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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended April 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-20438
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TELMED, INC.
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(Exact name of registrant as specified in its charter)
Delaware 65-0273037
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(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
9350 South Dixie Highway, Suite 1220, Miami, Florida 33156
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(Address of principal executive offices) (Zip Code)
Registrant's tel. number, including area code (305) 670-9773
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(Former name or former address, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES NO
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes of
Common Stock, as of the latest practicable date. As of April 30, 1997, there
were outstanding 620,000 shares of Common Stock, par value $.007 per share.
Page 1 of 11 pages. Exhibit index at page 9.
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TELMED, INC.
PART I FINANCIAL INFORMATION
I N D E X
Page
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Item 1. Financial Statements
Consolidated Balance Sheets as of April 30,
1997 and October 31, 1996 3
Consolidated Statements of Operations for
the three and six months ended April 30,
1997 and April 30, 1996. 4
Consolidated Statements of Cash Flows for
the six months ended April 30, 1997 and
April 30, 1996. 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 8
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TELMED, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
April 30, October 31,
1997 1996
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<S> <C> <C>
Current Assets
Cash and cash equivalents $ 167,815 $ 44,139
Accounts receivable, net of allowance for doubtful
accounts of $188,977 and $213,688, respectively 575,745 701,254
Due from affiliates - 26,189
Prepaid expenses and other current assets 48,510 28,439
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Total current assets 792,070 800,021
Property and equipment - net 69,700 140,840
Investment in debt securities - available for sale 17,335 109,487
Goodwill, net of accumulated amortization of
$38,296 and $26,894, respectively 27,847 39,249
Other assets 119,581 100,060
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Total assets $ 1,026,533 $ 1,189,657
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Loans payable - related parties $ 225,000 $ 245,000
Accounts payable 257,157 277,263
Accrued expenses 462,765 478,583
Due to affiliate - 2,100
Current portion of capital lease obligation 13,572 9,404
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Total current liabilities 958,494 1,012,350
Capital lease obligation, less current portion 54,289 39,356
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Total liabilities 1,012,783 1,051,706
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Minority interests 17,166 41,112
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Commitments (see Notes)
Stockholders' Equity
Common stock - par value $.007 per share, 10,000,000
shares authorized, 620,000 shares issued and
outstanding, as adjusted 4,340 4,340
Additional paid-in capital 5,685,016 5,685,016
Accumulated deficit, net of distributions of
$51,950 and -0-. (5,785,610) (5,677,581)
Unrealized gain on securities available for sale 92,838 85,064
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Total stockholders' equity ( 3,416) 96,839
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Total liabilities and stockholders' equity $ 1,026,533 $ 1,189,657
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TELMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
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APRIL 30, APRIL 30,
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues
Service Revenues $ 903,263 $ 1,127,442 $ 1,838,407 $ 2,293,014
Interest and Other Income 37,127 13,705 38,850 34,162
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Total Revenues 940,390 1,141,147 1,877,257 2,327,176
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Costs and Expenses
Cost of Services Provided 428,639 518,363 840,660 1,031,908
Research and Development Costs - - - 169
Clinical Testing Costs - 16,519 - 27,618
General and Administrative 639,992 854,713 1,531,945 1,596,345
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Total Expenses 1,068,631 1,389,595 2,372,605 2,656,040
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Loss Before Minority Interests
and Sale of CORF ( 128,241) ( 248,448) ( 495,348) ( 328,864)
Minority Interests In
Consolidated Entities ( 38,624) ( 7,253) ( 60,731) ( 18,987)
Gain on CORF Sale 500,000
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Net Loss $( 166,865) $( 255,701) $( 56,079) $( 347,851)
