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, 1999
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 (540) 982-7199
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 April 20, 1999 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 - March 31, 1999 3
Consolidated Statement of Operations - For the three
and nine months ended March 31, 1999 and 1998 4
Consolidated Statement of Cash Flows - For the
nine months ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operation 10 - 14
----------------------------------
PART II - OTHER INFORMATION 14
SIGNATURE 15
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TADEO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31,
ASSETS 1999
----------------------
CURRENT ASSETS:
Cash $ 555,137
Accounts receivable 158,132
Prepaid expenses and other assets 5,000
Note receivable - other 500,000
TOTAL CURRENT ASSETS 1,218,269
LONG--TERM NOTE RECEIVABLE 6,000,000
MARKETABLE SECURITIES 2,000,000
PROPERTY AND EQUIPMENT
net of accumulated depreciation of $41,560 78,442
CAPITALIZED SOFTWARE COSTS, net 988,962
DEFERRED FINANCE COSTS 43,075
DEPOSITS AND OTHER ASSETS 43,058
----------------------
$ 10,371,806
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 472,590
Accrued expenses 140,365
Notes payable - current portion 83,675
State audit reserves 700,000
Accrued termination costs, short-term 64,939
----------------------
TOTAL CURRENT LIABILITIES 1,461,569
ACCRUED TERMINATION COSTS, long-term 455,904
LONG TERM NOTES PAYABLE, net of current portion 311,779
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
Common stock, $.0001 par value, 40,000,000 shares
authorized, 15,042,813 shares issued and
outstanding as of March 31, 1999 1,504
Additional paid-in capital 17,797,413
Accumulated earnings/(deficit) (10,161,363)
TOTAL STOCKHOLDERS' EQUITY 8,142,554
----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,371,806
======================
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 March 31, Nine Months Ended March 31,
--------------------------------------- -----------------------------------
1999 1998 1999 1998
------------------ ------------------ ----------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 336,082 $ 154,194 $ 1,303,310 $ 502,723
COST OF GOODS SOLD 290,111 32,759 575,860 204,517
------------------ ------------------ ----------------- ---------------
GROSS PROFIT 45,971 121,435 727,450 298,206
OPERATING EXPENSES:
Selling, general and administrative 539,606 884,714 1,805,866 2,412,549
Research and development 37,133 4,280 99,629 33,740
Depreciation and amortization 5,177 2,573 15,585 9,561
TOTAL OPERATING EXPENSES 581,916 891,567 1,921,080 2,455,850
------------------ ------------------ ----------------- ---------------
SETTLEMENT OF EMPLOYMENT CONTRACTS,
(NON-CASH) - - 327,501 -
------------------ ------------------ ----------------- ---------------
INCOME (LOSS) FROM OPERATIONS (535,945) (770,132) (1,521,131) (2,157,644)
INTEREST INCOME (EXPENSE), net (12,687) - 508,006 (22,368)
------------------ ------------------ ----------------- ---------------
NET ( LOSS) $ (548,632) $ (770,132) $ (1,013,125) $ (2,180,012)
================== ================== ================= ===============
PREFERRED STOCK DIVIDENDS - - (27,288) (194,246)
------------------ ------------------ ----------------- ---------------
NET LOSS APPLICABLE TO
COMMON SHARE HOLDERS $ (548,632) $ (770,132) $ (1,040,413) $ (2,374,258)
================== ================== ================= ===============
NET ( LOSS) PER SHARE - basic and diluted $ (0.04) $ (0.08) $ (0.07) $ (0.24)
================== ================== ================= ===============
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 15,042,813 9,724,579 13,918,005 9,724,579
</TABLE>
See notes to consolidated
financial statements.
