts receivable -- 89,681
Decrease in inventories 48,992 571,003
(Increase) in prepaid expenses (9,742) (923,493)
Decrease in deposits and other assets 8,567 67,765
(Increase) in intangible assets -- (135,480)
(Decrease) increase in accounts payable (2,095,131) 1,300,179
(Decrease) increase in accrued liabilities (769,350) 361,462
(Decrease) in payroll taxes payable (381,977) --
----------- -----------
Total adjustments (4,501,188) 3,744,987
----------- -----------
NET CASH (USED IN) OPERATING ACTIVITIES (4,708,810) 2,875,974
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (158,932) (407,995)
Net cash paid for acquisitions -- (150,000)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (158,932) (557,995)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in cash escrow reserve account (1,550,000)
Issuance/(Repayment) of related party loans 54,965 (190,000)
Borrowing of revolving credit line 5,543,139 --
Repayment of revolving credit line -- (884,000)
Issuance of common stock, net of expenses -- 485,479
Issuance of note payable, net of discount -- 1,783,972
Net proceeds from (repayment of) long-term debt (144,065) (1,734,778)
Dividends paid on Series A Preferred Stock (160,450) (153,258)
Redemption of Series A Preferred Stock (322,880) (40,076)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,970,709 (2,282,661)
----------- -----------
NET INCREASE (DECREASE) IN CASH 102,967 35,318
CASH AT BEGINNING OF PERIOD 91,066 87,853
----------- -----------
CASH AT END OF PERIOD $ 194,033 $ 123,171
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
UNIVERSAL SELF CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - March 31, 1997
(UNAUDITED)
1. Basis of Presentation
Reference is made to the annual report on form 10-KSB/A of Universal Self
Care, Inc. (the "Company") dated October 15, 1996 for the year ended June 30,
1996.
The accompanying financial statements reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of financial
position and the results of operations for the interim periods presented. Except
as otherwise disclosed, all such adjustments are of a normal and recurring
nature. The results of operations for any interim period are not necessarily
indicative of the results attainable for a full fiscal year.
2. Earnings/(loss) per Share
Earnings/(loss) per share are based on the weighted average number of
common shares and common share equivalents outstanding during the period after
giving effect for preferred stock dividends during the period.
3. Contingencies
Department of Health Services
The Company has undergone an audit by representatives of the State of
California, State Controller's Office, Division of Audits. The purpose of the
audit was to determine the level of the Company's compliance with the guidelines
of the California Department of Health Services (Medi-Cal) and the California
State Board of Equalization. Representatives from the State Controller's Office
have raised the issue of whether the Company may have practiced two-tier pricing
policies in the charges to it's customers which are not in conformance with
Medi-Cal regulations. Under such regulations, a company may not charge any
customer prices less than those charged to the Medi-Cal program. Based upon
Management's independent review, the Company maintains that it has conformed
with pricing regulations because its prices are consistent within each of its
operating subsidiaries, Sugar Free and Home Therapy, and because these two
subsidiaries are offering different services. The Company's Management further
believes that the Medi-Cal program was charged the "prevailing prices" charged
for supplies, and that those charges were in compliance with
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<PAGE>
current regulations, and that the Representatives from the Controller's Office
compared prices for different services with different delivery methods. The
State Controller's Office contends that the reimbursement was paid for products,
and not for services, so the difference in pricing was not warranted based upon
the services rendered in conjunction with the products delivered. In July 1994,
the State Controller's Office issued an Auditor's Report with findings to the
Department of Health Services ("DHS") for the period beginning July 1, 1990
through June 30, 1993. The Report recommends a recovery of approximately $1.3
million due to such alleged two-tier pricing. In November 1994 the State
Controller's Office issued Letter of Demand for the recovery of such amounts
due. In November 1994, the Company appealed the audit determination made by the
State Controller's Office. In January 1996 a hearing was held before an
Administrative Law Judge. In July 1996 the Judge recommended that the
overpayment determination be upheld. In August 1996 the DHS adopted the
recommendation of the Law Judge as the final decision of the Director of DHS. In
January 1997 the Company filed an appeal to the decision with the Superior Court
for the County of Los Angeles. The Company intends to vigorously contest any
recovery by the State with respect to such alleged improper pricing practices
for services rendered.
