================================================================================
Form 10-QSB
U.S. Securities and Exchange Commission
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] 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 0-20356
CYBER-CARE, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0158479
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1903 S. CONGRESS AVENUE, SUITE 400, BOYNTON BEACH, FLORIDA 33426
(Address of principal executive offices)
(561) 737-2227
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such report(s), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 39,136,416 shares of common
stock, $.0025 par value, were outstanding as of September 30, 1999.
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<PAGE>
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
10-QSB - QUARTER ENDED SEPTEMBER 30, 1999
INDEX
FORM 10-QSB FORM 10-QSB FORM 10-QSB
PART NO. ITEM NO. DESCRIPTION PAGE NO.
I. FINANCIAL INFORMATION
1. Financial Statements
- Condensed Consolidated Balance
Sheet as of September 30, 1999
3
- Condensed Consolidated Statements of Operations
and Accumulated Deficit for the Three and Nine
Months Ended September 30, 1999 and 1998 5
- Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended
September 30, 1999 and 1998
6
- Notes to Condensed Consolidated Financial
Statements 9
2. Management's Discussion and Analysis
or Plan of Operations
13
II. OTHER INFORMATION
1. Legal Proceedings
17
2. Changes in Securities and Use of Proceeds
17
3. Defaults Upon Senior Securities
17
4. Submission of Matters to a Vote Security
Holders 17
5. Other Information 19
6. Exhibits and Reports on Form 8-K 19
Signatures
2
<PAGE>
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
------------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 784,704
Accounts receivable - trade, net of allowance for
doubtful accounts of $1,654,985.......................... 6,256,236
Current portion of mortgage and notes receivable .......... 73,573
Inventories of medical supplies ........................... 204,564
Prepaid expenses and other current assets ................. 1,167,447
------------
Total current assets .................................... 8,486,524
============
PROPERTY AND EQUIPMENT:
Aircraft and related equipment ............................ 20,899,836
Medical equipment ......................................... 1,789,782
Furniture, office and other equipment and improvements .... 1,701,308
------------
24,390,926
Less: accumulated depreciation and amortization ........... (3,093,689)
------------
Net property and equipment .............................. 21,297,237
============
OTHER ASSETS:
Mortgage and notes receivable, less current portion ....... 140,207
Goodwill, net of accumulated amortization of $256,532 ..... 8,087,452
Investment in equity securities ........................... 2,754,184
Medical technology and other licenses ..................... 12,558,890
Other assets .............................................. 1,787,131
------------
Total other assets ................................... 25,327,864
------------
TOTAL ASSETS ......................................... $ 55,111,625
============
The Accompanying Notes Are an Integral Part of the Condensed Consolidated
Financial Statements
3
<PAGE>
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
------------------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Line of credit ........................................................................... $ 3,554,051
Current maturities of long-term debt and notes payable ................................... 2,302,359
Current maturities of capital lease obligations .......................................... 186,350
Current maturities of convertible subordinated debentures ................................ 75,000
Accounts payable ......................................................................... 4,802,542
Accrued liabilities ...................................................................... 3,553,344
------------
Total current liabilities ....................................................... 14,473,646
------------
LONG-TERM LIABILITIES:
Long-term debt and notes payable, less current maturities ................................ 12,159,694
Capital lease obligations, less current maturities ....................................... 614,615
Subordinated debentures .................................................................. 367,500
Convertible subordinated debentures, less current maturities ............................. 850,000
------------
Total long-term liabilities ..................................................... 13,991,809
------------
Total Liabilities ............................................................... 28,465,455
