U.S. 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 Quarter ended September 30, 1998
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 1-11568
TADEO HOLDINGS, 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.)
42705 Grand River Avenue - Suite 20
Novi, Michigan 48375
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (248) 344-9599
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 issuer's Common Stock, $.0001
par value, as of November 9, 1998 was 15,042,813.
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TADEO HOLDINGS, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page
Number
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheet - September 30, 1998
and June 30, 1998 3
Consolidated Statement of Operations - For the three
months ended September 30, 1998 and 1997 4
Consolidated Statement of Cash Flows - For the
three months ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6 - 10
SIGNATURE 11
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<CAPTION>
TADEO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30, June 30,
ASSETS 1998 1998
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,620,758 $ 2,406,045
Marketable securities 2,000,000 0
Interest receivable 266,000 276,005
Note receivable - officer 0 162,627
Note receivable - other 550,000 0
---------- ----------
TOTAL CURRENT ASSETS 4,436,758 2,844,677
LONG--TERM NOTE RECEIVABLE (face value $17,000,000) 6,000,000 6,000,000
PROPERTY AND EQUIPMENT
net of accumulated depreciation of $9,588 and $8,599, respectively 9,337 10,326
DEPOSITS AND OTHER ASSETS 9,834 9,834
---------- ----------
$ 10,455,929 $ 8,864,837
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 84,072 $ 41,269
Notes payable - current portion 70,524 85,760
State audit reserves 700,000 700,000
Accrued termination costs, short-term 387,543 784,053
---------- ----------
TOTAL CURRENT LIABILITIES 1,242,139 1,611,082
ACCRUED TERMINATION COSTS, long-term 225,000 280,209
LONG TERM NOTES PAYABLE, net of current portion 0 23,260
REDEEMABLE PREFERRED STOCK, Series A 0 1,219,141
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, Series B Cumulative Convertible, $.0001 par value,
10,000,000 shares authorized, 1,000,000 shares issued
and outstanding 505,000 505,000
Common stock, $.0001 par value, 100,000,000 shares authorized,
12,747,913 shares issued and outstanding as of September 30, 1998 1,274 972
Additional paid-in capital 17,728,038 14,045,838
Accumulated earnings/(deficit) (9,245,522) (8,820,665)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 8,988,790 5,731,145
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,455,929 $ 8,864,837
========== ==========
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
TADEO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended September 30,
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES $ 0 $ 0
COST OF GOODS SOLD 0 0
--------------- ---------------
GROSS PROFIT 0 0
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 347,485 533,723
SETTLEMENT OF EMPLOYMENT CONTRACTS,
(NON-CASH) 327,501 0
--------------- ---------------
LOSS FROM OPERATIONS (674,986) (533,723)
INTEREST INCOME, net 277,417 0
--------------- ---------------
INCOME/( LOSS) BEFORE DISCONTINUED OPERATIONS (397,569) (533,723)
DISCONTINUED OPERATIONS, net 0 (111,634)
--------------- ---------------
NET INCOME/( LOSS) $ (397,569) $ (645,357)
PER SHARE:
Continuing $ (0.04) $ (0.07)
Discontinued 0 (0.01)
--------------- ---------------
NET INCOME/(LOSS) PER SHARE $ (0.04) $ (0.08)
--------------- ---------------
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 10,399,799 9,724,579
=============== ===============
See notes to consolidated financial statements.
