SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1995
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: 0-20438
TELMED, INC.
(Exact name of registrant as specified in its charter.)
DELAWARE 65-0273037
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification number)
9350 SOUTH DIXIE HIGHWAY, SUITE 1220
MIAMI, FLORIDA 33156
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 670-9773
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class)
COMMON STOCK PURCHASE WARRANTS
(Title of Class)
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.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. [ ]
As of December 29, 1995, the aggregate market value of the registrant's
voting stock held by non-affiliates was approximately $2,013,600.
As of December 31, 1995, the registrant had 4,340,000 shares of Common
Stock, par value $.001 per share outstanding.
Documents incorporated by reference: N/A
Page 1 of 28 pages.
Exhibit index at page 26.
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PART I
ITEM 1. BUSINESS.
COMPANY OVERVIEW
TelMed, Inc. ("TelMed") was organized in 1991 to engage in the business of
providing specialized home health care services, in conjunction with physicians,
for pregnant women with high risk pregnancy. Such services are intended to
include monitoring the well-being of the fetus and the management and treatment
of preterm labor. The services are intended to enable pregnant women who are at
risk of giving premature birth to be monitored and treated in their homes for
the management of their pregnancy in order to achieve improved medical outcomes
at significant cost savings through the reduction of maternal and neonatal
hospitalization. TelMed has been developing a portable fetal monitor to be used
in providing such services. While working with Advanced Medical Systems, Inc.
("AMS"), an independent manufacturer of fetal monitors, with a view to improving
its original monitor and having it manufactured by AMS. TelMed determined that a
newly developed model of AMS's monitor incorporated significant enhancements
over TelMed's original monitor, and accordingly, TelMed entered into an
agreement in December, 1994 to acquire all of AMS's rights to the new monitor
and to employ AMS as the manufacturer of the monitor. TelMed intends to employ
such new model in its proposed services. TelMed has completed Phase I hospital
clinical testing of its monitor and expects to begin Phase II in-home clinical
testing in February, 1996 in order to obtain approval for its use from the Food
and Drug Administration ("FDA"). (See "Regulation.")
In 1993, TelMed acquired Consul-Med, Inc., a Florida corporation,
("Consul-Med"). Consul-Med is engaged in the business of providing home health
care services in the State of Florida, and TelMed intends to utilize Consul-Med
as a base for providing the professional and administrative resources required
for its high risk pregnancy services when such services are begun.
As used herein, the terms "Registrant" and "Company" shall refer to
TelMed, Inc. together with its subsidiary corporations, including Consul-Med,
Inc., unless the context in which such term is used indicates otherwise.
PREGNANCY MONITORING - BACKGROUND
One of the most common and most serious complications of pregnancy is
preterm labor, an acute condition usually resulting in premature birth. The most
effective treatment for preterm labor is the early detection of preterm labor
and immediate therapeutic intervention when it commences to attempt to prolong
the pregnancy. Comprehensive systems of managing pregnancies in the patient's
home
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have been developed to assist physicians in improving the medical outcome of
complicated pregnancies at reduced costs. Such systems generally combine initial
screening of patients to ascertain which are at risk of experiencing premature
delivery, education and training of patients with respect to symptoms and proper
care, daily telephone contact between perinatal nurses and patients for the
assessment of the condition of the patients and infusion therapies, usually
consisting of intravenous administration of tocolytic drugs, when prescribed by
the patient's physician. The systems also include the use of portable monitors
for the daily at home measurement of the patient's uterine activity and the
transmission of the data of such activity to a central location, where it is
recorded, graphed and assessed by trained, perinatal nurses. The nurses contact
the patients' physicians as needed. The principal advantages of such systems are
that they assist the physician in the early detection of labor, thus enabling
prompt treatment of the patient in order to achieve an improved medical outcome.
By enabling such functions to be performed in the home, it avoids the
inconvenience, expenses and stress associated with visits to the hospital or
doctor's office.
The use of portable monitors for the prevention of preterm labor has not
been universally accepted, and questions have been raised by some medical
authorities concerning the efficacy of home monitoring. However, the FDA has
approved such devices for use in the management and monitoring of high risk
pregnancy.
In patients with a high risk pregnancy, it is especially important to
monitor the well-being of the fetus on a frequent and regular basis. One
prevalently used method to perform such monitoring is termed a non stress test
("NST"). NST is a diagnostic test made up of two components: (1) measurement of
fetal heart rate and (2) measurement of uterine contraction activity. Data on
these two factors assist the physician to decide whether the condition of the
fetus may require further medical attention. NST has become widely accepted as a
primary antepartum screening mechanism in high risk pregnancy. TelMed's monitor
is designed to enable such non stress testing to be performed in the patient's
home. The ability to perform such testing in the patient's home and transmit the
results to a health professional via the telephone lines are intended to permit
patients to avoid the inconvenience and stress associated with visits to the
hospital or doctor's office for routine monitoring.
PROPOSED SERVICES FOR HIGH-RISK PREGNANCIES
TelMed proposes to offer a comprehensive home care service to aid
physicians in the management and monitoring of high risk pregnancy. Such service
will include screening of patients under the supervision of the physician to
identify those women who are at risk of complications during pregnancy,
educating the patient with respect to the physiological changes experienced
during pregnancy
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and the symptoms associated with labor, and daily telephone contact throughout
the term of pregnancy by TelMed's perinatal nurses for the assessment of the
patient's condition and fetal well-being. When prescribed by the physician,
TelMed's nurses will administer or manage tocolytic therapies to meet the
individual needs of patients. The system is intended to include, as prescribed
by the patient's physician, the use of TelMed's portable fetal monitor to enable
its nurses to remotely monitor, review and assess the patient's uterine activity
and the fetal heartbeat and report the data so obtained to the patient's
physician.
Large, stationary monitors which measure both uterine activity and fetal
heart rate have been routinely used in the care of patients prior to or during
labor and delivery, but such use has been limited to hospital settings because
of their size. TelMed believes that its new monitor is the first portable
monitor which can perform both functions and transmit such data by ordinary
telephone lines to a remote location. It should be noted, however, that clinical
tests have not been conducted with respect to the monitor, and there can be no
assurance that the monitor can be successfully employed as intended or that it
will be approved for use by the FDA. (See "Governmental Regulation".)
TelMed's monitor consists of a portable, lightweight computerized recorder
which contains a modem for telephonic transmission, to which are attached two
belts containing sensing units. One belt is designed to be attached around the
abdomen above the navel and the other, below the navel. One sensor detects
uterine contractions, and the other detects the fetal heart rate. The patient
wears the belts during designated periods each day, at which time uterine
activity and fetal heart beat data are recorded. After each monitoring session,
the patient connects the recorder to a standard telephone outlet, and the
recorded data is thus transmitted to the TelMed's center, where the data will be
recorded, graphed on a computer screen and assessed by a registered nurse. The
nurse will contact the patient's physician as needed and provide the physician
with information concerning the patient, including a graphic display (by
computer, telephonic facsimile copy or hard copy) of the data recorded by the
monitor.
Clinical studies of TelMed's earlier model monitor were conducted on small
samples of patients by two obstetricians and three hospitals in Canada, and the
monitor is registered with the Ministry of Health, Bureau of Radiology and
Medical Devices of Canada for use as a non-invasive medical device. The Company
will seek to have its new model monitor approved for government reimbursement as
a medical device in Canada.
During the last year, TelMed prepared clinical studies, and it has
completed hospital clinical (Phase I) testing. It expects to begin in-home
clinical (Phase II) tests of the monitor in February, 1996.
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TelMed entered into an agreement dated December 27, 1994 with Advanced
Medical Systems, Inc. ("AMS") pursuant to which it purchased all of AMS's rights
to a fetal heart rate and uterine contraction monitor and to employ AMS as its
exclusive manufacturer of the monitor. During 1994, TelMed worked with AMS to
develop a more advanced model than a monitor which AMS has been marketing in
France and Israel. The monitor is more advanced than that previously being
developed by TelMed and employs state of the art features presently available on
hospital monitors. AMS will retain the right to continue selling its earlier
model in France and Israel. Pursuant to the agreement, TelMed paid AMS $100,000
upon execution of the agreement, and it will pay an additional sum of $100,000
when approval is obtained from the Food and Drug Administration, which latter
sum will be applied as a credit against purchases of units by TelMed. The
agreement provides for the payment by TelMed of a royalty to AMS equal to 5% of
the gross revenues collected by TelMed from the sale, lease or rental of the
monitor. Under the agreement, TelMed is required to seek Pre-Market Approval by
the FDA for the monitor, and it filed an amendment to its investigational device
exemption with the FDA in order to begin clinical testing of the AMS monitor
under protocols approved by the FDA for the TelMed's previous model monitor.
(See "Governmental Regulation.")
Upon obtaining FDA approval of its monitor, TelMed intends to open an
initial monitoring center in the offices of Consul-Med and will employ
registered nurses obtained through Consul-Med. As part of its services the
Company intends to provide supervision and administration of home-based drug
therapy.
The Company's marketing efforts will be primarily based on direct personal
contact with physicians, hospitals and health maintenance organizations and
advertising in medical publications relying upon the resources of Consul-Med,
which has an established reputation among physicians in the Florida area.
CONSUL-MED - BACKGROUND
Pursuant to an agreement dated June 21, 1993, TelMed acquired all of the
outstanding capital stock of Consul-Med, Inc. from Marvin L. Finston, M.D.
