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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 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
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TADEO HOLDING, 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
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The number of shares outstanding of the issuer's Common Stock, $.0001
par value, as of May 19, 1998 was 9,724,579.
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TADEO HOLDINGS, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
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PAGE
NUMBER
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
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Consolidated Balance Sheet - March 31, 1998
and June 30, 1997 3
Consolidated Statement of Operations - For the three
and nine months ended March 31, 1998 and 1997 4
Consolidated Statement of Cash Flows - For the
nine months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6 - 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION 8 - 9
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PART II - OTHER INFORMATION 10
SIGNATURE 11
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<TABLE>
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TADEO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
March 31, June 30,
1998 1997
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CURRENT ASSETS:
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Cash $ 2,819,981 $ 541,814
Accounts receivable - net of allowance for doubtful accounts
of $0 and 2,463,871, respectively - 10,241,191
Interest receivable 202,000 -
Inventories - 551,692
Prepaid expenses - 111,910
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TOTAL CURRENT ASSETS 3,021,981 11,446,607
LONG-TERM NOTES RECEIVABLE 16,100,000 -
PROPERTY AND EQUIPMENT
net of accumulated depreciation of $7,612 and $618,017, respectively 11,314 956,446
INTANGIBLE ASSETS
net of accumulated amortization of $0 and $806,265, respectively - 5,847,321
DEPOSITS AND OTHER ASSETS 9,834 48,356
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$ 19,143,129 $ 18,298,730
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ - $ 5,319,625
Notes payable - current portion 85,760 208,126
Accrued liabilities - 1,976,419
State audit reserves 700,000 700,000
Accrued income tax payable- current portion 475,000 -
Payroll taxes payable - 113,632
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TOTAL CURRENT LIABILITIES 1,260,760 8,317,802
LONG-TERM NOTES PAYABLE , net of current portion 32,686 262,916
REVOLVING CREDIT LOAN - 4,365,410
DEFERRED INCOME TAX PAYABLE- long term 2,000,000 -
REDEEMABLE PREFERRED STOCK, Series A 1,322,080 1,829,658
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, 9,724,579 shares
issued and outstanding as of March 31, 1998 972 972
Additional paid-in capital 14,045,838 14,045,838
Accumulated earnings/(deficit) (24,207) (11,028,866)
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TOTAL STOCKHOLDERS' EQUITY 14,527,603 3,522,944
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,143,129 $ 18,298,730
=============== ==============
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See notes to consolidated financial statements
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<TABLE>
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TADEO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31, Nine Months Ended March 31,
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1998 1997 1998 1997
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REVENUES $ - $ - $ - $ -
COST OF GOODS SOLD - - - -
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GROSS PROFIT - - - -
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 637,077 279,457 1,195,991 838,371
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LOSS FROM OPERATIONS (637,077) (279,457) (1,195,991) (838,371)
INTEREST INCOME 226,645 - 226,645 -
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INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS (410,432) (279,457) (969,346) (838,371)
DISCONTINUED OPERATIONS, including gain on disposal of
$15,241,967 and net of applicable taxes of $2,475,000 12,894,732 (23,692) 12,168,251 630,749
------------- -------------- --------------- ---------------
NET INCOME/LOSS $ 12,484,300 $ (303,149) $ 11,198,905 $ (207,622)
============= ============== =============== ===============
PER SHARE:
Continuing $ (0.05 $ (0.06) $ (0.12 $ (0.13)
Discontinued 1.33 - 1.25 0.08
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NET INCOME/(LOSS) PER SHARE $ 1.28 $ (0.06) $ 1.13 $ (0.05)
============= ============== =============== ===============
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 9,724,579 7,889,706 9,724,579 7,889,706
</TABLE>
See notes to consolidated financial statements.