Based upon the above contingency, the Company has provided a reserve, in
the event that a defense of its position does not prevail, of $700,000. The
Company had previously provided a combined reserve with the California State
Board of Equalization matter (below) in the amount of $1,630,000. Due to the
defined settlement amount on the other matter, the reserve has been allocated
among the two actions. Management believes that a total estimated settlement
amount of $700,000, or 54% of the maximum amount demanded, is reasonable under
the circumstances with respect to this matter.
California State Board of Equalization
The Company has also undergone an audit by the California State Board of
Equalization ("SBE") as a result of separate findings made by the State
Controller's Office (see Department of Health Services above). The SBE has
disagreed with the Company's policies regarding its sales tax payments on
certain items. The SBE has maintained that blood glucose meters, testing strips
and finger-prick lancets are taxable items. The Company has taken the position
that these items are exempt from sales tax because they were provided pursuant
to a doctor's prescription and furthermore, they are part of an integrated
treatment for providing insulin and insulin syringes, items which are
specifically exempt from sales tax in California. In addition, the Company
maintains that a portion of the revenues earned from the sales of diabetic
supplies were non-taxable services rendered as a separate and distinct charge.
On January 6, 1997 the SBE issued a Notice of Determination of $860,004
for the period July 1, 1989 through September 30, 1993. Of this amount,
penalties of $69,170 were subsequently waived. Additionally, interest has
accrued on this assessment of $186,330. The Company filed for appeal of this
assessment. The matter was referred to the SBE settlement department and Company
management determined that it would be in the Company's best
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interest to arrive at a final negotiated settlement amount. On April 28, 1997,
the Company agreed to a settlement of this matter for a total amount of
$980,000. Of this amount, $50,000 had previously been paid. Of the remaining
$930,000, $691,695 is associated with taxes and $238,305 is associated with
accrued interest. Upon acceptance of this settlement by SBE (which the Company
believes will be reflected in a formal Settlement Agreement), the full $930,000
will be payable in installments, with $300,000 payable upon consummation of the
Settlement Agreement and monthly installments of $63,000 commencing on September
30, 1997 until the liability plus accrued interest are repaid.
The Company has undergone an audit by Medicare covering the charges
submitted for reimbursement in the Western region (Region D) during the period
January 1, 1994 through December 31, 1995. Medicare determined that an
overpayment to the Company may have occurred as a result of the use of a
superseded diagnosis code on claims submitted. The claims in question were
originally submitted to Medicare in order to gain a denial of charges so that an
alternative carrier could be validly billed, since a denial is required by
certain intermediaries prior to billing for certain charges. Medicare may have
inappropriately made reimbursements on these charges. In November 1996 Medicare
issued a demand for refund of $795,702 plus interest of $35,475. In January 1997
Medicare began to offset the Company's claims for payment, and the interest
charged to the Company's account. The Company balance claimed by Medicare to be
owed by the Company on March 31, 1997 was $808,887, of which $795,701 was
principal and $22,290 was accrued interest. The Company rebilled Medi-Cal
$732,853 in February and in March $62,849. Company management feels that the
ultimate settlement to Medicare will not have a material impact on earnings
since the Company will collect any amounts paid to Medicare out of amounts
collected after rebillings to MediCal.
4. Revolving Line of Credit
In August, 1996 the Company entered into an accounts receivable funding
agreement with Health Care Partners Funding, L.P. ("HealthPartners") under which
the Company is able to borrow up to $4,500,000 against its qualified accounts
receivable, less the reserve. "Reserve" means the sum of $1,500,000. Qualified
accounts are generally defined as those which are less than 91 days old and are
due from a third-party payee source (ie. Medicare, Medicaid or Commercial
insurance carrier) as opposed to those that are payable directly by patients.
