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 quarterly period ended September 30, 1996
[ ] 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: 0-19815
CAREMATRIX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3069586
-------- ----------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
197 First Avenue, Needham, MA 02194
-----------------------------------
(Address of principal executive offices) (Zip Code)
(617) 433-1000
--------------
(Registrant's telephone number, including area code)
The Standish Care Company
Six New England Executive Park, Burlington, MA 01803
----------------------------------------------------
(Former name and address of Registrant)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X
-
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 13, 1996
----- --------------------------------
Common Stock, $.05 par value 16,990,747 shares
<PAGE>
CAREMATRIX CORPORATION
(formerly The Standish Care Company)
INDEX
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures
Financial Data Schedule
<PAGE>
CAREMATRIX CORPORATION
(formerly The Standish Care Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
September 30, September 30, December 31,
ASSETS 1996 1996 1995
------ ---------------- ---------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $64,442,000 $242,095 $367,631
Restricted cash 269,967 269,967 199,719
Accounts receivable, net 1,736,000 337,868 176,818
Due from related parties 178,715 178,715 437,234
Other current assets 677,000 203,780 56,625
----------------- ---------------- ---------------
Total current assets 67,303,682 1,232,425 1,238,027
Restricted deposits 610,732 610,732 610,732
Investment in Adams Square Limited Partnership 127,000 127,000 127,000
Investment in Cornish Realty Associates, L.P. - - 125,000
Due from related parties 30,670 30,670 130,215
Property, plant and equipment, net 14,488,000 10,855,836 11,079,454
Prepaid lease deposit, net 490,266 490,266 539,843
Non-compete agreement, net 161,575 161,575 219,671
Resident leases, net 139,278 139,728 176,979
Goodwill, net 22,583,000 1,468,000 1,504,000
Note receivable 922,000 - -
Other assets, net 668,000 155,468 223,910
----------------- ---------------- ---------------
Total assets $107,524,203 $15,271,700 $15,974,831
================= ================ ===============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
- ----------------------------------------------
Current liabilities:
Accounts payable $1,455,000 $642,371 $522,992
Accrued payroll and related taxes 224,009 224,009 217,304
Other accrued expenses 2,250,000 - -
Accrued severance costs 122,236 122,236 232,874
Accrued professional fees 51,978 51,978 570,997
Resident security deposits 158,017 158,017 172,945
Current portion of long-term debt 2,804,876 2,804,876 626,298
Other current liabilities 235,036 234,809 478,999
----------------- ---------------- ---------------
Total current liabilities 7,301,152 4,238,296 2,822,409
Other long-term liabilities 1,717,000 520,815 520,815
Long-term debt 10,509,000 10,509,306 12,457,003
Minority interest 80,051 80,051 156,970
Commitments and contingencies
Stockholders' equity
Series A Preferred stock 270,000 270,000 1,125,000
Series B Preferred stock - 1,400,000 -
Common stock 856,000 37,039 34,359
Additional paid-in capital 102,566,000 9,615,091 8,746,096
Accumulated deficit (15,775,000) (11,398,898) (9,887,821)
----------------- ---------------- ---------------
Total stockholders' (deficit) equity 87,917,000 (76,768) 17,634
----------------- ---------------- ---------------
Total liabilities and stockholders' equity $107,524,203 $15,271,700 $15,974,831
================= ================ ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
2
<PAGE>
CAREMATRIX CORPORATION
(formerly The Standish Care Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
Pro Forma
September 30, September 30, September 30,
1996 1996 1995
------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Service revenue $4,023,468 $2,154,253 $2,061,502
Management fees and marketing revenue 165,532 165,532 86,047
Development fees and other revenue - - 51,750
------------------------------------------------------------
4,189,000 2,319,785 2,199,299
Operating costs and expenses:
Community operating expense 1,661,379 1,661,379 1,528,116
Community rent expense 154,239 154,239 155,228
Selling, general and administrative expense 2,461,206 359,206 480,461
Salaries, wages and benefits - related party 489,000 - -
Transaction termination costs - - -
CareMatrix merger expense - 671,913 -
Depreciation and amortization expense 487,000 197,601 176,462
------------------------------------------------------------
Total operating costs and expenses 5,252,824 3,044,338 2,340,267
------------------------------------------------------------
Loss from operations (1,063,824) (724,553) (140,968)
Interest expense (455,000) (433,153) (413,316)
Interest income 44,000 20,861 44,322
Write-off of financing costs - - (686,384)
Other income - - 1,000,000
Minority interest 28,917 28,917 13,391
------------------------------------------------------------
Loss before income taxes (1,445,907) (1,107,928) (182,955)
Provision for income taxes - - -
------------------------------------------------------------
Net loss ($1,445,907) ($1,107,928) ($182,955)
============================================================
Net loss per common share ($0.08) ($0.30) ($0.06)
Weighted average number of common
shares outstanding 17,098,000 3,662,362 * 3,395,152 *
============================================================
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended
Pro Forma
September 30, September 30, September 30,
1996 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Service revenue $10,792,816 $6,534,569 $5,579,219
Management fees and marketing revenue 378,684 378,684 390,858
Development fees and other revenue 76,500 76,500 209,750
-------------------------------------------------------------
11,248,000 6,989,753 6,179,827
Operating costs and expenses:
Community operating expense 4,869,683 4,869,683 4,125,050
Community rent expense 458,469 458,469 426,916
Selling, general and administrative expense 7,213,098 1,290,098 1,789,531
Salaries, wages and benefits - related party 2,433,000 - -
Transaction termination costs - 186,352 -
CareMatrix merger expense - 671,913 -
Depreciation and amortization expense 1,430,000 590,870 497,209
-------------------------------------------------------------
Total operating costs and expenses 16,404,250 8,067,385 6,838,706
-------------------------------------------------------------
Loss from operations (5,156,250) (1,077,632) (658,879)
Interest expense (1,256,000) (1,256,092) (1,091,638)
Interest income 97,000 49,479 125,554
Write-off of financing costs - - (686,384)
Other income 696,249 696,249 1,000,000
Minority interest 76,919 76,919 63,332
-------------------------------------------------------------
Loss before income taxes (5,542,082) (1,511,077) (1,248,015)
Provision for income taxes - - -
-------------------------------------------------------------
Net loss ($5,542,082) ($1,511,077) ($1,248,015)
=============================================================
Net loss per common share ($0.33) ($0.45) ($0.40)
Weighted average number of common
shares outstanding 17,098,000 3,514,517 * 3,395,152 *
=============================================================
</TABLE>
* - Reflects weighted shares outstanding prior to the merger with CareMatrix
(Note 1).