Page 4 of 15
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<TABLE>
<CAPTION>
TADEO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended March 31,
-------------------------------------------------
1999 1998
-------------------- ------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/( loss) $ (1,013,125) $ (2,180,012)
-------------------- ------------------------
Adjustments to reconcile net income/(loss) to net cash from
operating
activities:
Depreciation 15,585 229,630
Amortization of deferred finance costs and debt discount 62,972 23,328
Amortization of capitalized software costs 331,591 34,211
Settlement of employment contracts,
(non-cash) 327,501 -
Changes in operating assets and liabilities:
(Increase) in accounts receivable (146,582) (68,082)
Decrease in interest receivable 276,005 202,000
Additions to capitalize software costs (1,320,553) (278,129)
(Increase) in prepaid expenses (5,000) (48,225)
(Increase) in deferred finance costs (108,000) (105,000)
Increase in accounts payable 21,484 240,976
(Decrease) Increase in accrued expenses (10,060) 103,797
Decrease in net assets of discontinued operation - 1,060,507
(Decrease) in accrued termination costs (543,419) -
Total (1,098,477) 1,395,013
adjustments
-------------------- ------------------------
NET CASH (USED IN) OPERATING ACTIVITIES (2,111,602) (784,999)
-------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash proceeds from the sale of operation - 8,065,336
Capital expenditures (120,002) (590,893)
(Increase) in note (500,000) -
receivable
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (620,002) 7,474,443
-------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable (79,585)
Increase in related party loans 162,627 -
Proceeds from debt 161,855 399,674
financing
Repayment of revolving credit line - (4,365,409)
Net proceeds from (repayment of) long-term debt 288,519 (352,596)
Net proceeds from the sale of Common Stock 205,256 2,005
Dividends paid on Series A Preferred Stock (27,288) (194,246)
Redemption of Series A Preferred Stock - (507,578)
-------------------- ------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 711,384 (5,018,150)
-------------------- ------------------------
NET INCREASE (DECREASE) IN CASH (2,020,220) 1,671,294
CASH AT BEGINNING OF PERIOD 2,575,356 904,062
-------------------- ------------------------
CASH AT END OF PERIOD $ 555,136 $ 2,575,356
==================== ========================
</TABLE>
See notes to
consolidated financial statements.
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TADEO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - March 31, 1999
(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. Loss Per Share
Loss Per Share is based on the weighted average number of common shares
outstanding during each period. Potential common shares are included in the
computation of diluted per share amounts outstanding during each period.
Potential common shares are not included for loss periods as such inclusion
would be anti-dilutive.
3. Marketable Securities
On September 24, 1998, the Company completed a Stock Purchase
Agreement, between ViewCast.Com Inc. (VCST) and Tadeo (the "Purchase
Agreement"). VCST purchased $2,000,000 worth of restricted Tadeo Common Stock
for $2,000,000 worth of VCST 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 VCST's Common Stock for the purchase price of $2.00 per
share. The Company is carrying VCST's Common Stock at cost, approximately the
market value on March 31, 1999. 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. On April 23, 1999, the Company sold 440,000 shares of VCST
for $6.00 a share in a private transaction. The Company realized a net gain of
$1,628,000 after brokerage commissions in this sale.
4. Note Receivable - Other
On January 20, 1999, 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 February 19,
1999, but was verbally extended until April 30, 1999. On April 30, 1999, the
Company loaned an additional $250,000 to Azurel, LTD in consideration for a
$500,000 promissory Note, due May 31, 1999 from Azurel, LTD with interest at
20.8% per annum. (which Note replaced the Note from Azurel, LTD dated January
20, 1999).
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5. 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 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'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 held a hearing on the issue and
ruled at that time. On January 20, 1999, the Superior Court recommended that the
overpayment determination be upheld. In March 1999 the Company's wholly-owned
subsidiary filed an appeal to the Superior Court's decision with the California
Court of Appeals. 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.
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6. 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 $295,843 at March 31, 1999.
B. With three former officers dated July 1998, aggregating
consideration of $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 of 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 retired the $225,000 notes on April 23,
1999.
7. 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 bears 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
form 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 Revenues"), the
principal of the Note will be reduced by any short-fall between Post
Closing Revenue and the Minimum Post Closing Revenue.
As a result of the aforementioned, the Company 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, therefore, reduced the gain on the
disposal of the discontinued business by $11,000,000. However, the Company
continued to vigorously pursue the full collection of the face amount of the
Note, as well as all interest accrued. See below.
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In September 1998, Gainor notified the Company that the assignment of
benefits provision was 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 sheet 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 such that, on an
annualized basis, collection would result in less than $5.75 million for such
account, and (ii) its generation of revenues from operation of the purchased
business was not as anticipated, both of which resulted in additional downward
adjustments to the Note principal under the terms of the Asset Purchase
Agreement.
On April 6, 1999, the Company received from Gainor Medical a
pre-payment in full of the Note. The Company received $9.3 million in cash, plus
Gainor agreed to return uncollected medical receivables previously sold by the
Company to Gainor totaling approximately $2 million. The Company had recorded
the Note at $6 million, so the transaction will result in a one time
extraordinary $3 million profit for the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Year 2000
The Company had no going operations during the first quarter of the
fiscal year. In October 1998, the Company acquired Astratek, Inc. ("Astratek").