("Finston") and Alan I. Miller, M.D. ("Miller"), was converted into $800,000 and
the right to receive shares of Common Stock of TelMed in consideration for a
value of $3,000,000, which value was established at $6.00 per share. The
issuance of such shares is subject to certain earnout conditions which provide
that, during the three-year period following the effective date of the agreement
(August 1, 1993), shares of TelMed Common Stock will be issued to Finston and
Miller on the basis of shares having a value of $.714 (as above calculated) for
each $1.00 of net income before taxes of Consul-Med during any year. No shares
have been issued pursuant to such provision since Consul-Med
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has not shown a net income since its acquisition. In connection with the merger,
Finston entered into a non-competition agreement with the Registrant in
consideration for $200,000. TelMed also agreed to pay a finder's fee in
connection with the merger to David Capital Company of $50,000 on closing plus
payments equal to 4% of the first $1,000,000, 3% of the second $1,000,000, and
2% of the third $1,000,000 of value of the shares of Common Stock, when and if
issued to Finston and Miller. Under the Agreement, Dr. Finston was to devote his
full time to Consul-Med pursuant to an employment agreement expiring on October
31, 1996, and Dr. Miller was retained as a medical consultant of Consul-Med
until October 31, 1996. By mutual agreement, Dr. Finston resigned effective June
30, 1994 and became a consultant to Consul-Med, and Dr. Miller became President
of Consul-Med as of that time.
CONSUL-MED - HOME HEALTH CARE SERVICES
Consul-Med provides nurses and other health care professionals to
non-affiliated, Medicare certified home health care agencies in the Florida
area. It also provides such services directly to non-Medicare patients and is
also the managing partner of joint venture partnerships that provide home health
care services directly to non-Medicare patients. It provides personnel in the
following disciplines: registered nurses, licensed practical nurses, home health
aides, physical therapists, occupational therapists, speech therapists and
medical social workers. The health care professionals deliver care and
therapies, on a temporary basis, at patients' places of residence. Consul-Med's
home health care includes infusion therapy and pharmaceutical services. The
health care professionals used by Consul-Med are retained as employees of
Consul-Med or as independent contractors on a case by case basis. Services
provided by Consul-Med are available on a twenty-four hour per day, seven days
per week basis. Providing nursing care and therapy in the patient's home is a
cost-effective alternative to institutional care in hospitals and other health
care facilities. Requests for such services come from patients, members of their
families, physicians and social workers. The type of service provided depends
upon the individual needs of the patient. All services require the written order
of a physician. Approximately 3% of Consul-Med's services during its last fiscal
year were provided directly by it or through its joint venture partnerships
directly to patients, and these patients or their third party payors were billed
for the services. Approximately 89% of Consul-Med's services during such year
were provided by Consul-Med as a sub-contractor to Medicare licensed home health
agencies. In the latter instance, payment for Consul-Med's services is made to
it by the Medicare licensed home health agencies. During the last fiscal year
one of such agencies accounted for 45% of Consul-Med's revenues, and two for 15%
each.
Consul-Med's services provided to patients on behalf of home health care
companies are performed by Consul-Med, Inc. Services
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provided directly to patients have been provided through two partnerships (the
"Partnerships"), Quality Life Care Associates of Jacksonville, Ltd. ("Quality
Care Jacksonville") and Quality Life Care Associates of Dade, Ltd. ("Quality
Care Dade"). Quality Care Jacksonville and Quality Care Dade are limited
partnerships in each of which a wholly-owned subsidiary of Consul-Med is general
partner and a fifty percent owner. The partners other than Consul-Med's
subsidiaries in the Partnerships have been corporations whose shareholders are
physicians who are in a position to refer private patients to the partnerships.
In addition to owning equity positions in, Consul-Med's wholly-owned
subsidiaries provide management services to, the Partnerships. The management
services consist of billing and collections, accounting services and day to day
management. Consul-Med is paid for such services on the basis of a percentage of
cash receipts of the Partnerships. Each of the Partnerships is licensed by the
State of Florida. Services provided by the Partnerships are provided directly to
patients and such patients or their third party payors are billed for the
services directly by the Partnerships. Approximately 3% of Consul-Med's revenues
during its last fiscal year resulted from services performed by the
Partnerships.
The home health care industry is a local industry in which patients and
referral sources are based in the immediate geographic area in which the
referral services are provided. Consul-Med maintains a strong local presence in
its marketing efforts in the Broward/Palm Beach and Jacksonville areas of
Florida, where it has a solid base of referring physicians. In addition,
referrals are obtained from hospital social work departments, case managers of
managed care companies, skilled nursing facilities and nursing homes.
Consul-Med's growth depends on its ability to establish and maintain strong
working relationships with these referral sources. The home health care industry
in south Florida is seasonal, with the highest volume experienced in the period
of November through April, and marketing efforts are more extensive during such
period.
CONSUL-MED - COMPREHENSIVE OUTPATIENT REHABILITATIVE FACILITIES
Consul-Med recently began to expand its operations to provide
comprehensive rehabilitative therapy for Medicare patients by establishing
off-site rehabilitation facilities. Services offered by the Company at its
rehabilitation centers include physical, occupational, speech and respiratory
therapists. The first facility was established in Delray Beach, Florida, in
September, 1994. Such facility was located in premises which, together with
necessary equipment, was leased on a time sharing basis with other providers of
rehabilitative therapy who were not related to the Registrant. During December,
1994, Consul-Med established five additional facilities in Jacksonville,
Florida. The Jacksonville facilities were owned and operated on a sub-contract
basis by two
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unrelated third parties who were paid a fee for treating Consul-Med's patients
based upon the amount of patient treatment provided. Subsequently, the Company
opened two free-standing rehabilitative facilities which replaced the previous
centers. The first was opened in Delray Beach, Florida on March 12, 1995, and
the second, in Jacksonville, Florida on December 13, 1995. The Delray Beach
facility consists of approximately 2,670 square feet of space rented (together
with certain equipment) at a cost of $5,801 per month. It received its
Comprehensive Outpatient Rehabilitative Facility ("CORF") certification from the
U.S. Health Care Finance Administration in June 1995. The Jacksonville facility
consists of approximately 2,200 square feet of space which is rented at a cost
of $1,225 per month. It is expected that the Jacksonville facility will receive
its CORF certification in March, 1996, and it is operating in the meantime as a
subcontractor for Northwood Sports Medicine. Revenues from the Company's
rehabilitation facilities accounted for 9% of the Company's total revenues
during the last fiscal year.
REIMBURSEMENT FOR SERVICES
Consul-Med's services include, and TelMed's services are intended to
include, assisting patients in obtaining reimbursement from their insurance
companies or other third-party payors. Patients generally find that obtaining
reimbursement for health care services from third party payors to be an onerous
task because of intricate claims forms and bureaucratic complications.
Consul-Med's procedures include contacting patients' insurance companies and
other third-party payors prior to the commencement of services in order to
determine the amounts of coverage, evaluate the coverages and employ established
procedures to obtain payments. The Company generally obtains assignments of
benefits from patients and receive payments directly; only an insignificant
portion of revenues are derived from patients who have no health benefits or
insurance. The Company's CORFs are reimbursed directly from Medicare.
In recent years, third-party payors for health care services have made
strong efforts to contain their costs by limiting their payments of benefits
through lowering rates of payments, increasing review of bills for services, and
reducing or eliminating coverage for certain medical services and procedures.
Because of questions regarding the independent value of home uterine activity
monitoring devices as distinguished from the nursing services, some third-party
payors have been unwilling to provide reimbursement or have limited
reimbursement for the type of preterm labor management services which the
Company intends to provide. The Company understands that such unwillingness has
decreased with respect to the use of a monitor heretofore approved by the FDA
pursuant to a pre-market approval submission for use in pregnancies after 24
weeks gestation. There can be no assurance that the Company will obtain FDA
approval for the use of its monitor for this indication
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or that even if obtained, third-party payors will provide adequate reimbursement
for all of the services which the Company proposes in the future. The limitation
of reimbursement for such services by third-party payors would adversely affect
the Company's ability to derive revenues from its proposed pregnancy monitoring
services.
COMPETITION
Consul-Med competes with a large number of companies that offer similar
services, including nurse staffing agencies, hospitals and non-profit home
health agencies. The home health care business is highly fragmented. According
to the National Association for Home Care, there are more than 12,000 home care
agencies in the United States. In its rehabilitative services,it also faces
severe competition from numerous competitors. Most of Consul-Med's competitors
are local businesses serving a small area, but there are also several large
national firms which compete with Consul-Med. Some of the large national firms
have much greater resources, and are better established, than Consul-Med. Home
health care business is generated by referrals from local physicians and other
medical organizations. Accordingly, home health care providers compete on a
local basis to develop relationships with key referral sources. The main
components of an entity's ability to compete in the market are quality and range
of services, speed of response, reliability and price.
With regard to the services proposed to be offered for the management and
treatment of pregnancy, at least one company currently offering such services,
Tokos Medical Corporation, has been in business for some time and has achieved
substantial acceptance in the medical community. It may be deemed to be well
established on a nationwide basis, and it is expected that the Company will
encounter intense competition from it particularly since reliability and quality
of service are more significant competitive factors than price in the field of
health care devices. TelMed intends to compete against other companies providing
a home health care service addressing pregnancy complications principally on the
basis that its monitor will provide a more significant diagnostic tool than
others because it measures and records both uterine contractions and fetal heart
beats whereas others employ portable monitors which measure and record uterine
contractions only.
GOVERNMENTAL REGULATION
Consul-Med and the Partnerships are licensed, as required, under the Home
Health Services Act of Florida as home health agencies. Such Act and the
regulations thereunder contain numerous provisions regulating the conduct of the
home health care business, including among other things, meeting professional
standards regarding certain employees, maintaining quality standards in
providing care, keeping of records, and having certain personnel
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policies.
In order to be eligible for Medicare payments in the State of Florida, a
home health care agency is required to obtain a certificate of need ("CON").
Services provided by Consul-Med for Medicare patients are provided by it only as
a subcontractor for other home health agencies which have CON's, and
accordingly, Consul-Med is not required to have CON approval. During 1995,
Consul-Med became certified to provide services under Medicaid.
Consul-Med and the Partnerships are also subject to various federal, state
and local laws and regulations regarding aspects of their operations. Consul-Med
and the Partnerships believe that they are in compliance with all laws and
regulations applicable to their business.