The term of the agreement is three years. Outstanding principal under the
agreement is secured by a first priority lien against substantially all of the
Company's assets.
On August 30, 1996, the Company transacted for the initial draw under this
agreement, the maximum available amount of $3,000,000. Substantially all such
funds were immediately expended by the Company for the repayment of past due
payroll taxes, past due accounts payable and certain short-term notes payable.
On November 4, 1996, the Company's Loan and Security Agreement with
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<PAGE>
HealthPartners was amended by, among other things, adjusting the Base Rate of
interest to equal 2.2% above the prime rate, increasing funding under the loan
to $4.5 million against its qualified accounts receivable, less the reserve.
"Reserve" means the sum of $100,000. Additionally, providing for the creation of
a sole purpose subsidiary of the Company to be responsible for marketing and
managing all of the Company's managed care contracts ("Newco"). Under the
amended agreement, HealthPartners received warrants to acquire 5% of the
outstanding common stock of Newco, subject to anti-dilution protection,
registration rights and redemption provisions. HealthPartners also received a
warrant to acquire 375,000 shares of Company Common stock at an exercise price
of $2.50.
On February 26, 1997, the Company's Loan and Security Agreement with
HealthPartners was temporarily amended for 90 days by eliminating the $4.4
million cap on borrowings based on the Company's qualified accounts. This
temporary amendment allows the Company to borrow up to the full amount that its
qualified accounts will support under the terms of such agreement.
Pursuant to the Loan Agreement with HealthPartners, the Company may
receive revolving credit advances in an amount not to exceed the lesser of (a)
80% of the qualified accounts receivable of the Company, or (b) $4,400,000. All
loans and other obligations under the Loan Agreement are secured by a first
priority lien and security interest in all accounts receivable of the Company.
The Loan Agreement was amended to contain a financial covenant which required
that the Company's net loss not exceed $50,000 for its quarter ended September
30, 1996, and requires it to achieve net income of at least $500,000 for its
fiscal year ending June 30, 1997. The Company was in default under the covenant
concerning the achievement of net income for the quarter ending September 30,
1996 and this default has been waived by HealthPartners. The Company is
classifying the revolving credit line as short term debt, because of the
financial covenant requirement listed above.
9 of 14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Statements
When used in the Form 10-QSB and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "will likely result"
and "the Company expects," "will continue," "is anticipated," "estimated,"
"project," or "outlook" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, each of which speak
only as of the date made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
has no obligation to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect anticipated or unanticipated
events or circumstances occurring after the date of such statements.
Results of Operations
The three months ended March 31, 1997 (the "1997 Three Month Period") as
compared to the three months ended March 31, 1996 (the "1996 Three Month
Period")
Revenue for the 1997 Three Month Period was $7,433,628, a decrease of
$1,228,709 or 14.2 percent from the 1996 Three Month Period. A contributing
factor was customer deductibles in the 1997 Three Month Period which were
approximately $885,000, an increase of $385,000 from the 1996 Three Month
Period. This impacted on sales revenue, which in turn slowed cash flow and
impeded the Company's ability to purchase product for shipment.
Total cost of goods sold during the 1997 Three Month Period were
$4,068,833, representing costs of approximately 55% of revenue for the period,
while total cost of goods sold for the 1996 Three Month Period were $5,362,463
or approximately 62% of revenue. This seven point improvement is in part the
result of favorable product discounts from various vendors. Total material cost
during the 1997 Three Month Period was $3,872,278 compared to $4,994,873 for the
1996 Three Month Period, or a decrease of 22.5%. Additionally, the Company
continued to realize favorable variances regarding total cost of packaging as
discussed in prior quarterly reports, during the 1997 Three Month Period which
were $192,520, compared to $253,341 for the 1996 Three Month Period, or a
decrease of 24.0%.