The accompanying notes are an integral part of the
consolidated financial statements
3
<PAGE>
CAREMATRIX CORPORATION
(formerly The Standish Care Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended September 30,
------------------------------------------------
1996 1995
----------------- -----------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,511,077) $(1,248,015)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 590,870 497,209
Accretion associated with capital lease obligations 150,971 150,971
Amortization of deferred costs 35,505 51,875
Minority interest in net loss of consolidated partnership (76,919) (63,332)
Compensation expense associated with issuance of warrants 9,300 22,733
Other income (696,249) -
Increase in restricted cash (70,248) (61,114)
Increase in accounts receivable (161,050) (29,194)
Decrease (increase) in due from related parties 358,064 (971,774)
Increase in other current assets (97,155) (27,318)
Increase in interest receivable - (18,404)
Decrease in note receivable - 1,291
Increase in accounts payable 119,379 173,089
Increase (decrease) in accrued payroll and related taxes 6,705 (14,959)
Decrease in accrued severance costs (110,638) -
(Decrease) increase in accrued professional fees (519,019) 522,488
(Decrease) increase in other current liabilities (259,118) 69,052
----------------- -----------------
Net cash used by operating activities (2,230,679) (945,402)
----------------- -----------------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (178,615) (1,209,651)
Increase in security deposits - 82,854
Return of previous investment in Cornish Realty Associates, Ltd. - 125,000
Use of prepaid deposit - 27,651
Proceeds from sale (repurchases) of bonds 825,554 (19,000)
Cash deposited to collateralize letters of credit - (62,750)
Funding of accrued development costs - (100,000)
Decrease in other assets 6,424 4,023
----------------- -----------------
Net cash provided (used) by investing activities 653,363 (1,151,873)
----------------- -----------------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 7,375 -
Increase in advance for expansion costs - 156,917
Payment of Convertible Preferred Stock dividends - (64,025)
Proceeds from issuance of Series B Preferred Stock 1,400,000 -
Proceeds from borrowings 1,250,018 2,281,000
Repayment of debt (1,183,285) (52,848)
Principal payments on capital lease obligations (22,328) (35,081)
----------------- -----------------
Net cash provided by financing activities 1,451,780 2,285,963
----------------- -----------------
Net increase in cash and cash equivalents (125,536) 188,688
----------------- -----------------
Cash and cash equivalents at beginning of year 367,631 232,716
----------------- -----------------
Cash and cash equivalents at end of period $242,095 $421,404
================= =================
NON-CASH ACTIVITIES
Purchase of property, plant & equipment by seller note financing $0 $1,850,000
Dividends accrued but not paid on Convertible Preferred Stock 57,875 0
Conversion of 20,500 shares of preferred stock to 61,727 shares
($.01 par value) of common stock 617 0
Refinancing fee due from third party 100,000 0
Reclass of a portion of the Cornish investment to other current assets 50,000 0
Reclass of a portion of the Cornish investment to other assets 75,000 0
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
4
<PAGE>
CAREMATRIX CORPORATION
(formerly The Standish Care Company)
Notes to Consolidated Financial Statements
PART I-FINANCIAL INFORMATION
1. Basis of Presentation
The accompanying financial statements and notes do not include all of the
disclosures made in The Standish Care Company's ("Standish") Annual Report on
Form 10-K for 1995, which should be read in conjunction with these statements.
The financial information included herein, with the exception of the
consolidated balance sheet at December 31, 1995, has not been audited. However,
in the opinion of management, the financial statements include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the quarterly results. The results of the three and nine month periods ended
September 30, 1996 are not necessarily indicative of the results to be expected
for the full year. Certain amounts in the 1995 consolidated financial statements
have been reclassified to conform with the 1996 presentation.
On October 4, 1996, Standish and twelve corporations under common control
(collectively referred to herein as "CareMatrix"), closed the previously
announced merger (the "Merger") of CareMatrix and twelve subsidiaries of
Standish, with each of the CareMatrix corporations surviving the Merger.