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TADEO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
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Nine Months Ended March 31,
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1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income/(loss) $ 11,198,905 $ (207,622)
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Adjustments to reconcile net income/(loss) to net cash from operating
activities:
Depreciation and amortization 220,069 479,239
Gain on sale of operations (14,853,655) -
Changes in operating assets and liabilities:
Increase in interest receivable 202,000 -
Increase in accrued income taxes payable 2,475,000 -
Changes in operating assets and liabilities of discontinued operations 894,742 (4,980,427)
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Total adjustments (11,061,844) (4,501,188)
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NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES 137,061 (4,708,810)
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CASH FLOWS FROM INVESTING ACTIVITIES
Cash proceeds from sale of operations 8,065,336 -
Capital expenditures (504,401) (158,932)
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NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES 7,560,935 (158,932)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance/(Repayments) of related party loans - 54,965
Borrowing of revolving credit line - 5,543,139
Repayment of revolving credit line (4,365,409) -
Net proceeds from (repayment of) long-term debt (352,596) (144,065)
Dividends paid on Series A Preferred Stock (194,246) (160,450)
Redemption of Series A Preferred Stock (507,578) (322,880)
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NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES (5,419,829) 4,970,709
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NET INCREASE (DECREASE) IN CASH 2,278,167 102,967
CASH - BEGINNING OF PERIOD 541,814 91,066
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CASH - END OF PERIOD $ 2,819,981 $ 194,033
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</TABLE>
See notes to consolidated financial statements
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TADEO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MARCH 31, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the annual report on form 10-KSB of Universal Self
Care, Inc. (the "Company") dated October 14, 1997 for the year ended June 30,
1997.
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.
Gainor Medical Management, LLC purchased the Company's operating
subsidiaries and all of its operating assets. The Company is now operating as a
"Discontinued Operations" while the Board of Directors of the Company determines
the next business for the Company to aquire.
1. DISCONTINUED OPERATIONS
On January 28, 1998, the Company sold the operations of its previous
business. Amounts in the accompanying financial statements have been
reclassified to present the previous operations as discontinued operations.
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
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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 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.
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 (see Note 1 above), 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.
MEDICARE PART B
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
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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 claims for payment. In the most
recent correspondence from Medicare on this subject, it was claimed that on
March 31, 1997 the Company owed a refund of $808,887, of which $795,701 was
principal and $22,290 was accrued interest. The Company rebilled Medi-Cal
$732,853 in February 1997 and $62,849 in March 1997.
Patient Care Services was previously the subject of an investigation by
Medicare for (i) Medicare's alleged overpayment for products and services
provided by Patient Care Services and (ii) Medicare's payment to Patient Care
Services 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 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 received a partially favorable Hearing Decision. The
Company received a refund on October 31, 1997, for $30,314 from Medicare Part B
based upon the partially favorable Hearing Decision. The Company's 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS
When used in the Form 10-Q 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
Since the Company has disposed of the operations of its previous
business during January 1998, a comparison and discussion of the disposed of
business with prior periods is not deemed to be relevent. The Company is
presently collecting interest income on the $17,000,000 note
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received from the sale of its business and from cash received
in connection with such sale. Such interest income amounted to $226,645 since
the January 28, 1998 sale date. General corporate overhead amounted to
$1,195,991 for the nine month period ended March 31, 1998 compared to $838,371
for the nine month period ended March 31, 1997, an increase of $352,620,
primarily resulting from activity associated with the sale of the Company's
operations.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had working capital of $1,761,221,
compared to working capital of $3,128,805 at June 30, 1997. The decrease in
working capital during the 1998 Nine Month Period is primarily due to a
combination of the sale of the net operating assets of the Company, a
substantial portion of which was settled through a long-term note receivable,
repayment of long term debt of $4,718,005, the redemption of Series A payments
of $507,578 and an increase in accrued current income tax of $475,000.
Cash provided by operations during the 1998 Nine Month Period was
$137,061 as compared to cash used by operations of $4,708,810 during the 1997
Nine Month Period. This improvement is primarily attributable to the gain on the
sale in the Gainor Transaction.
On January 28, 1998 the Company sold its operating subsidiaries and all
of its operating assets to Gainor Medical Management, LLC.
PART II - OTHER INFORMATION
4. Exhibits and reports on form 8-K
(a) Exhibits
27.0 Financial data schedule.
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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: /s/ Brian Bookmeier
------------------------
BRIAN BOOKMEIER
PRESIDENT
Date: May 19, 1998
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<TABLE> <S> <C>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 2,819,981
<SECURITIES> 0
<RECEIVABLES> 202,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,021,981
<PP&E> 18,926
<DEPRECIATION> 7,612
<TOTAL-ASSETS> 19,143,129
<CURRENT-LIABILITIES> 1,260,760
<BONDS> 32,686
1,322,080
505,000
<COMMON> 972
<OTHER-SE> 14,021,631
<TOTAL-LIABILITY-AND-EQUITY> 19,143,129
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (410,432)
<INCOME-TAX> 0
<INCOME-CONTINUING> (410,432)
<DISCONTINUED> 12,894,732
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,484,300
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
</TABLE>