Selling, general and administrative expenses during the 1997 Three Month
Period decreased to $3,442,899, as compared to $3,755,940 during the 1996 Three
Month Period. Accrual for bad debt expense for the 1997 Three Month Period is 2%
of revenue, as compared to the 1996 Three Month Period which was greater than 3%
of revenue. The combined costs of
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payroll and fringe benefits, including sales commissions, decreased by
approximately 9% during the 1997 Three Month Period over the 1996 Three Month
Period. Additionally, temporary labor for the 1997 Three Month Period decreased
to $26,426, as compared to $101,777 during the 1996 Three Month Period, or 74%.
The Company's consolidation of operations has resulted in many employees being
retrained for new positions, reducing the need for temporary labor.
Other expenses include interest expense, which decreased by $28,374 during
the 1997 Three Month Period over the 1996 Three Month Period. This decrease was
primarily due to the reduced costs associated with the HealthPartners line of
credit, as compared to the previous cost related to the sale of accounts
receivable and term loans.
Net loss for the 1997 Three Month Period of $303,149 is primarily
attributable to insufficient sales revenue in relation to operating expenses.
Sales revenue are normally lower in the first quarter of the calendar year due
to the requirement that customers meet their insurance deductible amounts in the
new benefit year.
The nine months ended March 31, 1997 (the "1997 Nine Month Period") as compared
to the nine months ended March 31, 1996 (the "1996 Nine Month Period")
Revenue for the 1997 Nine Month Period was $25,902,592, a decrease of
$1,217,295, or 4.5 % from the 1996 Nine Month Period. The Company traditionally
has experienced a slow third quarter due to the impact of deductibles and has
recovered the difference in the final quarter of the fiscal year.
Total cost of goods sold during the 1997 Nine Month Period was
$14,773,270, representing costs of approximately 57% of revenue for the period,
while total cost of goods sold for the 1996 Nine Month Period was $16,763,111 or
approximately 62% of revenue. This five point improvement is in part the
continuing result of a volume discount program initiated in fiscal year 1997 and
retroactively applied to fiscal year 1996. The amount of $77,383 which covered a
three month period of time, April through June 30, 1996, and $25,933 for the
month of July, which were both recorded during the 1997 fiscal year. The volume
discounts have increased by another 2 % in 1997 fiscal year and will continue to
the extent that the Company meets specified purchasing levels. Additionally,
improved pricing agreements with several vendors has contributed to the improved
margin on sales and a reduction in the Company's shipping and packaging costs by
utilizing a new vendor for the distribution of our products .
Selling, general and administrative expenses during the 1997 Nine Month
Period increased to $10,726,684 or 41% of revenue, as compared to $10,527,977 or
39% of revenue during the 1996 Nine Month Period. These increases are primarily
due to higher fees charged by Healthpartners of $199,773, or an increase of
$157,280, and an increase in consulting expenses of $109,473, or an increase of
$91,120, related to strategic planning and various outside consultants.
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Other expenses include interest expense, which increased by $3,407 during
the 1997 Nine Month Period over the 1996 Nine Month Period.
Net loss for the 1997 Nine Month Period of $207,622. Profits from
operations, in the amount of $402,638, were insufficient to support debt service
costs in the total amount of $610,260.
Liquidity and Capital Resources
As of March 31, 1997, the Company had a negative working capital of
$1,587,413, compared to working capital of $296,968 at June 30, 1996. The
decrease in working capital during the Nine Month Period is primarily due to the
reclassification of the Company's revolving line of credit from long term to
short term. This is based upon the financial covenant listed below.
Cash used by operations during the 1997 Nine Month Period was $4,708,810
as compared to cash provided by operations of $2,875,974 during the 1996 Nine
Month Period. This decrease is primarily due to required reductions in account
payables and accrued liabilities as well as an increase in accounts receivable.
Additionally, prior year saw the sale of accounts receivable to Daiwa.