Standish acquired all of the assets and operations of CareMatrix and issued
50,000,000 shares of its common stock to the stockholders of CareMatrix. The
Merger was treated as a "reverse acquisition" for accounting purposes, with
CareMatrix treated as the accounting acquiror. As a result of the reverse
acquisition, future reported financial statements will be those of historical
CareMatrix, consolidated, as of October 4, 1996, to include prospectively, the
results of Standish.
As used herein, the "Company" is defined as Standish following the consummation
of the Merger.
The unaudited pro forma balance sheet at September 30, 1996 and the unaudited
pro forma statements of operations for the three and nine months ended September
30, 1996 present the pro forma consolidated financial position and results of
operations of the Company. The unaudited pro forma balance sheet at September
30, 1996 has been adjusted to reflect the Merger, the Reverse Split (Note 7) and
the Offering (Note 7) as if such transactions had occurred at September 30,
1996. The unaudited pro forma combined statements of operations have been
adjusted to reflect the Merger, the Reverse Split (Note 7) and the Offering
(Note 7) as if such transactions had occurred on January 1, 1996.
The unaudited pro forma statements of operations do not purport to be indicative
of the results of operations that actually would have occurred had the Merger
and the Offering taken place on January 1, 1996 or that may be expected to occur
in the future.
2. Working Capital Loan
On January 16, 1996, pursuant to a letter of intent for a then proposed business
combination, Integrated Health Services, Inc. ("IHS") loaned the sum of $250,000
to Standish for working capital purposes. In February 1996, IHS informed
Standish that it was terminating their business combination discussions. This
loan could be become repayable to IHS in accordance with a promissory note which
bears interest at 8.5%, with interest payable semi-annually. Under certain
circumstances, up to $100,000 of the promissory note could become payable prior
to the maturity date of January 15, 1998. On or about April 9, 1996, Standish
asserted a claim against IHS based on IHS's unilateral breach of its contractual
obligations under its letter of intent with Standish as well as for its duties
of good faith and fair dealing. In addition, Standish has asserted claims that
IHS's conduct constitutes unfair and deceptive trade practices under applicable
Massachusetts law. Although no lawsuit has been commenced by the Company, the
Company intends to vigorously pursue its claims against IHS.
3. Stock Option Grants
In June 1996, Standish's Board of Directors voted to grant 75,000 stock options
(pre Reverse Split) to two officers and directors of Standish which allow the
holders of such stock options to purchase shares of the Company's common stock
at $2.94 per share (pre Reverse Split), the closing stock price on the day
5
<PAGE>
immediately preceding the board Meeting. Pursuant to the closing of the Merger,
an additional 675,000 stock options (pre Reverse Split) were granted to the two
officers of Standish.
4. Issuance of Preferred Stock
On July 30, 1996, through the issuance and sale to a principal stockholder of
CareMatrix (the "purchaser"), for $14,000 per share or $1,400,000 in the
aggregate, Standish issued 100 shares of its newly created Series B Convertible
Preferred Stock (the "Series B Stock") with a liquidation value of $14,000 per
share. Standish used a portion of the proceeds from the share issuance to repay
a promissory note of $1,000,000 and obtained an additional $400,000 to be used
for working capital purposes. The Series B Stock was redeemed by the Company
concurrent with the Offering (Note 7).
5. Omission of Preferred Stock Dividend
On September 27, 1996, Standish's Board of Director's voted to omit the $.25
quarterly dividend on the Series A Cumulative Convertible Preferred Stock
("Convertible Preferred Stock") for the quarter ended September 30, 1996. These
dividends, although not declared or paid, remain cumulative without interest.
Failure to pay any quarterly dividend results in a reduction of the conversion
price of the shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock. As a result of omitting more than four quarterly dividend
payments, holders of the Convertible Preferred Stock are entitled to vote, on a
one vote per share of Convertible Preferred Stock basis, with the holders of
Common Stock on all matters submitted to stockholders including the election of
directors.
6. Net Loss Per Common Share
The net loss per common share has been calculated by dividing the net loss for
the period plus any dividends omitted or paid on the Company's Convertible
Preferred Stock by the weighted average number of outstanding shares of common
stock. Dividends of $6,750 and $57,875 and $32,012 and $96,038 were omitted
during the three and nine month periods ended September 30, 1996 and 1995,
respectively. On a pro forma basis, dividends paid or omitted were $6,750 and
$20,250. Common stock equivalents have not been included in the calculation of
net loss per common share because the effects would have been anti-dilutive.
7. Subsequent Events
Name Change
On October 14, 1996, the Company changed its name to "CareMatrix Corporation."
Reverse Stock Split
On October 14, 1996, the Company effected a one-for-five reverse split of its
common stock (the "Reverse Split").
Common Stock Offering
On October 30, 1996, the Company completed a secondary public offering (the
"Offering") in which it sold 6,250,000 shares of its $0.05 par value common
stock (adjusted for the Reverse Split) at a price of $15.00 per share resulting
in net proceeds to the Company of approximately $87,000,000.
6
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Organized in October 1989, the Company operates assisted living communities
throughout the eastern United States and provides management, marketing,
development and other services to third party owners of assisted living
communities. Standish has achieved significant growth in revenues, primarily by
acquiring existing senior living communities and by providing management,
marketing, development and other services to communities owned by third parties.
Prior to the Merger, Standish operated ten communities for its own account with
a resident capacity of 516, and provided management and marketing services for
four communities with a resident capacity of 385.