============
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred shares, authorized 20,000,000 shares - none issued and
outstanding
Common shares, $.0025 par value, authorized 200,000,000; 39,136,416 issued
and outstanding ........................................................................ 97,841
Additional paid-in capital ............................................................... 53,333,245
Accumulated deficit ...................................................................... (26,784,916)
------------
Total shareholders' equity ..................................................... 26,646,170
------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................................... $ 55,111,625
============
</TABLE>
The Accompanying Notes Are an Integral Part of the Condensed Consolidated
Financial Statements
4
<PAGE>
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) (UNAUDITED)
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Revenue from operations ................ $ 10,772,612 $ 3,678,198 $ 27,520,587 $ 11,025,372
Equity in net income of investee ....... -- 78,984 90,300 136,413
Gain on sale of investment in equity
securities ........................... 76,790 -- 76,790 --
Gain on sale of subsidiary ............. -- -- 1,255,959 --
------------ ------------ ------------ ------------
Total income ................ 10,849,402 3,757,182 28,943,636 11,161,785
------------ ------------ ------------ ------------
Expenses:
Cost of revenues ....................... 6,394,024 1,443,532 15,497,641 5,358,301
General and administrative expenses .... 2,834,749 1,372,033 7,956,812 3,434,496
Depreciation and amortization .......... 766,770 545,687 2,080,985 951,123
Interest expense, net .................. 486,603 295,376 1,665,480 642,250
Interest - beneficial conversion feature 132,156 -- 884,289 --
------------ ------------ ------------ ------------
Total expenses .............. 10,614,302 3,656,628 28,085,207 10,386,170
------------ ------------ ------------ ------------
Income from continuing operations ............ 235,100 100,554 858,429 775,615
Merger costs ................................. -- 117,748 -- 117,748
Loss from discontinued operations ............ -- 1,476,098 -- 1,598,704
Loss from disposal of discontinued operations -- 678,529 -- 678,529
------------ ------------ ------------ ------------
Net income (loss) ............................ 235,100 (2,171,821) 858,429 (1,619,366)
Accumulated deficit-beginning of periods ..... (27,020,016) (19,709,936) (27,643,345) (20,262,391)
------------ ------------ ------------ ------------
Accumulated deficit-end of periods............ $(26,784,916) $(21,881,757) $(26,784,916) $(21,881,757)
------------ ------------ ------------ ------------
Earnings (loss) per share of common stock:
Basic earnings per share:
Income from continuing operations $ .01 $ .01 $ .03 $ .04
Discontinued operations .......... $ -- $ (.12) $ -- $ (.13)
------------ ------------ ------------ ------------
Net income (loss) ................ $ .01 $ (.11) $ .03 $ (.09)
============ ============ ============ ============
Diluted earnings (loss) per share .... $ .01 $ (.11) $ .03 $ (.09)
============ ============ ============ ============
Weighted average shares outstanding:
Basic ................................. 30,752,747 19,472,557 26,058,396 18,398,760
============ ============ ============ ============
Diluted ............................... 35,793,678 19,472,557 30,149,801 18,398,760
============ ============ ============ ============
</TABLE>
The Accompanying Notes Are an Integral Part of the Condensed Consolidated
Financial Statements
5
<PAGE>
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1999 1998
----------- -----------
<S> <C> <C>
Operating activities:
Income from continuing operations ................... $ 858,429 $ 775,615
Loss from discontinued operations ................... -- (1,598,704)
Loss from disposal of discontinued operations ....... -- (678,529)
Writedown of merger costs ........................... -- (117,748)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization .................. 2,080,985 951,123
Beneficial conversion feature .................. 884,289 --
Common stock issued for services rendered ...... 84,032 22,894
Equity in loss from unconsolidated company ..... (90,300) (136,413)
Gain on sale of subsidiary ..................... (1,255,959) --
Gain on sale of investment in equity securities (76,790) --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable - Trade ................. (4,367,792) (2,914,041)
Inventories of medical supplies ............. (79,039) (31,153)
Prepaid expenses and other current assets ... (186,086) (499,419)
Other assets ................................ (655,657) (564,840)