On August 30, 1996, the Company made its first borrowings under a Loan and
Security Agreement, dated as of August 15, 1996 (the "Loan Agreement"), by and
among the Company and HealthPartners. Such initial loan was in the aggregate
principal amount of $3,000,000, of which approximately $101,000 was utilized to
pay a portion of the breakage costs under a prior financing agreement, $200,000
was utilized to repay a short-term outstanding loan and the balance was utilized
to pay past-due payroll taxes, certain accounts payable and accrued expenses.
Pursuant to the Loan Agreement with HealthPartners, the Company may
receive revolving credit advances in an amount not to exceed the lesser of (a)
80% of the qualified accounts receivable of the Company, or (b) $4,400,000. All
loans and other obligations under the Loan Agreement are secured by a first
priority lien and security interest in all accounts receivable of the Company.
The Loan Agreement was amended to contain a financial covenant which required
that the Company's net loss not exceed $50,000 for its quarter ended September
30, 1996, and requires it to achieve net income of at least $500,000 for its
fiscal year ending June 30, 1997. The Company was in default under the covenant
concerning the achievement of net income for the quarter ending September 30,
1996 and this default has been waived by Healthpartners. The Company is
classifying the revolving credit line as short term debt, because of the
financial covenant requirement listed above.
In connection with the transactions pursuant to the Loan Agreement with
HealthPartners, the Company entered into an agreement with Fred Kassner, to whom
the Company remains
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indebted in the approximate amount of $1,474,000 (which is due and payable on
July 14, 1997). Pursuant to such agreement, Mr. Kassner has agreed to
subordinate his lien on the accounts receivable of the Company to the lien and
security interest held by HealthPartners in such collateral. In addition, in
consideration of Mr. Kassner's waiver of certain events of default under his
loan agreement with the Company (such events of default consisting of the
Company's failure to make certain mandatory prepayments out of the proceeds
received by the Company from certain exercises of the Company's common stock
purchase warrants), the Company issued to Mr. Kassner five-year warrants
entitling Mr. Kassner to purchase up to 100,000 shares of common stock of the
Company at an exercise price of $2.50 per share. Mr. Kassner has a pledge of all
the outstanding stock of each of the Company's operating subsidiaries to further
secure the Company's outstanding indebtedness to him.
In May 1997, the Company initiated a private placement of a maximum of
500,000 shares of its common stock at $2.00 a share. Shares of common stock sold
in this private placement are subject to "piggyback" registration rights. Under
the terms of this private placement, in May 1997 the Company sold 430,000 shares
of its common stock to accredited investors. The Company continues its efforts
to close the sale of the remaining 70,000 share available in this private
placement. To date, the Company has received gross proceeds of $860,000 from the
sale of shares in this private placement.
PART II - OTHER INFORMATION
5. Exhibits and reports on form 8-K
(a) Exhibits - None
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
it's behalf by the undersigned, thereunto duly authorized.
UNIVERSAL SELF CARE, INC.
By:
----------------------
Brian Bookmeier
President
Date: May 14, 1997
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 194,033
<SECURITIES> 0
<RECEIVABLES> 14,601,681
<ALLOWANCES> (2,619,522)
<INVENTORY> 502,162
<CURRENT-ASSETS> 12,824,132
<PP&E> 915,373
<DEPRECIATION> (544,478)
<TOTAL-ASSETS> 19,725,698
<CURRENT-LIABILITIES> 8,868,406
<BONDS> 0
1,923,329
505,000
<COMMON> 789
<OTHER-SE> 2,091,869
<TOTAL-LIABILITY-AND-EQUITY> 19,725,698
<SALES> 25,902,592
<TOTAL-REVENUES> 25,902,592
<CGS> 14,773,270
<TOTAL-COSTS> 14,773,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 517,101
<INTEREST-EXPENSE> 610,260
<INCOME-PRETAX> (207,622)
<INCOME-TAX> 0
<INCOME-CONTINUING> (207,622)
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