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<CAPTION>
TADEO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended September 30,
1998 1997
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/( loss) $ (397,569)$ (645,357)
Adjustments to reconcile net income/(loss) to net cash from
operating activities:
Depreciation and amortization 989 163,040
Settlement of employment contracts,
(non-cash) 327,501 0
Changes in operating assets and liabilities:
Decrease in interest receivable 10,005 0
Increase in accounts payable 42,803 0
(Decrease) in accrued termination costs (451,719) 0
Changes in operating assets and liabilities of
discontinued operations 0 1,431,512
-------------- --------------
Total adjustments (70,421) 1,594,552
-------------- --------------
NET CASH (USED IN) OPERATING ACTIVITIES (467,990) 949,195
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures 0 (78,999)
(Increase) in note receivable (550,000) 0
-------------- --------------
NET CASH (USED IN) INVESTING ACTIVITIES (550,000) (78,999)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) in notes payable (15,236) 0
Repayment/(Issuance) of related party loans 162,627 0
Repayment of revolving credit line 0 (689,589)
Net proceeds from (repayment of) long-term debt (23,260) (57,431)
Net proceeds from the sale of Common Stock 135,861 0
Dividends paid on Series A Preferred Stock (27,288) (49,998)
Redemption of Series A Preferred Stock 0 (143,334)
-------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 232,704 (940,352)
-------------- --------------
NET INCREASE (DECREASE) IN CASH (785,287) (70,156)
CASH AT BEGINNING OF PERIOD 2,406,045 541,814
-------------- --------------
CASH AT END OF PERIOD $ 1,620,758 $ 471,658
============== ==============
See notes to consolidated financial statements.
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TADEO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - September 30, 1998
(UNAUDITED)
1. Basis of Presentation
Reference is made to the annual report on form 10-K of Tadeo Holdings,
Inc. (the "Company") dated October 13, 1998 for the year ended June 30, 1998.
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. Discontinued Operations
On January 28, 1998, the Company sold the operations of its previous
business. Amounts in the prior year financial statements have been reclassified
to present the previous operations as discontinued operations.
3. Marketable Securities
On September 24, 1998, the Company completed a Stock Purchase
Agreement, between Multimedia Access Corporation (MMAC) and Tadeo (the "Purchase
Agreement"). MMAC purchased $2,000,000 worth of Tadeo Common Stock for
$2,000,000 worth of MMAC Common Stock. The Company issued 1,240,310 shares of
Tadeo Common Stock at the sale price of $1.6125 per share and received 1,000,000
shares of MMAC's Common Stock for the purchase price of $2.00 per share. The
Company is carrying MMAC's Common Stock at cost. In the case of each
corporation, the number of shares issued was less than 20% of the outstanding
Common Stock of the issuer on September 24, 1998.
4. Business Acquisition
On October 27, 1998, the Company completed the acquisition of Astratek,
Inc., a New York corporation ("Astratek"). The Company acquired Astratek
pursuant to a merger (the "Merger") of Astratek Acquisition Corp. ("AAC"), a
wholly-owned subsidiary of the Company, with and into Astratek, with Astratek
becoming the wholly-owned subsidiary of the Company, as the surviving
corporation of the Merger. The Merger was effected in accordance with the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of
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October 23, 1998, among the Company, AAC, Astratek, and the shareholders of
Astratek. Astratek develops software tools and related products for Internet and
intranet technology and provides consulting and professional services for
several major companies. As the Merger Consideration delivered to Astratek
shareholders, the Company issued 2,294,900 shares of the Company's common stock
in exchange for cancellation of all the issued and outstanding shares of the
capital stock of Astratek prior to the Merger and the issuance of 100 shares of
Astratek common stock to the Company post-Merger. The acquisition is accounted
for as a pooling of interests business combination.
5. Note Receivable - Officer
On August 28, 1998, the Note due from an Officer of the Company was
repaid, together with interest at 12% per annum.
6. Note Receivable - Other
On September 9, 1998, the Company loaned $250,000 to Azurel, LTD., a
Delaware corporation, in consideration for a $250,000 promissory note from
Azurel, LTD with interest at 20.8% per annum. The note was due on October 9,
1998, but was verbally extended until November 17, 1998. On July 28, 1998, the
Company provided $300,000 to Astratek, Inc. to support its operations and
working capital needs as short-term financing prior to consummation of the
Merger. In October 1998, the Company advanced an additional $150,000 to Astratek
for the same purpose.