Increase (decrease) in:
Accounts payable ............................ 1,377,894 751,254
Accrued liabilities ......................... (265,736) 141,701
----------- -----------
Net cash used in operating activities ........... (1,691,730) (3,898,260)
----------- -----------
Investing activities:
Issuance of notes receivable ........................ -- (805,468)
Payment of notes receivable ......................... 205,365 852,010
Purchases of property and equipment ................. (1,866,586) (1,107,130)
Purchase of goodwill ................................ (27,041) (313,760)
Proceeds from sale of investment in equity securities 60,833 --
----------- -----------
Net cash used in investing activities ............ (1,627,429) (1,374,348)
----------- -----------
.Financing activities:
Proceeds from long-term debt ........................ 276,203 3,395,179
Proceeds from convertible subordinated debentures ... 2,800,000 3,367,500
Repurchase of debentures ............................ -- (275,000)
Net advances on line of credit ...................... 1,662,250 --
Payments of capital lease obligations ............... (127,787) (127,480)
Payments of long-term debt .......................... (1,299,380) (1,056,399)
Proceeds from exercise of warrants and stock options 94,000 --
----------- -----------
Net cash provided by financing activities ........ 3,405,286 5,303,800
----------- -----------
Net increase in cash and cash equivalents ........... 86,127 31,192
Cash and cash equivalents at the beginning of period 698,577 958,902
----------- -----------
Cash and cash equivalents at the end of period ...... $ 784,704 $ 990,094
=========== ===========
</TABLE>
The Accompanying Notes Are an Integral Part of the Condensed Consolidated
Financial Statements
6
<PAGE>
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
<TABLE>
Supplemental disclosure of cash flow information:
<S> <C> <C>
Interest paid ....................................... $ 1,613,857 $ 536,927
=========== ===========
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
On April 1, 1998, the Company exchanged 680,000 common shares of the
Company valued at approximately $1.50 per share and a note payable in the amount
of $90,000 to acquire 100% of the outstanding common stock of Pharmacy Care
Specialists, Inc. ("PCS").
On April 1, 1998, the Company exchanged 607,500 common shares of the
Company valued at approximately $1.50 per share for an 81% interest in Ivanhoe
Medical Systems, Inc. ("Ivanhoe").
Effective September 1, 1998, the Company exchanged 1,320,000 common shares
of the Company valued at $1 per share to acquire 100% of the outstanding stock
of Valley Pain Centers, Inc. ("Valley").
On March 1, 1999, the Company exchanged 3,866,667 common shares of the
Company, valued at $2,900,000 for 100% of the outstanding common stock of Air
Response, Inc.
During the nine months ended September 30, 1999, the Company issued
135,750 shares of the Company's common stock in lieu of services rendered valued
at $84,032.
During the nine months ended September 30, 1999, the Company issued 40,000
shares as part of a 1998 settlement to a former employee.
In January 1999, certain debenture holders exercised their option to
convert $102,077 of subordinated debentures and accrued interest into common
stock which the Company issued 102,077 shares of common stock.
On May 3, 1999, the Company sold Valley Pain Center to two former officers
of the Company for 1,544,036 shares of the Company's common stock with a market
value of $2,702,000 ($1.75 a share), cash and other consideration of $352,000,
and the repayment of approximately $300,000 of liabilities owed by Valley,
resulting in a gain of $1,255,959. The Company retired 1,544,036 shares of the
Company's common stock from this transaction.
During the nine months ended September 30, 1999, the Company issued
298,578 common shares in lieu of cash payments on subordinated debentures valued
at $294,000.
During the nine months ended September 30, 1999, the Company repurchased
54,806 common shares of the Company at $1.75 from a former officer and director.
In payment of all obligations due the former officer, the Company issued a note
in the amount of $100,000.
During the nine months ended September 30, 1999, the Company issued 57,630
common shares as partial consideration for the purchase of certain operating
assets. The shares were valued at $62,500.
Effective September 1, 1999, the Company exchanged 7,399,996 common shares
of the Company valued at $1.12 per share to acquire 100% of the outstanding
stock of Cybercare, Inc.
In partial payment on the sale of shares of Westmark common stock, the
Company received $272,500 of its outstanding preferred stock held by Westmark.