TelMed's fetal monitor is subject to regulation by the FDA under the
provisions of the Federal Food, Drug, and Cosmetic Act ("FDC Act"). TelMed had
previously sought FDA approval for its monitor pursuant to section 510(k) of the
FDC Act on the ground that its fetal monitor, which is intended as a screening
tool to assess fetal well-being after 26 weeks of gestation, is a Class II
device which is "substantially equivalent" to the fetal monitors currently
commercially available. The FDA advised the Company that it had determined that
the Company's monitor is "not substantially equivalent to devices marketed in
interstate commerce prior to May 29, 1976" and cannot be marketed via the 510(k)
pre-market notification process. The Company was not successful in having such
decision reversed, and accordingly, it initiated the process for preparing and
submitting a Premarket Approval (PMA) application with the FDA in order to
employ its Portable Fetal Monitor. Securing PMA approval will entail significant
delays in commencing home health care services for high risk pregnancies as well
as substantial expenses. In December, 1993, TelMed received conditional approval
from the FDA to begin clinical trials of the monitor following certification of
Institutional Review Board approval ("IRB"). TelMed obtained IRB approvals on
April 6, 1994 and December 6, 1994. It postponed the clinical trials required
for the PMA in order to complete development of an improved model of its monitor
and thereafter to acquire an improved monitor. TelMed notified the FDA through
an amendment to its Investigational Device Exemption, which it received with
respect to its earlier model monitor, that its new model monitor was tested for
safety with testing equivalent for the earlier model. TelMed has completed
in-hospital (Phase I) clinical testing and expects to commence in-home (Phase
II) clinical trials in February, 1996. There can be no assurance that the
clinical trials will be successful or that a PMA for the fetal monitor will be
approved. If TelMed were to ultimately fail in securing FDA approval for its
monitor, its ability to market its proposed monitoring services will be
seriously adversely affected.
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TelMed's proposed monitoring services will be subject to various other
federal, state and local regulations. Moreover, the health care field is an area
of extensive and dynamic regulatory changes, which can have enormous effects on
permissible activities, the costs of doing business and the amount of
permissible payments by third-party payors. Extensive legislative action is
currently being proposed at the federal and state levels which may substantially
affect the home health care industry. The results of such proposals and effects
of any future legislation cannot be predicted.
PATENTS
TelMed was issued two patents with respect to certain features of its
earlier monitor. It is currently planning to file patent applications with
respect to certain features of its new monitor. There can be no assurance that
any patents will provide the Company with any significant advantages over others
with competing devices.
INSURANCE AND LITIGATION
In recent years health care providers and participants have become subject
of a greatly increasing number of lawsuits alleging malpractice or product
liability, many of which assert large monetary claims, and it has become more
and more costly to defend such lawsuits. The Company may find itself the subject
of such actions despite any precautions taken by it in conducting its operations
in a proper manner. The Company maintains general liability insurance, including
professional and products liability, to protect itself against claims which may
be asserted against it in amounts which it believes to be adequate for its
purposes. However, there can be no assurance that the amounts of its coverage
would be adequate to protect it from potential adverse judgments against it.
EMPLOYEES
At December 31, 1995, the Company had 133 employees in addition to its
officers, of which all but two were employed in Consul-Med. In addition to such
employees, Consul-Med had agreements with a pool of 91 nurses as of such date,
whose services it employs on a case by case basis. The Company believes that its
employee relations are good. None of its employees are covered by collective
bargaining agreements. In addition, the two partnerships of which Consul-Med's
wholly-owned subsidiary corporations are the general partners and fifty percent
equity owners employed approximately 37 persons at such date.
ITEM 2. PROPERTIES.
The Registrant's main office is located at 9350 South Dixie Highway, Suite
1220, Miami, Florida 33156. The office consists of
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approximately 3,100 square feet of space and is rented pursuant to a lease
expiring on August 30, 1999 at a rental of $31,000 for the period from March 1,
1994 through February 28, 1995 and base annual rentals of $43,400 from March 1,
1995 to February 28, 1997 and $46,500 from March 1, 1997 to August 30, 1999.
Consul-Med maintains facilities for its main operations at 3275 West
Hillsboro Boulevard, Suite 210, Deerfield Beach, Florida. Such premises consist
of 3,546 square feet of space and are leased from an unaffiliated party pursuant
to a lease expiring on November 15, 1998 at a base annual rental of $33,687.
Consul-Med also leases approximately 1,635 square feet of office space at 3070
Boulevard Center Drive, Jacksonville, Florida at a monthly rental of
approximately $1,490 pursuant to a lease expiring in February, 1995. In
addition, Consul-Med leases approximately 2,736 square feet of space for a
rehabilitation facility in Delray Beach, Florida at a monthly rental of $5,081
pursuant to a lease expiring on December 1, 1998. Consul-Med also leases
approximately 525 square feet of office space in Ft. Pierce, Florida pursuant to
a lease expiring on July 31, 1995.
The Company's subsidiary Portable Fetal Monitoring Inc. maintains an office
of approximately 800 square feet at 1111 Flint Road, Unit 5, Downsview, Ontario,
Canada, which premises are owned by Daniel Medical Laboratories and presently
provided to the Company on a rent free basis.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of fiscal 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock and Common Stock Purchase Warrants are traded in
the over-the-counter market, and they have been quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
since August 21, 1992 under the symbols "TEMD" for the Common Stock and "TEMDW"
for the Common Stock Purchase Warrants.
The following table sets forth, for the periods indicated, the range of the
high and low bid prices for the Company's Common Stock
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as reported by NASDAQ. Such prices reflect inter-dealer quotations, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.
HIGH LOW
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FISCAL YEAR ENDED OCTOBER 31, 1994
First Quarter 7 6 3/8
Second Quarter 6 3/4 6 1/4
Third Quarter 6 3/4 5 1/2
Fourth Quarter 7 1/8 6 1/4
FISCAL YEAR ENDED OCTOBER 31, 1995
First Quarter 7 1/8 1
Second Quarter 3 1 1/2
Third Quarter 2 1/16 1
Fourth Quarter 1 7/16 3/4
HOLDERS
The number of record holders of shares of the Company's Common Stock was
approximately 113 as of December 31, 1995. The Company believes that, in
addition, there were, as of such date, in excess of 1,200 beneficial owners of
its Common Stock whose shares are held in "street name".
DIVIDENDS
To date, the Company has not paid any cash dividends on its Common Stock.
The payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition and other relevant factors. The Board does
not expect to declare any dividends in the foreseeable future since it intends
to use earnings, if any, in its operations.
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ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes certain selected financial data and should
be read in conjunction with the more detailed financial statements and notes
thereto appearing elsewhere herein.
CONSOLIDATED OPERATIONS DATA (1):
FOR THE YEARS ENDED OCTOBER 31,
1995 (2) 1994 1993
-------- ---- ----
REVENUES:
Services revenues $ 4,422,705 $3,369,780 $ 780,442
Management fee income $ 12,780 $ 12,914 $ 8,216
Interest and other income $ 142,382 $ 89,311 $ 142,942
COSTS AND EXPENSES:
Cost of services provided $ 2,375,496 $1,943,476 $ 464,668
Research and development costs $ 143,788 $ 93,453 $ 51,144
General and administrative $ 3,048,911 $2,330,076 $ 809,578
Unrealized loss on investment $ - $ 137,982 $ -
Interest $ 1,382 $ 5,945 $ 2,151
Net loss $(1,025,765) $ (974,266) $(399,063)
Net loss per share $ (0.25) $ (0.26) $ (0.11)
CONSOLIDATED BALANCE SHEET DATA:
OCTOBER 31,
1995 (2) 1994
-------- ----
Current assets $ 1,670,478 $1,565,626
Total assets $ 3,730,362 $3,418,379
Current liabilities $ 573,227 $ 405,916
Total liabilities $ 573,227 $ 405,916
Minority interests $ 102,487 $ 70,229
Stockholders' equity $ 3,054,648 $2,942,234
(1) The operations of Consul-Med, Inc. have been included in the Company's
operations since August 1, 1993, the date of acquisition.
(2) 1995 financial information as restated (See Independent Auditors' Report
and Notes to Consolidated Financial Statements.)
-14-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
BACKGROUND
In August 1993, the Company acquired all of the outstanding Common Stock
of Consul-Med, Inc. This transaction has been accounted for as a purchase.
Accordingly, the operations of Consul-Med have been consolidated with the
Company effective August 1, 1993, the date of acquisition. Consul-Med provides
in-home nursing care and rehabilitative therapy for patients located within the
state of Florida.
TelMed's fetal monitor is subject to regulation by the FDA under the
provisions of the Federal Food, Drug, and Cosmetic Act ("FDC Act"). TelMed had
previously sought FDA approval for its monitor pursuant to section 510(K) of the
FDC Act on the ground that its fetal monitor, which is intended as a screening
tool to assess fetal well being after 26 weeks of gestation, is a Class II
device which is "substantially equivalent" to the fetal monitors currently
commercially available. The FDA advised the Company that it had determined that
the Company's monitor is "not substantially equivalent to devices marketed in
interstate commerce prior to May 29, 1976" and cannot be marketed via the 510(K)
premarket notification process. The Company was not successful in having such
decision reversed, and it initiated the process for preparing and submitting a
Premarket Approval Application (PMA) with the FDA in order to employ its
Portable Fetal Monitor. Securing a PMA approval will entail significant delays
in commencing home health care services for high risk pregnancies as well as
substantial expenses. On December 23, 1993, TelMed received conditional approval
from the FDA to begin its clinical investigation following certification of
Institutional Review Board approval ("IRB"), subject to TelMed submitting
certain additional information. TelMed obtained IRB approvals on April and
December 1994. It postponed the clinical trials required for the PMA initially
in order to complete development of an improved model of its monitor and
thereafter to acquire an improved monitor. TelMed intends to notify the FDA
through an amendment to its Investigational Device Exemption, which it received
with respect to its earlier model monitor, that its new model monitor has been
tested for safety with testing equivalent for the earlier model and that it will
begin clinical trials of its new monitor upon receiving IRB approvals of the
amendment. TelMed expects to receive such approvals shortly and to commence
clinical trials in February, 1995. There can be no assurance that the clinical
trials will be successful or that a PMA for the fetal monitor will be approved.
