<PAGE> 1
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 JULY 31, 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 _______________
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 ______
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 July 31, 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
Part I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Balance Sheets as of July 31,
1997 and October 31, 1996 3
Consolidated Statements of Operations for
the three and nine months ended July 31,
1997 and July 31, 1996. 4
Consolidated Statements of Cash Flows for
the nine months ended July 31, 1997 and
July 31, 1996. 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 8
Part II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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TELMED, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
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<S> <C> <C>
Current Assets
Cash and cash equivalents $ - $ 44,139
Accounts receivable, net of allowance for doubtful
accounts of $199,394 and $213,688, respectively 670,387 701,254
Due from affiliates - 26,189
Prepaid expenses and other current assets 68,397 28,439
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Total current assets 738,784 800,021
Property and equipment - net 119,168 140,840
Investment in debt securities - available for sale - 109,487
Goodwill, net of accumulated amortization of
$36,812 and $26,894, respectively 29,331 39,249
Other assets 128,981 100,060
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Total assets $ 1,016,264 $ 1,189,657
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Bank Overdraft $ 63,912 $ -
Loans payable - related parties 415,000 245,000
Accounts payable 484,051 277,263
Accrued expenses 69,126 478,583
Due to affiliate 25,000 2,100
Current portion of capital lease obligation 13,572 9,404
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Total current liabilities 1,070,661 1,012,350
Capital lease obligation, less current portion 43,327 39,356
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Total liabilities 1,113,988 1,051,706
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Minority interests - 41,112
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Commitments (see Notes)
Stockholders' Equity (Deficit)
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-. (5,879,918) (5,677,581)
Unrealized gain on securities available for sale 92,838 85,064
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Total stockholders' equity (deficit) (97,724) 96,839
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Total liabilities and stockholders' equity
Deficit $ 1,016,264 $ 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 NINE MONTHS ENDED
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JULY 31, JULY 31,
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1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Service Revenues $ 1,004,312 $ 917,630 $ 2,473,646 $ 3,210,644
Interest and Other Income 2,609 2,871 41,459 37,033
----------- ----------- ----------- -----------
Total Revenues 1,006,921 920,501 2,515,105 3,247,677
----------- ----------- ----------- -----------
Costs and Expenses
Cost of Services Provided 296,304 467,032 1,136,964 1,498,940
Research and Development Costs - - - 169
Clinical Testing Costs - - - 27,618
General and Administrative 817,163 976,819 1,980,035 2,573,163
----------- ----------- ----------- -----------
Total Expenses 1,113,467 1,443,851 3,116,999 4,099,890
----------- ----------- ----------- -----------
Loss Before Minority Interests
and Sale of Division (106,546) (523,350) (601,894) (852,213)
Minority Interests In
Consolidated Entities 12,238 3,661 (48,493) (15,326)
Gain on Division Sale 500,000
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Net Loss $ (94,308) $ (519,689) $ (150,387) $ (867,539)
=========== =========== =========== ===========
Net Loss Per Share $ (.15) $ (.84) $ (.24) $ (1.40)
=========== =========== =========== ===========
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
NINE MONTHS ENDED JULY 31,
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (150,387) $ (867,539)
Adjustments To Reconcile Net Loss
To Net Cash Used In Operating
Activities:
Unrealized Gain on Marketable Securities 7,774 35,496
Depreciation and Amortization 53,052 76,342
(Increase) Decrease In Accounts Receivable 30,867 (276,959)
(Increase) Decrease In Due From Affiliates 26,189 25,100
Increase (Decrease) In Minority Interest (41,112) (31,126)
(Increase) In Other Assets (28,921) (49,583)
(Increase) Decrease In Prepaid Expenses and
Other Current Assets (39,958) (76,862)
Increase (Decrease) In Accounts Payable
and Accrued Expenses (202,669) 173,873
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Net Cash Provided By (Used In) Operating Activities (345,165) (991,258)
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Cash Flows From Investing Activities:
Decrease In Available For Sale Investments 109,487 521,376
Disposition Of Equipment (21,462) (45,330)
Sale of Investment In General Partnership - 29,357
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Net Cash Provided By Investing
Activities 88,025 505,403
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Cash Flows From Financing Activities:
Increase in Lease Obligations 8,139 -
Incease in Loans From Affiliates 22,900 -
Distributions (51,950) -
Loan Receivable - 46061 Ontario Ltd. - (450,000)
Proceeds From Loan Receivable -
HMA Investment, Inc. - 289,318
Related Party 170,000 196,500
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Net Cash Used In Financing Activities 149,089 35,818
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Increase (Decrease) In Cash and Cash
Equivalents (108,051) (450,037)
Balance At October 31, 44,139 493,916
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Balance At July 31, $ (63,912) $ 43,879
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE> 6
TELMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 1 - DESCRIPTION OF BUSINESS AND FINANCIAL DIFFICULTIES
--------------------------------------------------
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
$5,900,000 and negative working capital of approximately $331,877 at July 31,
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 through 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
July 31, 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 nine month period ended July 31, 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
Nine Months Ended July 31, 1997 compared to Nine Months Ended July 31, 1996
ConsulMed contributed all of the operating revenue of the Company during the
nine months ended July 31, 1997 and 1996. Service revenues decreased $736,978
(23%) from $3,210,624 for the first nine months of fiscal 1996 to $2,473,646 for
the first nine months of fiscal 1997. Service revenues represent income from
in-home nursing care services provided. Cost of service provided of $1,136,964
for the nine months ended July 31, 1997 and $1,498,940 for the nine months ended
July 31, 1996 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 $593,128 (23%) from $2,573,163 to
$1,980,035 during the first nine months of fiscal year-end 1997. These costs
consist of operating expenses incurred by ConsulMed of $1,688,009 and $2,028,023
in the nine months ended July 31, 1997 and 1996 respectively, as well as
officers' salary, professional fees and general overhead expenses incurred by
the parent company of $366,068 and $545,140.
ConsulMed recorded a loss from operations of $8,687 for the first nine 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 $317,311
for the nine months ended July 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced significant cash flow problems during fiscal year 1996.
These difficulties continue into 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 ConsulMed'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) ConsulMed's home health care services could experience continued decrease
in revenues.
(2) ConsulMed'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.
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<PAGE> 9
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
------------------------------------------
27 Financial Data Schedule (for SEC use only).
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<PAGE> 10
SIGNATURES
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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: September 12, 1997 /s/ ALAN I. MILLER, M.D.
----------------------------
Alan I. Miller, M.D.,
President
Date: September 12, 1997 /s/ JEFFREY I. BINDER
----------------------------
Jeffrey I. Binder, Chairman
Date: September 12, 1997 /s/ SYED NAQVI
----------------------------
Syed Naqvi, Principal
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 670
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 739
<PP&E> 119
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,016
<CURRENT-LIABILITIES> 1,071
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> (101)
<TOTAL-LIABILITY-AND-EQUITY> 1,016
<SALES> 1,004
<TOTAL-REVENUES> 1,006
<CGS> 296
<TOTAL-COSTS> 296
<OTHER-EXPENSES> 817
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (94)
<INCOME-TAX> 0
<INCOME-CONTINUING> (94)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