7
<PAGE>
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
During the nine months ended September 30, 1999, the Company used
6,918,001 shares of the Company's common stock for conversion of subordinated
debentures totaling $5,000,000.
In July 1999, the Company issued 118,223 shares of the Company's common
stock to officers and employees in repayment of loans valued at $.60 per share
or $70,934.
In August 1999, the Company issued 34,090 additional shares of the
Company's common stock for the balance due on an acquisition for the assets of a
rehabilitation company valued at $37,500.
The value of the above common shares was determined using the quoted
market prices on the dates the transactions took place.
8
<PAGE>
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
Note 1 - Organization and Summary of Significant Accounting Policies
Organization
Cyber-Care, Inc. F/K/A Medical Industries Of America, Inc. ("Cyber-Care"
or the "Company") was incorporated in the State of Florida on September 29, 1989
and commenced operations on February 27, 1990. At the 1999 Annual Shareholder
meeting, which took place on August 26, 1999, the shareholders of the Company
approved the change in the Corporation's name to Cyber-Care, Inc.
The Company is a technology assisted disease management company and also
operates physical, occupational and speech therapy centers, provides
pharmaceutical services, sleep apnea, international air ambulance transport
services and other services.
The Company currently has approximately 5,200 shareholders.
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements are
unaudited. These statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the consolidated financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary to state
fairly the consolidated financial position and consolidated results of
operations as of and for the periods indicated. These consolidated financial
statements should be read in conjunction with the Company's consolidated
financial statements and notes thereto for the year ended December 31, 1998,
included in the Company's Form 10-KSB/A as filed with the Securities and
Exchange Commission.
The Company's consolidated financial statements include the activity of
the Company and its wholly owned subsidiaries. The consolidated financial
statements include, from the date of acquisition, the results of operations of
Air Response, Inc., and Cybercare, Inc. (see Note 2)
Earnings Per Common Share
Basic earnings per common share are calculated by dividing earnings by the
weighted average common shares outstanding. Diluted earnings per share have been
computed based on the assumption that all of the convertible preferred stock and
convertible subordinated debentures are converted into common shares, and that
all stock options where the exercise price is less than the market value have
been considered exercised under the treasury stock method. Under this
assumption, the weighted average number of common shares outstanding has been
increased accordingly.
Goodwill and Medical technology and other licenses
Goodwill was recorded at cost and is amortized using the straight-line
method over twenty-five years.
9
<PAGE>
Medical technology and other licenses were recorded at cost and are
amortized using the straight-line method over ten to seventeen years.
The Company periodically evaluates the recovery of the carrying amount of
intangibles by determining if any impairment indicators are present. These
indicators include management's plans for the division, income derived from the
business acquired and other factors. If this review indicates that intangibles
will not be recoverable, as principally determined based on the estimated
undiscounted cash flows of the entity over the remaining amortization period,
the Company's carrying value of the intangibles is reduced by the amount the
carrying value exceeds its fair value.
Estimates
The preparation of financial statements in conformity with general
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Note 2 - Businesses Acquired
Effective March 1, 1999, the Company acquired 100% of the outstanding
common stock of Air Response, Inc. ("Air Response") in exchange for $2,900,000
in common stock valued at $.75 per share plus an earn up arrangement payable
over three years. The maximum additional payout on the earnout over the
three-year period is $2,900,000 which will take the form of a convertible
interest-bearing debenture. The acquisition has been accounted for using the
purchase method of accounting. The net assets and revenue and expenses of Air
Response have been included in the Company's consolidated financial statements
from the date of acquisition.
Effective September 1, 1999, the Company acquired 100% of the outstanding
common stock of CyberCare, Inc. in exchange for 7,399,996 in common stock valued
at $1.12 per share and changed its name to Cyber-Care, Inc. The acquisition has
been accounted for using the purchase method of accounting. The net assets and
revenue and expenses of Cybercare, Inc. have been included in the Company's
consolidated financial statements from the date of acquisition. The former
shareholders of Cybercare, Inc. have been given registration rights which
provide that if the fair market value of the Company's common stock at the
effective date of the registration statement is less then $1.50, enough
additional shares will be issued to ensure that those shareholders have received
at least $1.50 per share value.