The results of operations for the three and nine month periods ended September
30, 1996 include the accounts of Standish, Bailey Retirement Center, Inc.,
("Bailey"), an assisted living community in Gainesville, Florida that Standish
acquired in July 1992, Dominion Villages, Inc. ("Dominion"), a chain of three
assisted living communities in the Tidewater, Virginia area which Standish
acquired in November 1993, Lowry Village, Inc. ("Lowry"), a stand-alone
Alzheimer's facility in Tampa, Florida which Standish acquired in January 1994,
Piedmont Villages, Inc. ("Piedmont"), a chain of three assisted living
facilities in North Carolina which Standish acquired in March 1994, Bailey Home
Suites ("Bailey Suites"), an assisted living community in Gainesville, Florida
that Standish began leasing in September 1994 and Lakes Region, L.L.C. ("Sunny
Knoll"). Standish and Emeritus Corporation ("Emeritus"), through a limited
liability company, acquired 51% and 49% ownership interests, respectively, in
the Sunny Knoll community located in Franklin, New Hampshire in May 1995.
The results of operations for the three and nine month periods ended September
30, 1995 include the accounts of Standish, Bailey, Dominion, Lowry, Piedmont and
Bailey Suites. The results of operations also include the accounts of Sunny
Knoll for the period May 1, 1995 to September 30, 1995.
7
<PAGE>
RESULTS OF OPERATIONS
Revenues
Standish's revenues for the three and nine month periods ended September 30,
1996 were $2,320,000 and $6,990,000 representing increases of $121,000 or 6% and
$810,000 or 13%, respectively, from revenues of approximately $2,199,000 and
$6,180,000 in the comparable periods in 1995.
Service revenue for the three and nine month periods ended September 30, 1996
were $2,154,000 and $6,535,000, representing increases of $92,000 or 4% and
$956,000 or 17% respectively, from service revenue of $2,062,000 and $5,579,000
in the comparable periods in 1995. The increase was partially attributable to
service revenue for the Sunny Knoll community acquired by Standish in May 1995
and thus not fully reflected in Standish's results for the first three quarters
of 1995. The remaining increase in service revenue was primarily attributable to
higher service revenues at certain of the communities operated by Standish
throughout both periods, primarily due to increased resident census and higher
average service fee rates at these communities.
Management fees and marketing revenue for the three and nine month periods ended
September 30, 1996 were $166,000 and $379,000, representing an increase of
$80,000 or 93% and a decrease of $12,000 or 3% respectively, from management
fees and marketing revenue of $86,000 and $391,000 in the comparable periods in
1995. The increase in management fees and marketing revenue for the three month
period ended September 30, 1996 versus the comparable period in 1995 was
primarily due to management fee revenue associated with three management
contracts which commenced during the latter half of 1995. The decrease in
management fees and marketing revenue for the nine month period ended September
30, 1996 versus the comparable period in 1995 was primarily due to two
management contracts which were terminated during 1995. The decreased revenue
from those management contracts were partially offset from revenue associated
with the three management contracts which commenced in the latter half of 1995.
Development fees and other revenue for the three and nine month periods ended
September 30, 1996 were $0 and $77,000, representing decreases of $52,000 or
100% and $133,000 or 63% respectively, from development fees and other revenue
of $52,000 and $210,000 in the comparable periods in 1995. The decrease in
development fees and other revenue is reflective of the fact that the majority
of the communities which Standish was in the process of developing for third
party owners during 1995 are now operational, and Standish now derives
management fees and marketing revenue from these communities.
Community Operating Expense
Community operating expense for the three and nine month periods ended September
30, 1996 were $1,661,000 and $4,870,000 representing increases of $133,000 or 9%
and $745,000 or 18% respectively, from community operating expense of $1,528,000
and $4,125,000 in the comparable periods in 1995. The increase in community
operating expense was primarily attributable to community operating expense for
the Sunny Knoll community acquired by Standish in May 1995 and thus not fully
reflected in Standish's results for the first three quarters of 1995. The
remaining increase in community operating expense was primarily attributable to
increased community operating expense at Standish's Piedmont Villages and Bailey
Village communities. The increase in community operating expense at these
communities were primarily due to increases in staffing.
Community Rent Expense
Community rent expense represents lease payments Standish is required to make
under operating leases at its Piedmont Villages and Bailey Suites communities.
Community rent expense for the three and nine month periods ended September 30,
1996 were $154,000 and $458,000, representing a decrease of $1,000 or 1% and an
increase of $31,000 or 7% respectively, from community rent expense of $155,000
and $427,000 in the comparable periods in 1995.
Selling, General and Administrative Expense
Selling, general and administrative expense for the three and nine month periods
ended September 30, 1996 were $359,000 and $1,290,000, representing decreases of
$121,000 or 25% and $500,000 or 28% respectively, from selling, general and
administrative expense of $480,000 and $1,790,000 in the comparable periods in
1995. The decrease in the amount of selling, general and administrative expense
for the three and nine month
8
<PAGE>
periods ended September 30, 1996 versus the comparable periods in 1995 was due
primarily to decreases in salaries, professional fees, marketing and public
relations costs and travel and related costs.
Transaction Termination Costs
Transaction termination costs were $0 and $186,000 for the three and nine month
periods ended September 30, 1996. These costs represent legal, accounting,
travel and other related costs associated with proposed business combinations
Standish considered during 1996 but did not consummate.