If TelMed were to ultimately fail in securing FDA approval for its monitor, its
ability to market its proposed monitoring services will be seriously adversely
affected.
The Company was incorporated on June 24, 1991. Prior to
-15-
<PAGE>
fiscal 1993, the Company had not yet generated revenues from operations and was
considered to be in the development stage. All share and per share information
discussed below has been adjusted to reflect a 3 for 2 Common Stock split
effected in January, 1992.
RESULTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1995 AND 1994:
Consul-Med contributed all of the operating revenue of the Company during
fiscal 1995 and fiscal 1994. Service revenues of $4,422,705 and $3,369,780
represent income from in-home nursing care services provided during fiscal 1995
and fiscal 1994, respectively. Cost of service provided of $2,375,496 and
$1,943,476 consists primarily of payroll and related costs.
Research and development costs were $361,788 and $93,453 for fiscal 1995
and fiscal 1994, respectively. These costs continue to be related to the
development of the Company's portable fetal monitor.
General and administrative costs were $2,948,911 and $2,330,076 for fiscal
1995 and fiscal 1994, respectively. These costs consist of operating expenses
incurred by Consul-Med of $1,930,233 and $1,575,869 during fiscal 1995 and
fiscal 1994, respectively, as well as officer salary, professional fees and
general overhead expenses incurred by the parent Company of $1,001,678 and
$754,207 during fiscal 1995 and fiscal 1994, respectively. The increases were
due primarily to higher administrative salaries, rents, professional fees and
travel costs.
Operating expenses were offset by $142,382 and $89,311 of interest income
for fiscal 1995 and 1994, respectively. Interest income increased in fiscal 1995
due to increases in investment funds from the Company's private placement and
accrued interest on the loan to Extreme Technologies, Inc. (see Liquidity and
Capital Resources). This resulted in a net loss of $(1,143,765) or $(.28) per
share for fiscal 1995, as compared with a net loss for fiscal 1994 of $(974,266)
or $(.26) per share.
Although the Company reported a loss for fiscal 1995, Consul-Med's business
expansion resulted in fourth quarter profitability for the subsidiary. The most
significant component of the business expansion was the opening of a home health
service operation in Ft. Pierce, Florida.
In September, 1994, Consul-Med opened its first off-site comprehensive
outpatient rehabilitation facility ("C.O.R.F."). Consul-Med plans to continue
this diversification of its health care business by exploring opportunities to
open additional off-site C.O.R.F.s in various markets within the State of
Florida.
-16-
<PAGE>
YEARS ENDED OCTOBER 31, 1994 AND 1993:
Consul-Med contributed all of the operating revenue of the Company during
fiscal 1994 and fiscal 1993. Service revenues of $3,472,005 and $780,442
represent income from in-home nursing care services provided during fiscal 1994
and the fourth quarter of fiscal 1993, respectively. Cost of service provided of
$1,943,476 and $464,668 consists primarily of payroll and related costs.
Research and development costs were $93,453 and $51,144 for fiscal 1994
and fiscal 1993, respectively. These costs continue to be related to the
development of the Company's portable fetal monitor.
General and administrative costs were $2,330,076 and $807,978 for fiscal
1994 and fiscal 1993, respectively. These costs consist of operating expenses
incurred by Consul-Med of $1,575,869 and $320,192 during fiscal 1994 and the
fourth quarter of 1993, respectively, as well as officer salary, professional
fees and general overhead expenses incurred by the parent Company of $754,207
and $487,786 during fiscal 1994 and fiscal 1993, respectively. The increases
were due primarily to higher administrative salaries, rents, professional fees
and travel costs.
Operating expenses were offset by $89,311 and $142,942 of interest income
for fiscal 1994 and 1993, respectively. Interest income declined in fiscal 1994
due to reductions in investment funds, which was partially offset by higher
interest rates during the year. This resulted in a net loss of $974,266, or
$0.26 per share for fiscal 1994, as compared with a net loss for fiscal 1993 of
$399,063 or $0.11 per share.
Although the Company reported a loss for fiscal 1994, Consul-Med's business
expansion resulted in fourth quarter profitability for the subsidiary. The most
significant component of the business expansion was the opening of a home health
service operation in Ft. Pierce, Florida.
In September, 1994, Consul-Med opened its first off-site comprehensive
outpatient rehabilitation facility ("C.O.R.F.").
YEARS ENDED OCTOBER 31, 1993 AND 1992:
Consul-Med contributed all of the operating revenue of the Company during
fiscal 1993. Service revenues of $780,442 represent income from in-home nursing
care services provided during the fourth quarter of fiscal 1993. Cost of service
provided of $464,668 consists primarily of payroll and related costs.
Research and development costs were $51,144 and $42,735 for fiscal 1993
and fiscal 1992, respectively. These costs are related to the development of the
Company's portable fetal monitor.
-17-
<PAGE>
General and administrative costs were $807,978 and $262,661 for fiscal
1993 and fiscal 1992, respectively. These costs consist of operating expenses
incurred by Consul-Med during the fourth quarter of 1993, totaling $320,192, as
well as officer salary, professional fees and general overhead expenses incurred
by the parent Company of $487,786 during all of fiscal 1993.
Operating expenses were offset by $142,942 and $35,240 of interest income
for fiscal 1993 and 1992, respectively. This resulted in a net loss of $399,063.
or $0.11 per share for fiscal 1993, as compared with a net loss for fiscal 1992
of $270,156 or $0.11 per share.
LIQUIDITY AND CAPITAL RESOURCES
In August, 1992, the Company realized net proceeds of approximately
$4,100,000 from a public offering of 500,000 Units at $10.00 per Unit, each
consisting of three shares of Common Stock Purchase Warrant. Each Warrant
entitles the holder to purchase one share of Common Stock for a period of five
years through August 20, 1997 at a price of $4.00 per share.
Cash used for operating activities has been provided by liquidation of
investments purchased with the proceeds of the Company's public offering in
August, 1992, and an increase in accounts payable balances.
In June, 1993, the Company entered into an Agreement and Plan of Merger
with Consul-Med, Inc., a provider of health care professionals to Medicare and
non-Medicare patients in Broward and Palm Beach counties, and the greater
Jacksonville, Florida area. The acquisition was consummated in August, 1993. At
closing, the Company paid $1,000,000 and agreed to an earnout, payable in Common
Stock of the Company. Cash used for the purchase of the Company's subsidiaries,
including the payment for a covenant not to compete, and the acquisition of
equipment was provided by the sale of investments.
During fiscal 1995 the Company raised net proceeds of $1,050,331 from the
private sale of 264,375 Units at $4.00 per Unit. Each Unit consised of two
shares of Common Stock and one Warrant to purchase one share of Common Stock for
$3.00 per share during the five-year period ending March 22, 2000. The offering
expired on November 15, 1995. The Company used part of the proceeds in further
development of its monitor and phase I clinical trials. The rest of the proceeds
are intended for use in phase II of its clinical trials.
During fiscal 1995, the Company loaned a total of $350,000 to Extreme
Technologies, Inc. ("Extreme"), a publicly held Canadian corporation which the
Company at the time was negotiating to
-18-
<PAGE>
acquire. The Company subsequently discontinued its efforts to acquire Extreme.
The first loan, evidenced by a 10% Senior Promissory Note of $100,000 was
schedule to mature on April 21, 1995. The second loan, evidenced by a $250,000
note was scheduled to mature on September 19, 1995. Neither note has been paid
to date. The loans are secured by the pledge of 6,550,000 restricted shares of
Extreme common stock and 1,028,415 free trading shares of Extreme common stock
owned by principal shareholders and officers of Extreme. The Company has also
obtained the right to vote such shares as trustee under the terms of a Voting
Trust Agreement. The pledge and voting trust agreements will terminate on the
earlier of the repayment of the Extreme notes, or June 1996.
In April 1995, the Company loaned $196,500 to an individual related to a
member of the Board of Directors. The loan was non-interest bearing, and was
repaid in June, 1996.
In October 1995, in consideration of a payment of $75,000 and the issuance
of a 10% Purchase Promissory Note in the amount of $289,318, the Company
assigned the Extreme Notes to HMA Investments Inc. ("HMA"), a privately held
investment company. The HMA note was initially payable in six bi-weekly
installments of $48,841 from November 14, 1995 through January 23, 1996. The
Company subsequently extended the maturity of the entire note balance to March
31, 1996. Under terms of the Assignment Agreement, the Company will retain as
security its interest in the two Extreme notes and its interest as voting
trustee under the voting Trust Agreement and as pledgee of the Extreme shares,
until the HMA note is paid in full.
In November 1995, the Company's Board of Directors approved a $450,000
loan to a Canadian corporation controlled by a member of the Company's board.
The loan was orginally due in May 1996, bearing interest at the rate of 10.75%
per annum. It is guaranteed by the board member and his brother, who is also a
stockholder of the borrower. In July 1996, the company received a payment of
$136,281, representing the accrued interest due through the date of payment plus
a principal payment of $100,000, leaving a balance due of $350,000. The loan was
extended under the same terms to October 15, 1996.
Cash flow from operations, plus existing cash reserves and short term
investments are expected to be sufficient to finance current and forecasted
operations for a period of between eighteen and twenty months from the date
hereof. The Company has no commitments at present which will require significant
use of cash.
IMPACT OF INFLATION
Inflation has not had a material impact on the Company to date.
-19-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of TelMed, Inc.
We have audited the accompanying consolidated balance sheets of TelMed, Inc. and
subsidiaries as of October 31, 1995 and 1994, and the related consolidated
statements of operations, cash flows, and stockholders' equity for the three
years ended October 31, 1995, 1994 and 1993. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the consolidated financial
statements of ConsulMed, Inc., a wholly owned subsidiary, which statements
reflect total assets of $996,756 and $1,020,530 as of October 31, 1995 and 1994,
respectively, and total revenues of $4,500,485, $3,382,880 and $795,787 for the
years ended October 31, 1995 and 1994, and the period from August 1, 1993 to
October 31, 1993, respectively. Those statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar as it relates
to the amounts included for ConsulMed, Inc. is based solely on the reports of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of TelMed, Inc. and subsidiaries as of
October 31, 1995 and 1994, and the results of their operations and their cash
flows for the three years ended October 31, 1995, 1994 and 1993, in conformity
with generally accepted accounting principles.