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Net Loss Per Share $( .27) $( .41) $( .09) $( .56)
=========== =========== =========== ===========
Weighted Average Shares
Outstanding 620,000 620,000 620,000 620,000
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TELMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30,
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $( 56,079) $( 347,851)
Adjustments To Reconcile Net Loss
To Net Cash Used In Operating
Activities:
Unrealized Gain on Marketable Securities 7,774 29,221
Depreciation and Amortization 82,542 46,776
(Increase) Decrease In Accounts Receivable 125,509 ( 296,283)
(Increase) Decrease In Due From Affiliates 26,189 25,100
Increase (Decrease) In Minority Interest ( 23,946) ( 27,465)
(Increase) Decrease In Prepaid Expenses and
Other Current Assets ( 20,071) ( 74,931)
Increase (Decrease) In Accounts Payable
and Accrued Expenses ( 55,923) 141,573
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Net Cash Provided By(Used In) Operating Activities 85,995 ( 503,860)
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Cash Flows From Investing Activities:
Decrease In Available For Sale Investments 92,152 513,829
Acquisition Of Equipment - ( 30,100)
(Increase) In Other Assets ( 19,521) ( 52,017)
Sale of Investment In General Partnership - 29,357
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Net Cash Provided By Investing
Activities 72,631 461,069
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Cash Flows From Financing Activities:
Increase in Lease Obligations 19,100 -
Payments on Loans to Affiliates ( 2,100) -
Distributions ( 51,950) -
Loan Receivable - 46061 Ontario Ltd. - ( 450,000)
Proceeds From Loan Receivable -
HMA Investment, Inc. - 289,318
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Net Cash Used In Financing Activities ( 34,950) ( 160,682)
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Increase (Decrease) In Cash and Cash
Equivalents 123,676 ( 203,473)
Balance At October 31, 44,139 493,916
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Balance At April 30, $ 167,815 $ 290,443
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997
NOTE 1 - DESCRIPTION OF BUSINESS AND FINANCIAL DIFFICULTIES
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 for use by women with high risk
pregnancies. During fiscal 1996, the Company began in-home clinical (Phase
II) tests of the monitor, and expects to complete Phase II testing during
fiscal 1997 or first quarter fiscal 1998. Thereafter, the Company will seek
approval from the U.S. Food and Drug Administration ("FDA") to market the
device. There can be no assurance that Phase II clinical testing will be
successfully completed or that the FDA will grant its approval based on the
Company's clinical studies.
In August 1993, the Company acquired all of the outstanding Common Stock of
ConsulMed, Inc. ("ConsulMed"). ConsulMed provides in-home nursing care and
rehabilitative therapy for private pay and Medicare patients located within
the State of Florida. ConsulMed has expanded its operations to provide
rehabilitative therapy, primarily to Medicare patients, through its
comprehensive out-patient rehabilitation facilities ("CORFs"). ConsulMed has
established two CORFs in Florida, one of which was during the first quarter
of 1997. ConsulMed also offers management support services to assist
independent owners in the establishment and operation of CORFs.
The Company has incurred consolidated net losses of approximately $2,962,000,
$1,025,000 and $974,000 for the years ended October 31, 1996, 1995 and 1994,
respectively. The Company has an accumulated deficit of approximately
$5,785,000 and negative working capital of approximately $166,000 at April
30, 1997. These factors raise substantial doubt about the Company's ability
to continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of the
aforementioned uncertainty. Management anticipates that TelMed will not be
prepared to generate revenues through at least the end of fiscal 1997, and
that ConsulMed will require additional funds for operations at least through
the first half of fiscal 1997.
Management's plans regarding these matters include i) implementing a
cost-cutting program to reduce overhead expenses, ii) using available
accounts receivable financing and related party loans for operating capital,
and iii) selling business assets. There is no assurance that such efforts
will be successful.
NOTE 2 - MANAGEMENT REPRESENTATION
The accompanying financial statements are unaudited for the interim period,
but include all adjustments (consisting only of normal recurring accruals)
which management considers necessary for the fair presentation of results at
April 30, 1997 and 1996.
These financial statements do not purport to contain complete disclosure in
conformity with generally accepted accounting principles and should be read
in conjunction with the Company's audited financial statements at, and for
the year ended October 31, 1996.