CareMatrix Merger Expense
CareMatrix Merger Expense was $672,000 for both the three and nine month periods
ended September 30, 1996. These costs represent legal, accounting, printing,
financial advisory fees and other related costs associated with the merger with
CareMatrix.
Depreciation and Amortization Expense
Depreciation and amortization expense for the three and nine month periods ended
September 30, 1996 were $198,000 and $591,000, representing increases of $22,000
or 13% and $94,000 or 19% respectively, from depreciation and amortization
expense of $176,000 and $497,000 for the comparable periods in 1995. The
increase in depreciation and amortization expense was attributable to
depreciation and amortization expense related to Sunny Knoll which Standish
acquired on May 1, 1995 and thus not fully reflected in the results for the nine
month period ended September 30, 1995. The increase was also attributable to
higher depreciation expense at Dominion Villages due to certain capital
improvements made at those communities and higher amortization expense at the
corporate level due to the amortization of certain non-compete agreements.
Interest Expense
Interest expense for the three and nine month periods ended September 30, 1996
was $433,000 and $1,256,000, representing increases of $20,000 or 5% and
$164,000 or 15% respectively, from interest expense of $413,000 and $1,092,000
for the comparable periods in 1995. The increases in interest expense are
attributable primarily to (i) interest expense associated with the acquisition
of Sunny Knoll which was acquired on May 1, 1995 and thus not fully reflected in
the results of operations for the nine months ended September 30, 1995 and (ii)
higher interest expense at Dominion Villages due both to increased borrowings
and increased borrowing costs.
Interest Income
Interest income for the three and nine month periods ended September 30, 1996
was $21,000 and $49,000, representing decreases of $23,000 or 52% and $77,000 or
61% respectively, compared to interest income of $44,000 and $126,000 for the
comparable periods in 1995. Interest income for the three and nine month periods
ended September 30, 1996 represents interest earned on cash and cash
equivalents. Interest income for the three and nine month periods ended
September 30, 1995 is primarily comprised of the accrued preferred return at the
rate of 15% per annum on Standish's investment in Cornish Realty Associates,
L.P.
Other Income
Other income for the nine month period ended September 30, 1996 was $696,000.
Other income is primarily composed of cash received for previously reserved
management fees and certain investments in SLI which Standish received in
connection with the sale and financing of Fox Ridge Manor to Northwood and the
refinancing of that community's related debt.
Minority Interest
Minority interest for the three and nine month periods ended September 30, 1996
was $29,000 and $77,000, representing increases of $16,000 or 123% and $14,000
or 22% respectively, versus $13,000 and $63,000 in the comparable periods in
1995. The increases in minority interest reflect the income associated with
Sunny Knoll and the corresponding chargeback of 49% of this income to the
minority partner.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at September 30, 1996 were $242,000 compared to
$368,000 at December 31, 1995, a decrease of approximately $126,000 or 34%. At
September 30, 1996, Standish had a working capital deficit of approximately
$3,006,000 compared to a working capital deficit of $1,584,000 at December 31,
1995.
On July 30, 1996, through the issuance and sale to a principal stockholder of
CareMatrix for $14,000 per share, or $1,400,000 in the aggregate, Standish
issued 100 shares of its newly created Series B Preferred Stock with a
liquidation value of $14,000 per share. Standish used a portion of the proceeds
from the share issuance to repay a promissory note of $1,000,000 and obtained an
additional $400,000 to be used for working capital purposes. The Series B
Preferred Stock was redeemed by the Company concurrent with the Offering.
On October 4, 1996, twelve wholly-owned subsidiaries of Standish merged with
CareMatrix, a privately held assisted living company in Needham, Massachusetts.
On October 14, 1996, Standish changed its name to CareMatrix Corporation and
effected a 1 for 5 reverse stock split. On October 30, 1996, the Company
completed a sale of common stock resulting in net proceeds to the Company of
approximately $87,000,000 dollars.
The Company will require resources in the future to fund the planned acquisition
and development of additional assisted living, supportive independent and
extended care facilities as well as its working capital requirements. The
Company expects to fund these resource requirements with the net proceeds from
the sale of common stock and related party or third party financing of assisted
living facilities. The Company and certain related parties are presently in
discussions with a number of third parties to secure commitments regarding
sources of additional financing. Furthermore, the Company intends to seek bank
borrowings and other debt or equity financings to provide additional sources of
capital in the future.