As discussed in Note 3 of Notes to Consolidated Financial Statements, the 1995
financial statements have been restated.
/s/ Schneider Ehrlich & Wengrover LLP
(formerly Schneider Ehrlich Sosinsky Rodis &
Wengrover LLP)
Woodbury, New York
January 17, 1996, except for Note 3,
as to which the date is June 27, 1996
-20A-
<PAGE>
TELMED, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31,
1995 1994
---- ----
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 493,916 $ 855,180
Accounts receivable, net of allowance for doubtful
accounts of $62,809 and $17,129, respectively 806,967 499,475
Due from affiliates 49,189 8,439
Loan receivable - related party 196,500 --
Prepaid expenses and other current assets 123,906 202,532
---------- ----------
Total current assets 1,670,478 1,565,626
Property and equipment - net 99,166 165,292
Investment in debt securities - available for sale 731,900 683,926
Loan receivable - HMA Investments, Inc. 289,318 --
Investment in general partnership 29,657 29,357
Goodwill, net of accumulated amortization of
$50,890 and $18,831, respectively 618,227 650,286
Covenant not to compete, net of accumulated amortization
of $90,000 and $50,000, respectively 110,000 150,000
Other assets 181,616 173,892
---------- ----------
Total assets $3,730,362 $3,418,379
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 205,962 $ 91,474
Accrued expenses 367,265 271,173
Current portion of long-term debt -- 43,269
---------- ----------
Total current liabilities 573,227 405,916
---------- ----------
Minority interests 102,487 70,229
---------- ----------
Commitments (see notes)
Stockholders' Equity
Common stock - par value $.001 per share, 20,000,000 shares authorized,
4,340,000 and 3,801,250 shares issued and
outstanding, respectively 4,340 3,801
Additional paid-in capital 5,685,016 4,627,389
Accumulated deficit (2,714,721) (1,688,956)
Unrealized gain on securities available for sale 80,013 --
---------- ----------
Total stockholders' equity 3,054,648 2,942,234
---------- ----------
Total liabilities and stockholders' equity $3,730,362 $3,418,379
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-20B-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS INDICATED
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Service revenues $ 4,422,705 $ 3,369,780 $ 780,442
Management fee income 12,780 12,914 8,216
Interest and other 142,382 89,311 142,942
------------ ------------ -----------
Total revenues 4,577,867 3,472,005 931,600
------------ ------------ -----------
Costs and Expenses:
Cost of services provided 2,375,496 1,943,476 464,668
Research and development costs 143,788 93,453 51,144
General and administrative 3,048,911 2,330,076 809,578
Unrealized loss on investment -- 137,982 --
Interest 1,382 5,945 2,151
------------ ------------ -----------
Total expenses 5,569,577 4,510,932 1,327,541
------------ ------------ -----------
Loss before minority interests (991,710) (1,038,927) (395,941)
Minority interests in income (loss) of
consolidated entities 34,055 (64,661) 3,122
------------ ------------ -----------
Net loss $ (1,025,765) $ (974,266) $ (399,063)
============ ============ ===========
Per share:
Net loss $ (0.25) $ (0.26) $ (0.11)
============ ============ ===========
Weighted average shares outstanding 4,097,243 3,788,435 3,759,595
============ ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-20C-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS INDICATED
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net loss $(1,025,765) $ (974,266) $ (399,063)
Adjustments to reconcile net loss to net cash
used in operating activities:
Noncash compensation 7,500 -- --
Loss on asset dispositions 112,682 -- --
Unrealized loss on marketable securities -- 137,982 --
Depreciation and amortization 144,974 93,894 23,670
Decrease (Increase) in accounts receivable (299,053) (92,642) 94,754
Decrease in minority interest 34,055 (64,661) 3,122
(Increase) decrease in prepaid expenses
and other current assets 70,187 (14,251) (19,708)
Increase (decrease) in accrued expenses 96,092 129,195 (48,243)
Increase in accounts payable 114,823 33,940 14,856
----------- ---------- -----------
Net cash used in operating activities (744,505) (750,809) (330,612)
----------- ---------- ------------
Cash flows from investing activities:
Decrease in available-for-sale investments 34,400 175,412 1,935,582
Payment for purchase of ConsulMed,
net of cash acquired -- -- (843,196)
Payment for covenant not to compete -- -- (200,000)
Acquisition of equipment (50,438) (21,411) (90,329)
Increase in other assets (79,119) (30,299) (36,299)
Contribution to general partnership (300) -- --
Distribution from general partnership -- 4,143 --
---------- ---------- ----------
Net cash provided by (used in) investing activities (95,457) 127,845 765,758
---------- ---------- ----------
Cash flows from financing activities:
Loan receivable - related party (196,500) -- --
Decrease in due from affiliates -- 43,588 86,824
Loan receivable - HMA Investments, Inc. (364,318) -- --
Payment of loan receivable - HMA
Investments, Inc. 75,000 -- --
Increase(decrease) in due to affiliates (40,750) (10,539) 6,306
Payment of note payable -- -- (40,000)
Payment of stockholder loans -- -- (205,438)
Payment of long-term debt (43,269) (68,518) (16,557)
Due to minority interests (1,797) 60,009 --
Proceeds from issue of securities 1,050,332 -- --
---------- ---------- ----------
Net cash provided by (used in) financing activities 478,698 24,540 (168,865)
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents (361,264) (598,424) 266,281
Balance at beginning of period 855,180 1,453,604 1,187,323
---------- ---------- ----------
Balance at end of period $ 493,916 $ 855,180 $1,453,604
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-20D-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 1, 1992 TO OCTOBER 31, 1995
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED GAIN
COMMON STOCK PAID-IN ACCUMULATED ON SECURITIES
SHARES AMOUNT CAPITAL DEFICIT AVAILABLE FOR SALE TOTAL
------ ------ ------- ------- ------------------ ------
<S> <C> <C> <C> <C> <C> <C>
Balances, November 1, 1992 3,750,000 $3,750 $ 4,544,415 $ (315,627) $ -- $ 4,232,538
Shares attributable to
Loyalty Units issued 22,890 23 (23) -- -- --
Net loss for the year -- -- -- (399,063) -- (399,063)
--------- ------ ----------- ----------- ------- -----------
Balances, October 31, 1993 3,772,890 3,773 4,544,392 (714,690) -- 3,833,475
Shares attributable to Loyalty
Units issued 13,860 14 (14) -- -- --
Shares issued under consulting
agreements 9,000 9 60,741 -- -- 60,750
Shares issued for purchase of
minority interests 5,500 5 22,270 -- -- 22,275
Net loss for the year -- -- -- (974,266) -- (974,266)
--------- ------ ----------- ----------- ------- -----------
Balances, October 31, 1994 3,801,250 3,801 4,627,389 (1,688,956) -- 2,942,234
Shares granted to employee 10,000 10 7,490 -- -- 7,500
Private placement of common stock 528,750 529 1,050,137 -- -- 1,050,666
Net loss for the year -- -- -- (1,025,765) -- (1,025,765)
Unrealized gain on securities
available for sale -- -- -- -- 80,013 80,013
--------- ------ ----------- ----------- ------- -----------
Balances, October 31, 1995 4,340,000 $4,340 $ 5,685,016 $(2,714,721) $80,013 $ 3,054,648
========= ====== =========== =========== ======= ===========
</TABLE>
See Notes to Consolidated Financial Statements
-20E-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 1 - DESCRIPTION OF BUSINESS
TelMed, Inc. (the "Company") was incorporated on June 24, 1991 under
the laws of the State of Delaware. The Company is currently seeking
regulatory approval to market a portable fetal monitor device in the
United States. The monitor has not produced any revenues to date.
In August 1993, the Company acquired all of the outstanding Common
Stock of Consul-Med, Inc. ("ConsulMed"). ConsulMed provides in-home
nursing care and rehabilitative therapy for private pay and Medicare
patients located within the state of Florida.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
BASIS OF PRESENTATION
The Company's policy is to consolidate with entities over which it has
operational and financial control, including those entities in which
it does not own a majority interest. These financial statements
include the accounts of the Company's wholly-owned subsidiaries,
ConsulMed, Consul-Med of South Florida, Inc., ConsulMed of
Jacksonville, Inc., Jacksonville Home Care, Inc. and Direct Health
Care, L.C.; Quality Life Care Associates, A.J.V., a joint venture
50%-owned by ConsulMed; Quality Life Care Associates of Jacksonville,
Ltd. (QLCA-Jax), and Quality Life Care Associates of Dade (QLCA-Dade),
limited partnerships in which ConsulMed holds a 50% general
partnership interest. The Company's other general partnership
investment is accounted for under the cost method. Portable Fetal
Monitoring, Inc. has not had any accounting activity since its
acquisition by the Company in 1991 and does not presently have assets
or liabilities. All intercompany accounts and transactions have been
eliminated in consolidation.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities and the reported revenues and expenses. Actual results
could vary from the estimates that were used.
REVENUE RECOGNITION
The Company recognizes revenues at the time the related services are
rendered.
BAD DEBTS
The Company's policy is to provide an allowance for all uncollectible
accounts. The allowance is based on prior year's experience and
management's analysis of possible bad debts.
-20F-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES - continued
LOSS PER SHARE
Loss per share is based on the weighted average number of shares
outstanding during the period.
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments with an original maturity of three
months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Fixed assets are
depreciated on a straight-line basis over their estimated useful lives
as follows:
Office furniture and equipment 5 - 7 years
Computer and medical equipment 5 years
Leasehold improvements 7 years
INVESTMENTS IN DEBT SECURITIES - AVAILABLE FOR SALE
Effective in fiscal 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under the provisions of
SFAS No. 115, debt securities classified as available-for-sale are
recorded at their fair value. Declines in value deemed to be other
than temporary are charged directly to earnings. Subsequent increases
in value are reflected as a component of stockholders' equity.