Astratek, a wholly-owned subsidiary of the Company, develops software tools and
related products for Internet and Intranet technology and provides consulting
and professional services for several major companies. The Company will jointly
develop a business plan with Astratek's management to address potential problems
relating to year 2000 issues. The Company plans to work with its customers,
suppliers and third party service providers to identify external and internal
weaknesses and provide solutions which will prevent the disruption of Astratek's
business operations. Astratek is currently implementing a new accounting system
which is year 2000 compliant. The Company does not expect the cost of such
implementation, or the effects of year-2000 non-compliance issues involving its
customers and suppliers, to have a material adverse effect on its future results
of operations, liquidity or capital resources.
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.
General
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 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
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Astratek common stock to the Company post-Merger.
As a result of the Astratek acquisition being accounted for as a
pooling of interest business combination, the historical pre-acquisition
financial results of Astratek are compared below with the Company's results of
operations for the three and nine month periods ended March 31, 1999.
Results of Operations
The three months ended March 31, 1999 (the "1999 Three Month Period")
as compared to the three months ended March 31, 1998 (the "1998 Three Month
Period")
Revenue for the 1999 Three Month Period was $336,082, an increase of
$181,888, or 218%, from the 1998 Three Month Period. Several factors are
contributing to this increase. Revenue associated with the Visual Audit product
that is distributed by Viasoft on behalf of the Company increased $95,868 during
the 1999 Three Month Period, or a 206% increase over the 1998 Three Month
Period, and revenue associated with professional services provided to various
clients decreased by $3,980 during the 1999 Three Month Period, or a 1% decrease
over the 1998 Three Month Period.
Total cost of goods sold during the 1999 Three Month Period were
$290,111, representing costs of approximately 86% of revenue for the period,
while total cost of goods sold for the 1998 Three Month Period were $32,759 or
approximately 21% of revenue. This 65% unfavorable variance as a percent of
revenue is in part the result of increased utilization of outside consultants in
completing time sensitive, one time professional services projects.
Selling, general and administrative expenses during the 1999 Three
Month Period decreased $345,108, as compared to $884,714 during the 1998 Three
Month Period. Contributing to the Company's favorable variance is the capturing
of capitalized software costs that were once recognized as expenses aggregating
$113,550.
Other income and expenses include interest income of $12,432 and
interest expenses of $25,119, during the 1999 Three Month Period as compared to
the 1998 Three Month Period in which this item did not exist.
Net loss for the 1999 Three Month Period of $548,632 is primarily
attributable to the aforementioned increase in total operating expenses, without
the increased generation of operating revenues to offset such expenses.
The nine months ended March 31, 1999 (the "1999 Nine Month Period") as compared
to the nine months ended March 31, 1998 (the "1998 Nine Month Period")
Revenue for the 1999 Nine Month Period was $1,303,310, an increase of
$800,587, or a 259 percent increase from the 1998 Nine Month Period. Several
contributing factors favorably impacted revenue: an increase of $274,703 in
revenue during the 1999 Nine Month Period, or a 231% increase from the 1998 Nine
Month Period, from Visual Audit sales, and an increase of $435,884 in
professional services fees from clients, during the 1999 Nine
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Month Period, a 214% increase from the 1998 Nine Month Period.
Total cost of goods sold during the 1999 Nine Month Period were
$575,860, representing costs of approximately 44% of revenue for the period,
while total cost of goods sold for the 1998 Nine Month Period were $204,517, or
approximately 41% of revenue. A contributing factor to the percentage increase
relates to the improved process by which operations record and capture
capitalized software costs as it relates to consultants expenses during the 1999
Nine Month Period. Additionally, higher utilization of consultants to complete
one time specific professional services projects for the 1999 Nine Month Period
contributed to the increase.
Total operating expenses during the 1999 Nine Month Period decreased to
$1,805,866, or 139% of revenue, as compared to $2,412,549, or 480% of revenue,
during the 1998 Nine Month Period. A contributing factor relates to the improved
process by which operations record and capture capitalized software costs as it
relates to salary expenses, which during the 1999 Nine Month Period resulted in
12% of such decrease.
Other income and expenses include interest income of $508,006 during
the 1999 Nine Month Period compared to interest expense of $22,368 during the
1998 Nine Month Period.
Net loss for the 1999 Nine Month Period of $1,013,125 is primarily
attributable to the losses from operations, in the amount of $1,521,131, and the
non-cash transaction of $327,501 which relates to (i) the issuance of 168,332
shares of Common Stock (at $1.00 value per share per exchange of severance
payments), (ii) the exchange of severance payments for payment of the exercise
price of concurrently granted options to acquire 84,167 shares of Common Stock
at $1 per share to Messrs. Brian Bookmeier, Alan Korby and Matthew B. Gietzen,
(iii) the issuance of and 30,523 shares of common stock at $2.457 to Ms.
Priscilla Chad under terms of the Stock Purchase Agreement dated April 26, 1996.