10
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
On October 14, 1996, an amendment to the Company's Restated Certificate of
Incorporation became effective which effected a one-for-five reverse split
of the Company's common stock. As a result of the Reverse Split, the par
value of the common stock increased to $.05 per share. The rights of the
holders of the Company's common stock were not otherwise affected.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On September 15, 1995, Standish's Board of Directors voted to omit the
payment of a dividend for the quarter ended September 30, 1995. The
omission of payment of the dividend was the fourth such dividend to be
omitted. As such, holders of the Series A Cumulative Convertible
("Preferred Stock") are entitled to vote, on a one vote per share basis
with the holders of common Stock, on all matters thereafter submitted
including the election of directors. On October 4, 1996 the Board of
Directors of the Company voted to pay to the holders of the Preferred Stock
all dividends in arrears.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On October 14, 1996, the Company changed its name to "CareMatrix
Corporation."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report
11
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.01 Agreement and Plan of Merger dated as July 3, 1996 by and among the
Registrant, each of the Standish Subsidiaries and Pre-Merger
CareMatrix (with certain exhibits and schedules attached thereto)
(5)
2.02 Agreement and Plan of Merger by and among AMA New Jersey Development,
Inc., Standish Acquisition 12, Inc. and The Standish Care Company (6)
3.01 Restated Certificate of Incorporation of the Registrant (1)
3.02 Certificate of Amendment to Restated Certificate of Incorporation of
the Registrant filed August 23, 1993 (2)
3.03 Certificate of Designations of the Registrant filed on August 31,
1993 (2)
3.04 Certificate of Correction of the Registrant filed on September 1,
1993 (2)
3.05 Certificate of Amendment to Restated Certificate of Incorporation of
the Registration filed June 8, 1994 (4)
3.06 Certificate of Amendment to Restated Certificate of Incorporation of
the Registrant filed June 30, 1995 (4)
3.07 Certificate of Retirement and Prohibition of Reissuance of Shares of
the Registrant filed July 28, 1995 (4)
3.08 Certificate of Designations of the Registrant filed July 30, 1996 (5)
3.09 By-Laws of the Registrant (3)
3.10 Amendment to the By-Laws of the Registrant dated July 24, 1995 (4)
3.11 Certificate of Amendment to Restated Certificate of Incorporation
filed on October 3, 1996 (6)
3.12 Certificate of Amendment of Restated Certificate of Incorporation
filed on October 11, 1996 (6)
3.13 Amendment to By-Laws of the Registrant dated October 4, 1996 (*)
4.01 Specimen Certificate for Common Stock (*)
10.01 Form of Third Amended and Restated Employment Agreement between the
Registrant and Michael J. Doyle (5)
10.02 Form of Amended and Restated Employment Agreement between the
Registrant and Kenneth M. Miles (5)
10.03 Form of Amended and Restated Stock Option Agreement between the
Registrant and Michael J. Doyle dated as of June 28, 1996 (5)
10.04 Form of Amended and Restated Stock Option Agreement between the
Registrant and Kenneth M. Miles dated as of June 28, 1996 (5)
10.05 Preferred Stock Purchase Agreement dated as of July 30, 1996 between
the Registrant and Abraham D. Gosman (5)
10.06 Warrants dated July 30, 1996 to purchase an aggregate of 400,000
shares of the Registrant's Common Stock issued to Abraham D. Gosman
(5)
10.07 First Amendment to Warrant dated as of July 30, 1996 (6)
10.08 Registration Rights Agreement dated as of July 30, 1996 between the
Registrant and Abraham D. Gosman (5)
10.09 Employment Agreement dated July 29, 1996 by and between CareMatrix of
Massachusetts, Inc. and Marc H. Benson (6)
10.10 1996 Equity Incentive Plan (6)
10.11 Lease Agreement concerning 197 First Avenue office space (6)
10.12 Assignment Agreement dated July 3, 1996 by and between CareMatrix of
<PAGE>
Massachusetts, Inc. ("CMM") and Chancellor of Massachusetts, Inc.
(Tampa, Florida) (6)
10.13 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Atlanta, Georgia) (6)
10.14 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Boynton Beach, Florida) (6)
10.15 Management Agreement, dated as of June 30, 1996, between CMM and
Continuum Care of Dedham, Inc. (Dedham, Massachusetts) (6)
10.16 Management Agreement, dated as of July 1996, between CMM and
Continuum Care of Needham, Inc. (Needham, Massachusetts) (6)
10.17 Assignment Agreement, dated as of June 6, 1996, between CMM and
Continuum Care of West Bridgewater, Inc. (West Bridgewater,
Massachusetts) (6)
10.18 Assignment Agreement, dated as of June 6, 1996, between CMM and
Continuum Care of Massachusetts, Inc. (Auburn, Massachusetts) (6)
10.19 Assignment Agreement, dated as of June 6, 1996, between CMM and
Continuum Care of Massachusetts, Inc. (Plymouth, Massachusetts) (6)
10.20 Assignment Agreement, dated as of June 6, 1996, between CMM and
Continuum Care of Massachusetts, Inc. (Raynham, Massachusetts) (6)
10.21 Development Agreement, dated September 1, 1996, between CareMatrix of
Cypress Station, Inc. and Chancellor of Houston, Inc. (Houston,
Texas) (6)
10.22 Assignment Agreement, dated July 3, 1996, by and among AMA Funding
Corporation, CareMatrix of Massachusetts, Inc., and Chancellor of
Massachusetts, Inc. (Peoria, Arizona) (6)
10.23 Turnkey Construction Agreement, dated August 14, 1996, by and among
CMM, Atlantic on the Hudson, LLC and Cambridge House Associates
General Partnership (Ossining) (6)
10.24 Management Agreement, dated October 3, 1996, among CMM and The
Mayfair at Glen Cove, LLC and Hassett-Belfer Senior Housing, LLC.