The results reflected for the six months period ended April 30, 1997 are not
necessarily indicative of the results for the entire fiscal year to end on
October 31, 1997.
NOTE 3 - STOCKHOLDERS' EQUITY
In December, 1996 the Company's Board of Directors ratified, subject to
stockholder approval, a 1-for-7 reverse split of the Company's Common Stock,
an increase in par value to $.007 per share, and a change in the number of
authorized shares from 20,000,000 to 10,000,000. The Company's stockholders
approved the recapitalization on January 31, 1997.
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<PAGE> 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Six Months Ended April 30, 1997 compared to Six Months Ended April 30, 1996
ConsulMed contributed all of the operating revenue of the Company during the
six months ended April 30, 1997 and 1996. Service revenues decreased $454,607
(20%) from $2,293,014 for the first six months of fiscal 1996 to $1,838,407 for
the first six months of fiscal 1997. Service revenues represent income from
in-home nursing care services provided. Cost of service provided of $840,660
and $1,031,908 consists primarily of payroll and related costs. With the
expansion of managed care, especially in the South Florida area, the
opportunities to provide third party nursing services greatly diminished in
that managed care providers provided such services through wholly owned
subsidiaries or through contract with national service companies. This trend
is expected to continue, resulting in increased pressure on the Company's
ability to generate revenue from in-home nursing care.
General and administrative costs decreased $64,400 (4%) from $1,596,345 to
$1,531,945 during the first six months of fiscal year-end 1997. These costs
consist of operating expenses incurred by ConsulMed of $1,297,494 and
$1,560,811 in the six months ended April 30, 1997 and 1996 respectively, as
well as officer salary, professional fees and general overhead expenses
incurred by the parent company of $234,451 and $355,346.
ConsulMed recorded a profit from operations of $178,372 for the first six
months of fiscal year 1997, including a $500,000 gain from the sale of its CORF
(See "Liquidity and Capital Resources" below). This compares with a loss of
$7,495 for the six months ended April 30, 1996.
Liquidity and Capital Resources
The Company experienced significant cash flow problems during fiscal year 1996.
These difficulties continued into the first half of fiscal year 1997. Although
during fiscal 1996, the Company adopted certain cost reductions in general and
administrative expenses with respect to administrative staff, this was offset
by increased expenses associated with the establishment of Comprehensive
Outpatient Rehabilitative Facility ("CORF") and the development of the
pulmonary program. The Company funded Consul-Med's operating deficit and the
continued expenses associated with testing the fetal monitor, through the
utilization of remaining cash and loans from related parties. In addition,
during the first quarter of fiscal 1997, the Company began factoring accounts
receivable and sold one of its CORF facilities for $500,000 and retained a
management contract.
The Company continues to revise its operating budget, evaluating the
profitability of the various operating departments, and reducing administrative
costs and personnel in order to preserve existing cash and anticipated cash
flow.
The ability of the Company to continue as a going concern in dependent on the
Company's ability to generate cash flow and return to profitable operations, or
obtain suitable financing from third parties. No assurances can be given,
however, that these goals can be accomplished.
The Company has no current commitments for capital expenditures.
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<PAGE> 8
Forward Looking Statements
From time to time, the Company may publish forward looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, usage and development activities and
some other matters. The words "may", "will", "expect", "anticipate",
"continue", "estimate", "project", "intend" and similar expressions are
intended to identify such forward looking statements. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors could cause its actual results and experience
to differ materially from anticipated results and other expectations expressed
by the Company's forward looking statements. The risks and uncertainties that
may effect the operations, performance, development and results of business,
include but are not limited to, the following:
(1) Consul-Med's home health care services could experience continued
decrease in revenues.
(2) Consul-Med's CORF operation could experience difficulties in generating
increased revenues or revenues could decrease due to competitive and other
factors.
(3) TelMed's fetal monitor's clinical testing could be prolonged due to
further testing requirements.
(4) The FDA could require additional testing prior to final determination.
(5) There can be no assurances that the fetal monitor will ultimately
receive FDA approval or that this device can be sold or licensed to third
parties.