The following unaudited pro forma summary presents the consolidated
results of operations as if the acquisitions of Air Response, Inc. and
CyberCare, Inc. had occurred on January 1, 1998, after giving effect of certain
adjustments, including amortization of goodwill and related income tax effects.
The pro forma financial information does not purport to be indicative of the
results of operations that would have occurred had the transactions taken place
at the beginning of the periods presented or of future results of operations.
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
1999 1998
------------ ------------
Revenue ....................... $ 31,047,597 $ 20,670,059
------------ ------------
Loss from continuing operations (736,370) (194,306)
------------ ------------
Net loss ...................... (736,370) (2,436,812)
------------ ------------
Basic loss per share .......... $ (.02) $ (.08)
------------ ------------
10
<PAGE>
Note 3 - Private Placement
During the nine months ended September 30, 1999, the Company, pursuant to
a private placement, sold $2,000,000 of 12% convertible debentures together with
2,000,000 three-year detachable warrants. The warrants may be exercised at any
time through April, 2002 for $.50 per share. The debentures are due through
April 2002 with interest payable semi-annually. The debentures are convertible
at any time into common stock at $.50 per share. The market price of the
Company's common stock was between $.656 and $1.125 per share on the dates the
debentures were issued. The majority of the debentures were issued when the
Company's stock price was approximately $.656 per share. The proceeds were used
for general corporate purpose. The securities issued in connection with the
private placement are exempt from registration pursuant to Regulation D, rule
506. This transaction was approved by the Company's shareholders.
During the quarter ended September 30, 1999, the Company, pursuant to a
private placement sold $850,000 of 10% convertible debentures together with
847,000 three-year warrants at $1.25 per share, a substantial discount. This
transaction was approved by the Company's shareholders. Subsequent to September
30, 1999, the Company sold $3,220,000 of convertible debentures together with
1,188,000 three-year warrants.
During the quarter ended September 30, 1999, certain debenture holders
exercised their options to convert $5,000,000 of subordinated debentures at
various conversion prices for which the Company issued 6,918,001 shares of
common stock.
In accordance with EITF D-60, the Company is required to amortize as
additional interest expense the difference between the market price of the
Company's common stock and the conversion rate of the subordinated debentures at
the commitment date (i.e., Beneficial Conversion Feature or "BCF"). The term of
the amortization is for the period from the date of closing through the date the
debenture can be first converted.
EITF D-60 requires a beneficial conversion feature (BCF) to be recorded (a
non-recurring item) when convertible debt is issued. The Company recorded a BCF
on the issuance of subordinated debentures totaling $799,218, of which $231,830
has been recorded in the first quarter of 1999, $468,000 was recorded in the
second quarter of 1999 and $99,388 was recorded in the third quarter of 1999. In
accordance with SFAS 123 "Accounting for Stock Based Compensation," the
detachable warrants issued in conjunction with the sale of the debentures have a
fair market value of $727,700, which is being amortized over the life of the
debentures in accordance with APB 14, paragraph 16. The Company amortized
$32,768 and $85,071 during the three and nine month periods ended September 30,
1999, respectively, as additional interest expense relative to the fair market
value of the warrants.
Note 4 - Litigation and Contingencies
The Company is engaged in litigation with various parties regarding
matters of dispute which have arisen in the normal course of business. In each
instance of litigation where there is a material amount at dispute the Company
has the benefit of indemnification from a third party.
Note 5 - Segment and Related Information
The Company's reportable segments are international air ambulance
transport, physical and occupational rehabilitation, pharmacy services and
technology assisted disease management.
11
<PAGE>
INTERNATIONAL AIR AMBULANCE TRANSPORT offers national and international
fixed-wing air ambulance transport services to ill, injured or otherwise
incapacitated persons requiring relocation and possible emergency medical care
during flight. Circumstances requiring the Company's transport services include
the relocation of patients requiring specialized medical procedures such as
organ transplants, cancer treatment, specialized cardiac surgery, burn care,
stroke care and advanced brain and spinal cord surgery, as well as
transportation to hospitals and medical facilities recognized nationally for
excellence in their respective fields. The flights are generally long distance
in nature.