(Glen Cove, New York) (6)
10.25 Development Agreement, dated March 8, 1996, between CareMatrix of
Emerald Springs Inc./Netwest of Yuma, Inc. and Emerald Springs
Associates General Partnership (Yuma) (6)
10.26 Development Agreement, dated August 28, 1996, between CareMatrix of
Amethyst Arbor Inc./Netwest Development Corporation and Amethyst
Arbor Associates General Partnership (Peoria) (6)
10.27 Assignment Agreement, dated as of June 6, 1996 between CCC of
Connecticut, Inc. and CareMatrix of Massachusetts, Inc. (Westfield
Court, Connecticut) (6)
10.28 Assignment Agreement, dated July 3, 1996, by and between Chancellor
of Houston, Inc. and CareMatrix of Massachusetts, Inc. (Houston,
Texas) (6)
10.29 Assignment Agreement, dated July 3, 1996, by and between Continuum
Care of Massachusetts, Inc. and Chancellor of Massachusetts, Inc.
(Ridgefield, Connecticut) (6)
10.30 Assignment Agreement, dated June 6, 1996, by and between CCC of
Florida, Inc. and CareMatrix of Massachusetts, Inc. (Millbury,
Massachusetts) (6)
10.31 Assignment Agreement, dated July 3, 1996, by and among AMA Funding
Corporation, CareMatrix of Massachusetts, Inc., and Chancellor of
Massachusetts, Inc. (Tucson, Arizona) (6)
10.32 Management Agreement, dated August 14, 1996, by and among CMM and
Cambridge House Associates General Partnership (Ossining) (6)
10.33 Assignment Agreement, dated July 3, 1996, by and between CarePlex of
Southington, Inc., and Chancellor of Massachusetts, Inc.
(Southington, Connecticut) (6)
<PAGE>
10.34 Assignment Agreement, dated July 3, 1996, by and among The CarePlex
Group, Inc., CareMatrix of Massachusetts, Inc. and Chancellor of
Massachusetts, Inc. (Deerfield Beach, Florida) (6)
10.35 Development Agreement, dated April 18, 1996, by and between Cheshire
Care, LLC and CareMatrix Corporation (Cheshire) (6)
10.36 Assignment Agreement, dated July 3, 1996, by and between CareMatrix
of Massachusetts, Inc. and Chancellor of Massachusetts, Inc.
(Atlanta, Georgia) (6)
10.37 Purchase and Sale Agreement, dated May 1996, between CCM (f/k/a
CareMatrix Corporation) and Ensign-Bickford Realty Corporation (Avon,
Connecticut) (6)
10.38 Assignment Agreement, dated July 3, 1996, by and between CareMatrix
of Massachusetts, Inc. and Chancellor of Massachusetts, Inc. (Macon,
Georgia) (6)
10.39 Assignment Agreement, dated July 3, 1996, by and between CareMatrix
of Massachusetts, Inc. and Chancellor of Massachusetts, Inc. (Durham,
North Carolina) (6)
10.40 Assignment Agreement, dated July 3, 1996, by and between CareMatrix
of Massachusetts, Inc. and Chancellor of Massachusetts, Inc.
(Livingston, New Jersey) (6)
10.41 Assignment and Assumption of Management Agreement, date July 3, 1996,
by and between CCC of New Jersey, Inc. and CareMatrix of
Massachusetts, Inc. (Park Ridge, New Jersey) (6)
10.42 Agreement, dated July 3, 1996, by and between CCC of New Jersey, Inc.
and CareMatrix of Massachusetts, Inc. (6)
10.43 Development Agreement, dated April 18, 1996, by and between
Woodbridge Care, LLC and CareMatrix Corporation (Woodbridge) (6)
10.44 Assignment Agreement, dated July 3, 1996, by and between CareMatrix
of Massachusetts, Inc., and Chancellor of Massachusetts, Inc. (Glen
Cove, Roslyn, Great Neck, Wallingford) (6)
10.45 Assignment Agreement, dated July 3, 1996, by and between CareMatrix
of Massachusetts, Inc. and Chancellor of Massachusetts, Inc. (Bonita
Springs, Florida) (6)
10.46 Assignment Agreement, dated July 3, 1996, by and between CareMatrix
of Massachusetts, Inc. and Chancellor of Massachusetts, Inc. (Jensen
Beach, Florida) (6)
10.47 Assignment Agreement, dated July 3, 1996, by and between CareMatrix
of Stony Brook, Inc. and CareMatrix of Massachusetts, Inc. (Darien,
Connecticut) (6)
10.48 Agreement of Sale, dated September 6, 1996, by and between Reston
Land Corporation and CMM (Reston) (6)
10.49 Deposit Receipt and Sales Agreement, dated September 5, 1996, between
Bonita Bay Properties, Inc. and CMM (Bonita Bay, Florida) (6)
10.50 Global Services Agreement, dated September 1, 1996, between
Chancellor Senior Housing Group, Inc. and CMM (6)
27 Financial Data Schedule (*)
(*) Filed herewith.