(6) There can be no assurances that additional funding, if necessary, could
be obtained in order to continue the operations of the business.
(7) There can be no assurances that the Company's desire to acquire other
business can be achieved.
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<PAGE> 9
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) Financial Statements
(i) Report of Independent Auditors'
(ii) Consolidated Balance Sheets at October 31, 1995 and 1996
(iii) Consolidated Statements of Operations for each of the years in
the three-year period ended October 31, 1996
(iv) Consolidated Statements of Cash Flows for each of the years in
the three-year period ended October 31, 1996
(v) Consolidated Statements of Stockholders' Equity for each of
the years in the three-year period ended October 31, 1996
(vi) Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
None.
(3) Exhibits
Sequential
Page No.
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3(a)(i) - Restated Certificate Of Incorporation and Amendment (1)
to Certificate Of Incorporation
3(a)(ii) - Amendment to Certificate of Incorporation -
3(b) - By-Laws (1)
4(b)(i) - Warrant Agreement for Public Warrants (2)
4(b)(ii) - Warrant Agreement for Private Warrants -
10(a)(i) - Employment Agreement between Registrant and (3)
Jeffrey I. Binder
10(a)(ii) - Stock Option Plan of Registrant (3)
10(a)(iii) - Employment Agreement between Consul-Med, Inc. (4)
and Alan I. Miller
10(a)(iv) - Consulting Agreement between Consul-Med, Inc. (4)
and Marvin L. Finston
10(a)(v) - Lease Agreement between Consul-Med of South (4)
Florida, Inc. and HHL Financial Services, Inc.
10(a)(vi) - Promissory Notes, dated February 21, 1995 and (5)
June 21, 1995, of Extreme Technologies, Inc.
payable to the company.
10(a)(vii) - Assignment Agreement, dated October 1, 1995, (5)
between HMA Investments, Inc. and the Company
with respect to promissory notes of Extreme
Technologies, Inc.
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<PAGE> 10
10(a)(viii) - Promissory Note dated November 6, 1995 of Daniel (5)
Laboratories payable to the company and
Guaranty Agreement of Daniel Diena and
Emmanuel Diena.
21 List of Subsidiaries of Registrant.
27 Financial Data Schedule (for SEC use only).
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(1) Incorporated by reference to the corresponding exhibit in the
Company's Registration Statement on Form S-1 (SEC File No. 33-45472).
(2) Incorporated by reference to the corresponding exhibit in the
Company's Report on Form 10-K for the fiscal year ended October 31, 1992.
(3) Incorporated by reference to the corresponding exhibit in the
Company's Report on Form 10-K for the fiscal year ended October 31, 1993.
(4) Incorporated by reference to the corresponding exhibit in the
Company's Report on Form 10-K for the fiscal year ended October 31, 1994.
(5) Incorporated by reference to the corresponding exhibit in the
Company's Report on Form 10-K/A for the fiscal year ended October 31, 1995.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K for the quarter for
which this report was filed.
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<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELMED, INC.
Date: June 13, 1997 /S/ ALAN I. MILLER, M.D.
-------------------------
Alan I. Miller, M.D.,
President
Date: June 13, 1997 /S/ JEFFREY I. BINDER
-----------------------------
Jeffrey I. Binder, Chairman
Date: June 13, 1997 /S/ SYED NAQVI
-----------------------------
Syed Naqvi, Principal
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TELMED, INC. FOR THE THREE MONTHS ENDED APRIL 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 167
<SECURITIES> 0
<RECEIVABLES> 576
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 49
<PP&E> 70
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,026
<CURRENT-LIABILITIES> 958
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> (7)
<TOTAL-LIABILITY-AND-EQUITY> 1,026
<SALES> 903
<TOTAL-REVENUES> 940
<CGS> 429
<TOTAL-COSTS> 429
<OTHER-EXPENSES> 678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (167)
<INCOME-TAX> 0
<INCOME-CONTINUING> (167)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (168)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