7. 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.
8. Contingencies
Department of Health Services
The Company's wholly-owned subsidiary 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
wholly-owned subsidiary'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's wholly-owned subsidiary 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's wholly-owned
subsidiary maintains that it has conformed with pricing regulations because its
prices are consistent within each of its wholly-owned 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
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program was charged the "prevailing prices" charged for supplies, and that those
charges were in compliance with 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's wholly-owned subsidiary 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's wholly-owned subsidiary filed an appeal to the
decision with the Superior Court for the County of Los Angeles. On January 4,
1999, the Superior Court will hold a hearing on the issue and rule at that time.
The Company's wholly-owned subsidiary 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's wholly-owned subsidiary
has provided a reserve, in the event that a defense of its position does not
prevail, of $700,000. 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. Unless the California two-tier
pricing controversy is either settled of the related claims made by the State of
California otherwise released prior to the maturity date of the Note delivered
to the Company in partial consideration for the sale of assets pursuant to the
terms of the Transaction, then the principal of the Note payable to the Company
will be reduced by the amount then alleged to be owed to the State of California
with respect to such controversy.
On December 18, 1997, the Company's wholly-owned subsidiary underwent
an audit by the Medi-Cal program. The purpose and scope of the audit was to
determine if the Company's wholly-owned subsidiary's documentation supported
reimbursement of the $653,990 in various sizes of disposable insulin syringes
and $1,975,588 for blood glucose test strips that Medi-Cal had made to the
Company's wholly-owned subsidiary from November 1, 1994 to April 30, 1996. As of
June 9, 1998, DHS reported that its audit disputed reimbursement for an
aggregate of $75,351. The Company's wholly-owned subsidiary has made a
counteroffer of $50,000 to settle the case, but the DHS has rejected that offer.
A formal hearing on this matter has been scheduled for December 8, 1998.
Medicare Part B
The Company's wholly-owned subsidiary 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
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overpayment to the Company's wholly-owned subsidiary 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. As of January 28, 1998 Medicare offset a total of $ 630,918 of the
Company's wholly-owned subsidiary claims for payment. In the most recent
correspondence from Medicare on this subject, it was claimed that on March 31,
1997 the Company's wholly-owned subsidiary owed a refund of $808,887, of which
$795,701 was principal and $22,290 was accrued interest. The Company's
wholly-owned subsidiary rebilled Medi-Cal $732,853 in February 1997 and $62,849
in March 1997.
The Company's wholly-owned subsidiary, was previously the subject
of an investigation by Medicare for (i) Medicare's alleged overpayment for
products and services provided by the wholly-owned subsidiary and (ii)
Medicare's payment to the Company's wholly-owned subsidiary for claims which
were allegedly not properly subject to Medicare reimbursement. During fiscal
1995, Medicare withheld $300,766 of payments due for claims reimbursement to
cover previously estimated liabilities resulting from this investigation. A
further assessment in the amount of $78,500 resulting from a continuation of
this investigation has been made, and that amount withheld in July 1996. The
Company's wholly-owned subsidiary went through an in-person hearing on May 28,
1997 to contest Medicare's aggregate $379,000 of withheld reimbursements, and on
July 28, 1997 the Company's wholly-owned subsidiary received a partially
favorable Hearing Decision. The Company's wholly-owned subsidiary received a
refund on October 31, 1997, for $30,314 from Medicare Part B based upon the
partially favorable Hearing Decision. The Company's wholly-owned subsidiary
intends to appeal the partially unfavorable amount of $348,686 from the Hearing
Officer's decision and has retained counsel to contest the decision in
proceedings before an administrative law judge, where it is now pending. The
Company cannot now determine when this matter will be finally resolved.
9. Termination Agreements
The Company entered into the following contracts subsequent to the
disposal of its business:
A. With a former operating officer commencing March 1998, aggregating
$485,000, payable in monthly installments of $7,633 through March 2003.