Liquidity and Capital Resources
As of March 31, 1999, the Company had a negative working capital of
$243,300, compared to working capital of $136,101 at June 30, 1998. The decrease
in working capital during the 1999 Nine Month Period is primarily due to an
increase in accounts receivable and the Company suppling working capital to
Astratek, Inc., its wholly-owned subsidiary.
Cash used in operations during the 1999 Nine Month Period was
$2,111,602 as compared to cash used by operations of $784,999 during the 1998
Nine Month Period. This increase is partially attributable to a combination of:
(i) a lump sum payment aggregating $385,000, (ii) a $252,490 balance settled by
exchanging cash severance payments for the direct issuance of 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 to
Messrs. Brian Bookmeier, Alan Korby and Matthew B. Gietzen; and (iii) severance
payments aggregating $76,333 to Edward Buchholz and $113,625 to Tod Robinson,
(iv) $52,067 to Priscilla Chad, (v) an increase in capitalized software costs
during
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the 1999 Nine Month Period.
An aggregate sum of 229,950 shares of Series A Redeemable Preferred
Stock, $.0001 par value per share (the "Series A Preferred Stock") was redeemed,
evidencing all outstanding shares of Series A preferred Stock during the 1999
Nine Month Period. The Company was able to redeem the outstanding Series A
Preferred Stock due to an amendment of its certificate of designations relating
to the Series A Preferred Stock, which outstanding shares without redemption
would have obligated the Company to pay $1,149,745 in aggregate redemption
payments through March 2001. This redemption has improved the Company's cash
flow during the 1999 Nine Month Period.
The Company acquired Astratek, Inc. by merger on October 27, 1998.
Prior to consummation of this acquisition, the Company advanced $450,000 in
working capital funds to Astratek in the form of loans. The Company anticipates
that it will continue to supply working capital funding to Astratek in the
future. Although the Company and Astratek management are currently working to
develop operating budgets with respect to Astratek's future operations and its
financing requirements, at this time the amount and the timing of any future
financing of Astratek by the Company has not been finally determined.
On April 5, 1999, the Company began to retire a $361,779 Promissory
Note payable to a principal stockholder of the Company due June 1, 2000, bearing
interest at the floating prime rate. Between April 5 and April 7, 1999, the full
principal and accrued interest of this Promissory Note was paid.
On April 6, 1999, the Company received from Gainor Medical a
pre-payment in full of the Note. The Company received $9.3 million in cash, plus
Gainor agreed to return uncollected medical receivables previously sold by the
Company to Gainor totaling approximately $2 million. The Company had recorded
the Note at $6 million, so the transaction will result in a one time
extraordinary $3 million profit for the Company.
On April 21, 1999, the Company retired a $108,000 Promissory Note
payable due June 1, 2000, bearing interest at the floating prime rate. The
Promissory Note was paid in full with $85,000 in cash and the issuance of 20,000
shares of Common Stock.
On April 23, 1999, the Company retired its severance obligations to
three former employees (two of whom were former officers/Directors and one of
whom is a current officer/Director) aggregating $225,949, with the payment of
all principal and accrued interest under the Promissory Notes evidencing these
obligations. The Company had accrued this amount as of March 31, 1999.
On April 23, 1999, the Company sold 440,000 restricted shares of VCST
for $6.00 a share in a private transaction. The Company realized at net gain of
$1,628,000 gain after brokerage commissions in this sale. A member of the Board
of Directors acted as the broker for the sale.
The Company's wholly-owned subsidiary owed Medicare Part B a refund of
$808,887, of which $795,701 was principal and $22,290 was accrued interest.
Medicare offset the amount against the Company's claims for payment. The Company
rebilled MediCal $732,853 in February 1997 and $62,849 in March 1997.
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PART II - OTHER INFORMATION
Item. 5. Other Information
On April 6, 1999, the Company received from Gainor Medical a
pre-payment in full of the Note. The Company received $9.3 million in cash, plus
Gainor agreed to return uncollected medical receivables previously sold by the
Company to Gainor totaling approximately $2 million. The Company had recorded
the Note at $6 million, so the transaction will result in a one time
extraordinary $3 million profit for the Company.
On April 23, 1999, the Company sold 440,000 restricted shares of VCST
for $6.00 a share in a private transaction. The Company realized at net gain of
$1,628,000 gain after brokerage commissions in this sale. A member of the Board
of Directors acted as the broker for the sale.
Item. 6. Exhibits and reports on form 8-K
(a) Exhibits
27.0 Financial data schedule.
14 of 15
<PAGE>
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/Mike Niles
--------------
Mike Niles
Corporate Controller
Date: May 14, 1999
15 of 15
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