INTANGIBLE ASSETS
Costs in excess of net assets acquired have been classified as
goodwill and are being amortized on a straight-line basis over periods
ranging from five to twenty years.
The covenant not to compete is being amortized on a straight-line
basis over its sixty-month term. Amortization was $40,000, $40,000 and
$10,000 for fiscal 1995, 1994 and 1993, respectively.
NOTE 3 - RESTATEMENT
The Company has restated its financial statements for the year ended
October 31, 1995 to correct the misclassification of a loan to a
related party in the amount of $196,500. The loan was previously
recorded as research and development expenditures, of which $118,000
was expensed and $78,500 recorded as Capitalized software costs. In
addition,
-20G-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 3 - RESTATEMENT - continued
the Company has reclassified a $100,000 payment for financial
consulting services from research and development costs to general and
administrative expenses. The effect of these restatements was to
decrease the 1995 net loss and net loss per share by $118,000 and
$.03, respectively. The effect on the Company's Consolidated Balance
Sheet was to increase current assets by $196,500, decrease Capitalized
software costs by $78,500, and increase Stockholders' equity by
$118,000.
The Loan receivable - related party represents a non-interest bearing
loan to an individual who is related to one of the Company's directors
and who is also a stockholder in 460617 Ontario Ltd. (see Note 18).
The loan was repaid in June 1996. During the fourth quarter of fiscal
1995, the Company advanced an additional $100,000 to this individual,
which amount was repaid in October 1995.
The Company entered into the $100,000 financial consulting agreement
with HMA Investments, Inc. in connection with the Company's efforts to
acquire Extreme Technologies, Inc. during fiscal 1995 (see Note 8).
NOTE 4 - ACQUISITIONS
a) In August 1993, the Company acquired all of the outstanding shares of
ConsulMed for $800,000 in cash and merged ConsulMed into a newly
formed subsidiary of the Company. The Company also paid $200,000 to
one of the selling shareholders for a five-year covenant not to
compete. The selling shareholders are entitled to receive up to
$3,000,000 of additional consideration payable in shares of the
Company's Common Stock, valued at $6.00 per share. The shares are
issuable at the rate of $.714 for each $1.00 earned by ConsulMed, as
defined, during each of the next three fiscal years, commencing with
fiscal 1994. If the cumulative earnings at any time during the three-
year period total $3,500,000, the selling shareholders will earn all
500,000 shares issuable under the earnout provision. No shares have
been earned to date. The Company incurred acquisition costs of
approximately $166,000 in connection with the purchase. The Company
has also agreed to pay an additional finder's fee equal to 4% of the
first $1,000,000, 3% of the second $1,000,000, and 2% of the third
$1,000,000 of value of the shares of Common Stock when, and if, issued
to the selling shareholders pursuant to the earnout.
At the time of the acquisition, the Company entered into an employment
agreement with one of the selling shareholders who remained as
president of ConsulMed, and a consulting agreement with the other
selling shareholder. During fiscal 1994, the officer terminated his
employment by mutual agreement with the Company and the other selling
shareholder replaced him under terms of a new employment contract.
b) During fiscal 1994, the Company issued 5,500 shares of its Common
Stock to purchase the remaining 50% interest in Quality Life Care
Associates (QLCA), a general partnership. The partnership was then
dissolved and the operations and accounts of
-20H-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 4 - ACQUISITIONS - continued
QLCA were transferred to ConsulMed. The total consideration was
$22,275 in Company share value plus assumed liabilities of
approximately $44,000. In connection with the acquisition, the Company
issued an additional 9,000 shares of its Common Stock to the various
individual shareholders of the acquired entities for consulting
services to be rendered to the Company over a one-year period. The
shares have been valued at $60,750.
The transactions described above have been accounted for as purchases
and, accordingly, the net assets or net liabilities and results of
operations of the acquired entities have been included in the
Company's consolidated financial statements commencing on the date of
acquisition.
The following unaudited pro forma summary combines the consolidated
results of operations of the Company and the acquired entities as if
the acquisitions had occurred at the beginning of the fiscal year
prior to the year in which the respective acquisitions were effected,
after giving effect to certain adjustments, including amortization of
intangibles, reduced interest income, and related income tax effects.
This pro forma summary does not necessarily reflect the results of
operations as they would have been if the Company and the acquired
entities had constituted a single entity during such periods.
OCTOBER 31,
1994 1993
---- ----
Net revenues $ 3,472,005 $2,900,614
Net loss $(1,129,186) $ (750,427)
Net loss per share $ (.30) $ (.20)
Goodwill amortization related to these transactions was $32,059,
$15,065 and $3,766 for fiscal 1995, 1994 and 1993, respectively.
NOTE 5 - COMMITMENTS
CONSULTING AND EMPLOYMENT AGREEMENTS
a) The Company has entered into employment agreements with two of its
officers. One agreement, with the Company's chairman, has a five-year
term and provides for annual compensation of $160,000, as adjusted,
plus an annual performance bonus determined by the Board of Directors.
Base compensation will be adjusted annually for increases in the
Consumer Price Index.
Effective June 30, 1994, the president of ConsulMed resigned by mutual
agreement and his employment contract terminated. Also as of that
date, the other selling shareholder of ConsulMed became president and
entered into a new employment agreement. The
-20I-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 5 - COMMITMENTS - continued
agreement provides for a salary of $75,000 through December 31, 1994,
and $150,000 per annum through October 31, 1996. The officer will also
be entitled to receive an annual bonus equal to 5% of ConsulMed's
consolidated pre-tax income. The bonus earned this year, amounting to
approximately $8,000, was waived by the officer.
b) The Company entered into a medical consulting agreement with one of
the former ConsulMed shareholders who currently serves as its
president. Under the agreement, the consultant received a monthly fee
of $6,250 per month plus an annual bonus equal to 2.5% of the annual
pre-tax income of ConsulMed and its consolidated entities. This
agreement terminated on January 1, 1995.
A two-year agreement with a medical consultant providing for a monthly
fee of $2,266.48 expired in fiscal 1995. A $50,000 certificate of
deposit pledged to collateralize a bank loan to the consultant was
released to the Company during the year when the loan was repaid.
The Company's former president, who resigned during fiscal 1993, has
been serving as a consultant to the Company on a month-to-month basis
at the rate of $60,000 per year. This arrangement was terminated in
December 1995.
OPERATING LEASES
The Company is committed to leases for office space at various
locations in Florida. Future minimum rentals on these leases as of
October 31, 1995 are as follows:
OCTOBER 31,
-----------
1996 $179,402
1997 185,616
1998 186,192
1999 51,680
--------
$602,890
========
Rent expense was $125,432, $12,106 and $20,997 for fiscal 1995, 1994
and 1993, respectively.
NOTE 6 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
OCTOBER 31,
1995 1994
---- ----
Prepaid consulting fees $ -- $ 87,800
Other 123,906 114,732
-------- --------
$123,906 $202,532
======== ========
-20J-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 7 - ACCOUNTS RECEIVABLE
Bad debt expense was $51,174, $12,020 and $16,907 in fiscal 1995, 1994
and 1993, respectively.
Under existing arrangements, ConsulMed earns a fee of 6% of
collections for management services rendered to the health care
operations of ConsulMed's partners in QLCA-Jax. Unpaid balances are
included in accounts receivable in the consolidated balance sheet.
Following are the receivable balances and management fees billed, by
year and entity:
OCTOBER 31,
1995 1994
---- ----
Accounts receivable:
First Coast Home Care, Inc. $26,304 $ 8,029
Northeast Florida Home Care, Inc. 19,085 410
Jacksonville Home Health Care, Inc. 3,800 --
------- -------
$49,189 $ 8,439
======= =======
Management fees:
First Coast Home Care, Inc. $15,900 $ 5,926
Northeast Florida Home Care, Inc. 16,300 6,988
Jacksonville Home Health Care, Inc. 3,800 --
------- -------
$36,000 $12,914
======= =======
NOTE 8 - LOAN RECEIVABLE - HMA INVESTMENTS, INC.
During fiscal 1995, the Company loaned a total of $350,000 to Extreme
Technologies, Inc. ("Extreme"), a publicly traded Canadian corporation
which the Company at the time was negotiating to acquire. The Company
subsequently discontinued its efforts to acquire Extreme. The first
loan, evidenced by a 10% Senior Promissory Note of $100,000 was
scheduled to mature on April 21, 1995. The second loan, evidenced by a
$250,000 note was scheduled to mature on September 19, 1995. Neither
note has been paid to date. The loans are secured by the pledge of
6,550,000 restricted shares of Extreme common stock and 1,028,415 free
trading shares of Extreme common stock owned by principal shareholders
and officers of Extreme. The Company has also obtained the right to
vote such shares as trustee under the terms of a Voting Trust
Agreement. The pledge and voting trust agreements will terminate on
the earlier of the repayment of the Extreme notes, or June 1996.
In October 1995, in consideration of a payment of $75,000 and the
issuance of a 10% Purchase Promissory Note in the amount of $289,318,
the Company assigned the Extreme Notes to HMA Investments Inc.
("HMA"), a privately held investment
-20K-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 8 - LOAN RECEIVABLE - HMA INVESTMENTS, INC. - continued
company. The HMA note was initially payable in six bi-weekly
installments of $48,841 from November 14, 1995 through January 23,
1996. The Company subsequently extended the maturity of the entire
note balance to March 31, 1996. Under terms of the Assignment
Agreement, the Company will retain as security its interest in the two
Extreme notes and its interest as voting trustee under the voting
Trust Agreement and as pledgee of the Extreme shares, until the HMA
note is paid in full.
NOTE 9 - OTHER ASSETS
Included in Other Assets at October 31, 1995 and 1994, is a balance
due from the Company's medical consultant of $6,868 and $25,000,
respectively on an unsecured note receivable in the original amount of
$25,000. The note is payable without interest at the current rate of
$2,266 per month.