PHYSICAL AND OCCUPATIONAL REHABILITATION provides physical rehabilitation
and occupational and speech therapy services and offers sleep and disordered
breathing diagnostic programs to physicians and hospitals.
PHARMACY SERVICES is a closed network pharmacy located in Lakeland,
Florida which provides unit-dosed medications to over 2,000 residents in
assisted-living facilities across Florida. Pharmacy Services delivers
medications to the facilities, provides training workshops, and does third-party
billing.
TECHNOLOGY ASSISTED DISEASE MANAGEMENT segment is currently in the startup
stages, and will provide hardware and software products using internet
technology for use in disease management services, data gathering and research.
The accounting policies of the reportable segments are the same as those
described in Note 1 to the Company's Condensed Consolidated Financial
Statements. The Company evaluates the performance of its operating segments
based upon income before taxes and nonrecurring charges such as beneficial
conversion feature and extraordinary items.
Segment information for the nine months ended September 30, 1999 and
1998 is as follows:
For the nine months ended September 30, 1999:
For the nine months ended September 30, 1999:
<TABLE>
<CAPTION>
International Physical and Technology
Air Ambulance Occupational Assisted Disease
Transport Rehabilitation Pharmacy Management Other Services Total
------------ -------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from
operations ........... $ 14,936,461 $ 7,007,720 $ 3,560,629 $ 16,457 $ 694,176 $ 26,215,443
Income from continuing
operations ........... 898,859 639,409 272,423 (757,911) (278,750) 774,030
Depreciation and
amortization ......... 1,407,212 268,642 70,709 75 149,950 1,896,588
Total assets ......... $ 26,711,543 $ 8,217,367 $ 2,194,594 $ 11,757,330 $ 768,760 $ 49,649,594
</TABLE>
For the nine months ended September 30, 1998:
<TABLE>
<CAPTION>
Physical and
International Occupational
Air Ambulance Rehabilitation Pharmacy Other Services Total
------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from
operations ........... $ 4,473,044 $ 907,221 $ 1,667,265 $ 2,791,891 $ 9,839,421
Income from continuing
operations ........... (122,259) 317,146 77,379 789,308 1,061,574
Depreciation and
amortization ......... 676,750 69,133 34,151 87,221 867,255
Total assets ......... $ 13,338,664 $ 4,578,842 $ 1,729,065 $ 3,033,600 $ 22,680,171
</TABLE>
Reconciliation to consolidated amounts:
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
----------------------------------------------
1999 1998
------------------- --------------------
<S> <C> <C>
Revenues
Total revenues for reportable segments $ 26,215,443 $9,839,421
Other revenues 1,305,144 1,185,951
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
----------------------------------------------
1999 1998
------------------- --------------------
<S> <C> <C>
=================== ====================
Total revenues from operations $ 27,520,587 $11,025,372
=================== ====================
Operating earnings
Total earnings for reportable segments $ 774,030 $1,061,574
Unallocated amounts
Corporate headquarters expense 84,399 (403,706)
Loss from discontinued operations and disposal - (2,277,233)
=================== ====================
Net income (loss) $ 858,429 $(1,619,366)
=================== ====================
</TABLE>
Note 6 - Investment in Westmark Group Holdings, Inc. ("Westmark")
Prior to September 30, 1999 the Company held 683,457 of Westmark's common
stock, or an ownership of 20.6% and 333,333 shares, or an ownership of 20.7%, as
of September 30, 1998. As a result of the Company's ownership in Westmark, the
Company is required to account for this investment on the equity method. The
equity method requires the Company to include in its statement of operations its
proportionate ownership percentage of Westmark's quarterly profit.