The Company has recorded the present value of this contract at
$359,265, with the balance being $325,966 at September 30, 1998.
B. With a former operating officer commencing March 1998, aggregating
$151,000, payable in monthly installments of $12,625 through February
1999. The Company has recorded the present value of this contract at
$143,603, with the balance being $61,577 at September 30, 1998.
C. With three former officers dated July 1998, aggregating
consideration of
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$862,498, with $385,000 paid in August 1998, $225,000 settled through
the issuance of notes payable due January 2000, bearing interest at 7%
per annum and the $252,490 balance settled by exchanging cash severance
payments for the direct issuance 168,332 shares of Common Stock (at
$1.00 value per share) and the exercise price of concurrently granted
options to acquire 84,167 shares of Common Stock at $1 per share. The
Company has accrued the amounts related to these contracts as of
September 30, 1998.
10. NOTE RECEIVABLE
The Note is due from Gainor in connection with the sale of the Company's
business in January 1998. The Note has a face amount of $17,000,000 and is
due in January 2003. The Note bares interest at the rate of 7% for the
first year and 8% per annum thereafter, with interest payable quarterly.
The Asset Purchase Agreement states that the Note is subject to reduction
by Gainor under each of the following circumstances:
A) A failure to obtain the requisite number of assignments of benefits
from former patients, with a maximum adjustment of $2,000,000.
B) The failure of Gainor to collect a minimum of $5.75 million of
purchased accounts receivable with the principal on the Note reduced
by any short - fall.
C) If 75% of the revenues achieved by the acquired business for the
year subsequent to closing (the "Post Closing Revenue") does not equal
at least $17,000,000 (the "Minimum Post Closing Revenue"), the
principal of the Note will be reduced by any short-fall between Post
Closing Revenue and the Minimum Post Closing Revenue."
In September 1998, Gainor notified the Company that the assignment of
benefits provision is currently at the maximum adjustment level of
$2,000,000. Gainor made a $559,800 downward adjustment to the Note
principal, and granted an extension until November 21, 1998 of the time
for a sufficient number of assignments of benefits to be received by Gainor
in order to avoid further downward adjustment to the Note principal. Gainor
had previously reduced the Note balance by approximately $145,000, for what
were claimed to be unrecorded purchase date accruals, as an adjustment to
the closing balance set under the Asset Purchase Agreement. In addition,
Gainor notified the Company that as of August 31, 1998, (i) its collection
of receivables purchased from the Company pursuant to the Asset Purchase
Agreement were behind schedule that, on an annualized basis, would result
in collecting more than $5.75 million of such account, and (ii) its
generation of revenues from operation of the purchased business was not as
anticipated, either of which could result in additional downward
adjustments to the Note principal under the terms of the Asset Purchase
Agreement.
As a result of the aforementioned, the Company has reduced the carrying
basis of the Note to $6,000,000 based on what management believes would be
the value of the Note if it were to be sold to an unrelated third party in
an arms-length transaction. The Company has therefore reduced the gain on
the disposal of the discontinued business by $11,000,000. However, the
Company will continue to vigorously pursue the full collection of the face
amount of the Note as well as all interest accrued.
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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.
TADEO HOLDINGS, INC.
By:/s/Michael F. Niles
Michael F. Niles
Controller
Date: December 4, 1998
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000879465
<NAME> TADEO HOLDINGS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,620,758
<SECURITIES> 2,000,000
<RECEIVABLES> 816,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,436,758
<PP&E> 18,925
<DEPRECIATION> 9,588
<TOTAL-ASSETS> 10,455,929
<CURRENT-LIABILITIES> 1,242,139
<BONDS> 70,524
0
505,000
<COMMON> 1,274
<OTHER-SE> 8,482,516
<TOTAL-LIABILITY-AND-EQUITY> 10,455,929
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (397,569)
<INCOME-TAX> 0
<INCOME-CONTINUING> (397,569)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (397,569)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