In December 1994, the Company entered into an agreement with Advanced
Medical Systems, Inc. (AMS) pursuant to which the Company agreed to
purchase all of AMS' rights to a fetal heart rate and uterine
contraction monitor, and to employ AMS as its exclusive manufacturer
of the monitor. AMS will retain the right to continue selling its
earlier model in France and Israel. The Company paid AMS $100,000 upon
execution of the agreement, and is obligated to pay an additional sum
of $100,000 when Pre-Market Approval is obtained from the U. S. Food
and Drug Administration (FDA). This latter payment will be applied as
a credit against purchases of monitor units from AMS. The agreement
also requires the Company to pay to AMS a royalty equal to 5% of the
gross revenues collected by the Company from the sale, lease or rental
of the monitor. The Company is currently seeking Pre-Market Approval
for the monitor from the FDA, and has begun clinical testing of the
monitor under protocols approved by the FDA. The initial $100,000
payment for marketing rights is included in Other Assets in the
accompanying 1995 consolidated balance sheet, and will be amortized
over a period to be determined upon FDA approval, or charged to
operations if the FDA application is not approved.
NOTE 10 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
OCTOBER 31,
1995 1994
---- ----
Office equipment $126,595 $106,304
Medical equipment 19,894 100,185
Leasehold improvements 28,698 5,785
-------- --------
175,187 212,274
Less: Accumulated depreciation and
amortization 76,021 46,982
-------- --------
$ 99,166 $165,292
======== ========
-20L-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 10 - PROPERTY AND EQUIPMENT - continued
Depreciation expense was $47,591, $35,764 and $9,233 for the years
ended October 31, 1995, 1994 and 1993, respectively.
NOTE 11 - INVESTMENT IN MARKETABLE DEBT SECURITIES
OCTOBER 31,
1995 1994
---- ----
COST MARKET COST MARKET
---- ------ ---- ------
U.S. government agency
collateralized mortgage
obligation (CMO), 5.75%,
contractual maturity
August 2003 $591,104 $531,356 $821,909 $683,926
U.S. Treasury Bill, 5.27%,
due December 7, 1995 200,544 200,544 -- --
-------- -------- -------- --------
$791,648 $731,900 $821,909 $683,926
======== ======== ======== ========
The Company reported an unrealized loss on the CMO of $137,982 in its
Statement of Operations for fiscal 1994. In fiscal 1995, the
investment recovered $80,013 in value, which the Company has reflected
as a credit directly to stockholders' equity.
NOTE 12 - ACCRUED EXPENSES
Accrued expenses consist of the following:
OCTOBER 31,
1995 1994
---- ----
Accrued insurance $ 3,587 $102,008
Accrued payroll and payroll taxes 252,592 128,468
Other 111,086 40,697
-------- --------
$367,265 $271,173
======== ========
NOTE 13 - STOCKHOLDERS' EQUITY
RECAPITALIZATION
In January 1992, the Company's Board of Directors authorized the
following:
- The issuance of 200,000 Common Stock Purchase Warrants to the
purchasers in the Company's Private Offering on the basis of
one warrant for each three shares of Common Stock. Each warrant
entitles the holder to purchase one share of Common Stock for a
period of five years at a price of $4.00 per share. A total of
75,000 of these Warrants were sold by selling security holders
in the Company's public offering.
-20M-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 13 - STOCKHOLDERS' EQUITY - continued
PUBLIC OFFERING
In connection with its public offering of units in August 1992, the
Company issued 500,000 Common Stock Purchase Warrants. Each Warrant
entitles the holder to purchase one share of Common Stock for a period
of five years through August 20, 1997 at a price of $4.00 per share.
PRIVATE PLACEMENT
During fiscal 1995 the Company raised net proceeds of $1,050,666 from
the private sale of 264,375 Units at $4.00 per Unit. Each Unit
consists of two shares of Common Stock and one Warrant to purchase one
share of Common Stock for $3.00 per share during the five-year period
ending March 22, 2000. The offering expired on November 15, 1995.
CONTINGENT SHARES
The Company is contingently obligated to issue up to 500,000 shares of
its Common Stock to the selling shareholders of ConsulMed in the event
that ConsulMed attains certain earnings levels over the next fiscal
year (see Note 4).
STOCK GRANT
In July 1995, the Company sold 10,000 unregistered shares of its
Common Stock to an officer for par value ($.001 per share). The
different between the value of the shares and the consideration paid,
which amounted to $7,490 was charged to operations during the year.
NOTE 14 - STOCK OPTION PLAN
The Company has reserved 500,000 shares of Common Stock for issuance
under its stock option plan (the "Plan"). The Plan provides for the
granting of options to officers, directors, employees and advisors of
the Company. The exercise of incentive stock options ("ISOs") issued
to employees who are less than 10% stockholders shall not be less than
the fair market value of the underlying shares on the date of grant or
not less than 100% of the fair market value of the shares in the case
of an employee who is a 10% stockholder. The exercise price of
non-statutory stock options shall not be less than the par value of
the shares to which the option relates. Options are not exercisable
for a period of one year from the date of grant. Thereafter, options
may be exercised as determined by the Board of Directors, with maximum
terms of ten and five years, respectively, for ISOs issued to
employees who are less than 10% stockholders and employees who are 10%
stockholders. The Plan will terminate in 2002.
In fiscal 1995, the Company granted one of its officers an option to
purchase up to 30,000 shares of the Company's Common Stock for $.001
per share, subject to certain vesting requirements. The option expired
in November 1995 when the officer left the Company.
-20N-
<PAGE>
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 15 - INCOME TAXES
As of October 31, 1995, the Company has a federal net operating loss
carryforward for tax and financial reporting purposes of approximately
$2,800,000, expiring from 2006 through 2010. The carryforwards are
subject to limitations on the amount that can be utilized by the
Company in a year due to change of ownership rules as defined by
applicable federal tax statutes. For October 31, 1995, a total of
approximately $2,710,000 can be utilized, with the balance of $90,000
available at the rate of approximately $25,000 per year. Unused losses
can be carried forward and added to the losses allowable in subsequent
years. As of October 31, 1995, the Company has not recognized the
potential future tax benefits of any net operating loss carryforwards.
NOTE 16 - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
During fiscal 1995, three customers accounted for 49%, 16% and 16%,
respectively of the Company's service revenues. During fiscal 1994,
three customers accounted for 22%, 20% and 12%, respectively, of the
Company's service revenues. During fiscal 1993, two customers
accounted for 27% and 19%, respectively, of the Company's service
revenues.
All of the Company's business activity is with customers located
within the State of Florida. The Company grants credit to its
customers who are comprised principally of large Medicare-certified
home health agencies.
NOTE 17 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
OCTOBER 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest paid $1,382 $ 5,945 $2,151
====== ======= ======
Acquisition of minority interest:
Net liabilities assumed $43,868
Common Stock issued 22,275
-------
$ -- $66,143 $ --
====== ======= ======
Common Stock issued pursuant to
stock grants and consulting agreements $7,500 $60,750 $ --
====== ======= ======
</TABLE>
NOTE 18 - SUBSEQUENT EVENT
In November 1995, the Company's Board of Directors approved a $450,000
loan to 460617 Ontario Ltd., a Canadian corporation controlled by a
member of the Company's board. The loan is due in May 1996, bears
interest at the rate of 10.75% per annum, and is guaranteed by the
board member and his brother, who is also a stockholder of the
borrower.
-20O-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Jeffrey I. Binder 49 Chairman of the Board
and Director
Martin Stern 44 Secretary, Treasurer and
Director
Emmanuel Diena 39 Director
Kenneth A. Rosen, M.D. 50 Director
Alan I. Miller 51 Director and President of
Consul-Med, Inc.
Mr. Binder has been the Chairman of the Board and a director of the Company
since its inception, and he is the chief executive officer of the Company. Mr.
Binder is also Chairman of JeMJ Financial Services, Inc., a private holding
company, and since November, 1994 he has been a director of NAL Financial Group,
Inc., a public company engaged in the finance business. Since March, 1994, he
has also been chairman and a director of Malom, Inc., a privately held company
which provides billing and collection services for medical related receivables.
Mr. Binder has been Chairman of Commodore Holdings Ltd., a cruise line holding
company, since April, 1995. From December, 1987 to June, 1994, he was a
director, and during part of such period he was the Vice Chairman, of GGL
Industries, Inc., a private holding company. From September, 1985 to June, 1994,
he was Chairman of the Board of Georgetown Manor, Inc. (which formerly operated
a retail furniture outlet) and Furniture Industries of Florida, Inc. (a real
estate holding company). Between March, 1989 and October, 1993, he was the
President and a director of Sector Associates, Ltd., a public company engaged in
the furniture retail business, and chairman of the board of its subsidiary,
ToSI. Mr. Binder received a bachelor's degree from Drake University in 1968, a
master's degree from the London School of Economics in 1969 and a Juris Doctor
degree from George Washington National Law Center in 1971. Mr. Binder devotes
approximately one-half of his time to the business of the Company.
Mr. Stern has been Secretary and Treasurer and a director of the Company
since its inception. Mr. Stern has been self employed as a certified public
accountant and financial consultant in New
-21-
<PAGE>
York City for over five years. Between January, 1985 and December, 1990, Mr.
Stern was also a director of Medphone Corporation, a public company engaged in
developing and marketing a telephonic cardiac monitor-defibrillator. Mr. Stern
received a bachelor's degree from Brooklyn College in 1971 and a master's degree
from Baruch College in 1975. Mr. Stern devotes only a portion of his time to the
affairs of the Company.
Mr. Diena has been employed by Daniel Medical Laboratories since 1980,
where he is currently a Vice President and a director. Mr. Diena received a
bachelor's degree from the University of Toronto in 1980 and a doctorate in
rabbinical studies from Ner Israel Rabbinical College, Toronto, in 1982. Mr.
Diena is a citizen of Canada.
Dr. Miller has been a practicing physician since 1967. He has been engaged
in private practice in Florida since 1974, specializing in gastroenterology. Dr.