<PAGE>
In accordance with Rule 12b-32 under the Securities Exchange Act of 1934, as
amended, the following documents are hereby incorporated by reference:
(1) Filed as an Exhibit to the Registrant's Registration Statement on
Form S-18 (No. 33-43187-B)
(2) Filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (No. 33-64720)
(3) Filed as an Exhibit to the Registrant's Registration Statement on
Form S-18 (No. 33-44966-B)
(4) Filed as an Exhibit to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1995
(5) Filed as an Exhibit to the Registrant's Registration Statement on
Form S-4 (No. 333-5364)
(6) Filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (File No. 333-11455)
(b) Reports on Form 8-K
Standish filed a report on form 8-K on July 15, 1996 to announce
its merger with CareMatrix.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAREMATRIX CORPORATION
(Formerly The Standish Care Company)
Registrant
Date: November 13, 1996 /s/Michael J. Doyle
----------------- ------------------------------------
Michael J. Doyle
(Chief Executive Officer and Director)
Date: November 13, 1996 /s/Kenneth M. Miles
----------------- ------------------------------------
Kenneth M. Miles
(Senior Vice President of Finance)
Exhibit 3.13
CAREMATRIX CORPORATION
AMENDMENT NO. 2 TO BY-LAWS
Pursuant to Director Action by
Written Consent Dated Effective October 4, 1996
Article III of the By-laws of the Company is hereby amended as follows:
(a) by striking out Section 3.1 in its entirety and substituting in lieu
thereof a new Section 3.1 to read as follows:
Section 3.1. Enumeration. The officers shall consist of a chairman of the
board of directors, a chief executive officer, a president, a treasurer,
a secretary and such other officers and agents (including a vice chairman
of the board of directors and one or more senior vice-presidents,
executive vice presidents, vice-presidents, assistant treasurers and
assistant secretaries), as the Board of Directors may, in their
discretion, determine.
(b) by striking out Section 3.2 in its entirety and substituting in lieu
thereof a new Section 3.2 to read as follows:
Section 3.2. Election. The chairman of the board, chief executive
officer, president, treasurer and secretary shall be elected annually by
the directors at their first meeting following the annual meeting of the
stockholders or any special meeting held in lieu of the annual meeting.
Other officers may be chosen by the directors at such meeting or at any
other meeting.
(c) by renumbering the current Sections 3.9, 3.10, 3.11, 3.12 and 3.13 as
3.10, 3.11, 3.12, 3.13 and 3.14, respectively, and by inserting a new Section
3.9 to read as follows:
Section 3.9. Chief Executive Officer. Except as otherwise provided by the
board, the chief executive officer shall have such duties and powers as
are commonly incident to the office and such duties and powers as the
board of directors shall from time to time designate.
(d) by deleting the first sentence of Section 3.10 (formerly Section 3.9)
concerning the office of President.
Exhibit 4.01
- --------------------------------------------------------------------------------
[SIDE ONE: DESCRIPTION OF CAREMATRIX CERTIFICATE OF STOCK/STAMPED SPECIMEN]
- --------------------------------------------------------------------------------
COMMON STOCK COMMON STOCK
NUMBER SHARES
CAREMATRIX
CAREMATRIX CORPORATION
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 141706 10 1
THIS CERTIFICATE IS TRANSFERABLE IN DENVER, CO OR NEW YORK, NY
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
is the owner of
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.05 PAR VALUE, OF
CAREMATRIX CORPORATION
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed or accompanied by a proper assignment. This Certificate and the shares
represented hereby are issued and shall be subject to all the provisions of the
Certificate of Incorporation and the By-Laws of the Corporation and all
amendments thereto, copies of which are on file at the principal office of the
Corporation and the Transfer Agent, to all of which the holder of this
Certificate by acceptance hereof assents. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Corporation has caused the facsimile signatures of
its duly authorized officers and its facsimile seal to be hereunto affixed.
Dated:
CERTIFICATE OF STOCK
/s/ /s/
SPECIMEN SPECIMEN
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY PRESIDENT
CAREMATRIX CORPORATION
CORPORATE
SEAL
1989
DELAWARE
COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. Box 1596
Denver, Colorado 80201
TRANSFER AGENT AND REGISTRAR
BY AUTHORIZED SIGNATURE
(C) SECURITY-COLUMBIAN UNITED STATES BANKNOTE COMPANY 1960
<PAGE>
- --------------------------------------------------------------------------------
[SIDE TWO: DESCRIPTION OF CAREMATRIX CERTIFICATE OF STOCK/STAMPED SPECIMEN]
- --------------------------------------------------------------------------------
CAREMATRIX CORPORATION
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock of the Corporation or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Such requests shall be made to the Corporation's
Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- .............Custodian .............
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors Act ..
survivorship and not as tenants (State)
in common
UNIF TRF MIN ACT -- .......Custodian (until age .......)
(Cust)
.............under Uniform Transfers
(Minor)
to Minors Act.......................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------
- -------------------------------------------
-----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
---------------------------------------------------------------------- Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
-------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated __________________
X
---------------------------------------------------------------------------
X
---------------------------------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
--------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 512,062
<SECURITIES> 0
<RECEIVABLES> 337,868
<ALLOWANCES> 167,807
<INVENTORY> 0
<CURRENT-ASSETS> 1,232,425
<PP&E> 10,855,836
<DEPRECIATION> (1,496,605)
<TOTAL-ASSETS> 15,271,700
<CURRENT-LIABILITIES> 4,238,295
<BONDS> 0
0
1,670,000
<COMMON> 37,039
<OTHER-SE> (1,783,807)
<TOTAL-LIABILITY-AND-EQUITY> 15,271,700
<SALES> 0
<TOTAL-REVENUES> 6,989,753
<CGS> 0
<TOTAL-COSTS> 5,328,152
<OTHER-EXPENSES> 2,739,233
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,256,092
<INCOME-PRETAX> (1,511,077)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,511,077)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,511,077)
<EPS-PRIMARY> ($0.45)
<EPS-DILUTED> ($0.45)
</TABLE>