Miller was one of the co-founders of Consul-Med, Inc. He holds a Bachelor of
Science degree and a Doctor of Medicine degree from the University of Miami,
Florida. He is a diplomat of the American Board of Internal Medicine and the
American Board of Gastroenterology. Dr. Miller closed his practice in 1995 in
order to devote his full time to the Company.
Dr. Rosen has been a practicing physician in Miami, Florida since 1972,
and he is affiliated with Baptist Hospital and South Miami Hospital. Dr. Rosen
is also an Associate Professor in the Department of Dermatology at the
University of Miami Medical School. He received a bachelor's degree from Emory
University in 1965 and a Doctor of Medicine degree from the University of Miami
School of Medicine in 1969. Dr. Rosen holds a Diplomate from the American Board
of Dermatology.
Directors are elected for one-year terms to serve until the next annual
meeting of stockholders and until their respective successors are elected and
qualified. The executive officers of the Company are elected annually at the
first meeting of the Company's Board of Directors held after each annual meeting
of stockholders. Each executive officer holds office until his successor is duly
elected and qualified, his resignation, or his removal in the manner provided in
the Company's by-laws.
In addition to its officers the Company employs the following persons who
may be deemed significant employees:
NAME AGE POSITION
---- --- --------
Mitchell Wallace 39 Comptroller and Chief
Financial Officer
Mr. Wallace has been employed by the Company since November, 1995 as
comptroller and chief financial officer. Prior to being employed by the Company,
Mr. Wallace was employed as Controller at
-22-
<PAGE>
Alliance Medical Practices, Inc. a private owner and manager of medical
practices, between January, 1995 and November, 1995 and as chief financial
officer at Pal-med Health Services, a private health care provider, between
April, 1988 and November, 1995.
Reports on Forms 4 and 5 were not filed for the fiscal year ended October
31, 1993 on behalf of Mr. Stern to reflect a gift by him in January, 1993 of
2,000 shares of Common Stock of the Registrant to Leah Stern, his wife, as
custodian for Devorah Stern, their daughter, under the Uniform Gift to Minors
Act of New York.
ITEM 11. EXECUTIVE COMPENSATION.
The following table provides a summary compensation table with respect to
the compensation of the Company's chief executive officer (CEO). No other
officers or directors of the Company received an annual salary and bonus of
$100,000 or more. Accordingly, the compensation table does not include salaries
of other executive officers. No compensation was paid to any officers or
directors prior to the fiscal year ended October 31, 1992.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- --------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
NAME OTHER RESTRICTED SECURITIES ALL
AND ANNUAL STOCK UNDERLYING LTIP OTHER
PRINCIPAL COMPEN- AWARD(S) OPTIONS PAYOUTS COMPEN-
POSITION YEAR SALARY BONUS($) SATION($) ($) SARS ($) SATION($)
- ----------- ---- -------- -------- --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey I.
Binder, CEO 1995 $150,000 0 0 0 0 0 0
" 1994 $150,000 0 0 0 0 0 0
</TABLE>
The Company has entered into an employment agreement with Mr. Binder
providing for his employment as Chairman and Chief Executive Officer of the
Company for a term of five years commencing on May 1, 1993 at an annual salary
of $150,000 plus a bonus to be determined by the Board of Directors. Commencing
January 1, 1994, the salary is adjusted by any increase in the Consumer Price
Index, and he is currently being paid an annual salary of $160,200.
The Company has entered into an employment agreement with Dr. Miller
providing for his employment as chief executive officer of Consul-Med for the
period from July 1, 1994 to October 31, 1996, which provides for an annual
salary of $75,000 until July 1, 1995 and $150,000 thereafter plus an annual
bonus equal to 5% of the net income before state and federal taxes of Consul-Med
and its subsidiaries.
-23-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of December 31, 1995,
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of the Company's Common Stock, par value $.001
per share, by (i) each person who is known by the Company to own beneficially
more than five (5%) percent of the Company's outstanding Common Stock; (ii) each
of the Company's directors; and (iii) all directors and officers of the Company
as a group.
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP* OF CLASS
- ----------------------- ---------- --------
Jeffrey I. Binder 462,000 12%
9300 So. Dadeland Blvd.
Miami, FL 33156
Martin Stern ** 113,500 3%
c/o Telephonic Medical
Care, Inc.
9300 So. Dadeland Blvd.
Miami, FL 33156
Emmanuel Diena 231,000 6%
1111 Flint Road, Unit 1
Downsview, Ont. M3J 3C7
Canada
Kenneth A. Rosen, M.D. 10,000 *** -
c/o TelMed, Inc.
9300 So. Dadeland Blvd.
Miami, FL 33156
Alan I. Miller
3275 W. Hillsboro Bl., #207
Deerfield Beach, FL 33442 - -
All directors and
officers as a group
(5 persons) 816,500 21%
- --------------
* The persons named in the table have sole voting and investment power with
respect to all shares shown as beneficially owned by them.
** Leah Stern, the wife of Martin Stern, beneficially owned an additional
117,500 shares of Common Stock, including 4,000 shares held by her as custodian
for her daughter under the Gift to Minors Act of New York and sold such shares
during the last fiscal year. Leah Stern and Martin Stern each disclaim
beneficial ownership in the shares which have been held by the other.
*** Shares subject to options immediately exercisable, which amount to less than
1%.
-24-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In November, 1995, the Company loaned $450,000 to 460617 Ontario Limited
(a Canadian corporation), carrying on business as Daniel Medical Laboratories
(Daniel Medical), pursuant to a promissory note payable on May 6, 1996 with
interest at 10.75% per annum. Daniel Medical is owned by Mr. Emmanuel Diena and
members of his family, and the loan was personally guaranteed by them.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements:
Financial Statements are set forth under Item 8.
(2) Financial Statement Schedules:
None.
-25-
<PAGE>
(3) Exhibits:
SEQUENTIAL
PAGE NO.
----------
3(a) - Restated Certificate of Incorporation and (a)
Amendment to Certificate of Incorporation.
3(b) - By-Laws. (a)
4(a) - Form of Common Stock Certificate. (a)
4(b) - Warrant Agreement, including form of Warrant (b)
Certificate.
10(a)(i) - Agreement between Registrant, Emmanuel Diena, (a)
Daniel Diena, Joseph Schochet and Portable
Fetal Monitoring, Inc., dated July 12, 1991
for the purchase of the capital stock of
Portable Fetal Monitoring, Inc.
10(a)(ii) - Assignment to Registrant of rights to portable (a)
fetal monitor.
10(a)(iii)- Employment Agreement between Registrant and (a)
Joseph Schochet.
10(a)(iv) - Mergers and Acquisitions Agreement with South (b)
Richmond Securities, Inc.
10(a)(v) - Financial Consulting Agreement with South (b)
Richmond Securities, Inc.
10(a)(vi) - Agreement and Plan of Merger, dated as of (c)
June 21, 1993, by and between TelMed,
Inc., T.M. Sub #1, Inc., Consul-Med,
Inc., Marvin L. Finston, M.D. and Alan
I. Miller, M.D.
10(a)(vii) - Employment Agreement between Registrant (d)
and Jeffrey I. Binder.
10(a)(viii)- Stock Option Plan of Registrant. (d)
10(a)(ix) - Employment Agreement between Consul-Med, Inc. (d)
Inc. and Marvin L. Finston.
10(a)(x) - Consulting Agreement between Consul-Med, Inc. (d)
and Alan I. Miller.
10(a)(xi) - Employment Agreement between Consul-Med, Inc. (e)
and Alan I. Miller.
10(a)(xii)- Consulting Agreement between Consul-Med, Inc. (e)
and Marvin L. Finston.
10(a)(xiii)- Lease Agreement between Consul-Med of South (e)
Florida, Inc. and HHL Financial Services,
Inc.
10(a)(xiv)- Promissory Notes, dated February 21, 1995 and
June 21, 1995, of Extreme Technologies, Inc.
payable to the Company.
10(a)(xv) - Assignment Agreement, dated October 1, 1995,
between HMA Investments, Inc. and the
Company with respect to promissory notes
of Extreme Technologies, Inc.
-26-
<PAGE>
10(a)(xi) - Promissory Note dated November 6, 1995 of
Daniel Laboratories payable to the
Company and Guaranty Agreement of Daniel
Diena and Emmanuel Diena.
21 - List of Subsidiaries of Registrant. (e)
- --------
(a) Incorporated by reference to the corresponding exhibit in the Company's
Registration Statement on Form S-1 (SEC File No. 33-45472).
(b) Incorporated by reference to the corresponding exhibit in the Company's
Report on Form 10-K for the fiscal year ended October 31, 1992.
(c) Incorporated by reference to Exhibit (i) to the Registrant's Report on Form
8-K for June 21, 1993.
(d) Incorporated by reference to the corresponding exhibit in the Company's
Report on Form 10-K for the fiscal year ended October 31, 1993.
(e) Incorporated by reference to the corresponding exhibit in the Company's
Report on Form 10-K for the fiscal year ended October 31, 1994.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year ended October 31, 1995.
-27-
<PAGE>
SIGNATURES
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
its behalf by the undersigned, thereunto duly authorized.
Dated: August 21, 1996 TELMED, INC.
By: /s/ JEFFREY I. BINDER
-----------------------------
Jeffrey I. Binder, Chairman
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
Chairman and Director
(Principal Executive
/s/ JEFFREY I. BINDER Officer) August 21, 1996
- -----------------------
Jeffrey I. Binder
Principal Financial
/s/ MITCHELL WALLACE and Accounting Officer August 21, 1996
- -----------------------
Mitchell Wallace
Secretary, Treasurer
/s/ MARTIN STERN and Director August 21, 1996
- -----------------------
Martin Stern
/s/ EMMANUEL DIENA Director August 21, 1996
- -----------------------
Emmanuel Diena
/s/ KENNETH A. ROSEN Director August 21, 1996
- -----------------------
Kenneth A. Rosen, M.D.
/s/ ALAN I. MILLER Director August 21, 1996
- -----------------------
Alan I. Miller
-28-
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