On September 30, 1999, the Company exercised its right to require Westmark
to repurchase $333,333 of Westmark's common stock held by the Company at a price
of $5.73 per share. The consideration received by the Company was $60,833, in
cash and return of all of the Company's outstanding preferred stock held by
Westmark valued at $272,500. Effective with this repurchase, the Company's
ownership in Westmark decreased to 18.9% and will require the Company to change
its accounting for this investment to the cost method.
Note 7 - Sale of Valley Pain Center Subsidiary
On May 3, 1999, the Company sold Valley Pain Centers, Inc. ("Valley") to
two former officers of the Company for 1,544,036 shares of the Company's common
stock with a market value of $2,702,000 ($1.75 a share), cash and other
consideration of $352,000, and the repayment of approximately $300,000 of
liabilities owed by Valley, which resulted in a gain on the sale of $1,255,959.
The Company retired 1,544,036 shares of the Company's common stock as a result
of this transaction.
Note 8 - Line of Credit
During the nine months ended September 30, 1999, the Company increased its
availability under its line of credit from $1,500,000 to $3,500,000.
Note 9 - Sale of Common Stock
On July 21, 1999, the Company entered into a commitment with a financial
institution for the sale of up to $25,000,000 of the Company's common stock in
amounts that could exceed 20% or more of the Company's issued and outstanding
common stock as of a certain date subject to shareholder approval at the
Company's annual meeting. At the Company's option, this line of credit using
underwritten stock, may or may not be used to finance various activities of the
Company. No shares have been sold under this agreement as of September 30, 1999.
This transaction was approved by the Company's shareholders.
Note 10 - Termination of merger agreement
On August 11, 1999, the Company terminated the definitive agreement,
originally entered into in March 1999, to merge with American Enterprise
Solutions, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
13
<PAGE>
FORWARD-LOOKING STATEMENT
This Quarterly Report on Form 10-QSB contains forward-looking statements.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the Company's actual results
to differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, changes in the regulation of the
healthcare industry at either the federal and state levels, changes in
reimbursement for services by government or private payors, competitive
pressures in the healthcare industry and the Company's response thereto, the
Company's ability to obtain and retain favorable arrangements with third-party
payors, the Company's ability to obtain capital in favorable terms and
conditions, and general conditions in this economy.
The following discussion of the Company's results of operations and
financial condition should be read in conjunction with the Company's condensed
consolidated unaudited Financial Statements listed in Part I, Item I and the
Notes thereto appearing elsewhere in this Form 10-QSB, and the Company's audited
Financial Statements and the Notes thereto appearing in the Company's 1998
Annual Report on Form 10-KSB/A.
COMPARISON OF THE RESULTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998
Revenue increased 150% to $27.5 million for the nine months ended
September 30, 1999 from $11 million for the 1998 period, driven by increases in
all business segments except technology assisted disease management which is
further explained below. Net income increased to $858,000 for the nine months
ended September 30, 1999 in comparison to a net loss of $1.6 million for the
same period in 1998. The results were driven by internal growth, reduction in
expenses and acquisitions which were partially offset by increased interest
expense including a beneficial conversion feature of $884,000.
International Air Ambulance's revenue increased 233%, or $10.4 million, to
$14.9 million for the nine months ended September 30, 1999, driven by the
acquisition of Air Response, Inc. effective March 1, 1999 and internal growth.
Operating income increased 822% or $1 million to $899,000 for the nine months
ended September 30, 1999, reflecting the acquisition of Air Response, increased
utilization of aircraft and decrease in overall operating costs, as a percentage
of revenue, due to synergies.
Physical and Occupation Rehabilitation's revenue increased 672%, or $6.1
million, to $7 million, driven by the acquisition of Your Good Health Network,
effective October 15, 1998, and internal growth. Operating income increased 102%
or $322,000, to $639,000 for the nine months ended September 30, 1999,
reflecting the acquisition of Your Good Health Network and internal growth.
Pharmacy's revenue increased 114%, or $1.9 million, to $3.6 million for
the nine months ended September 30, 1999. The increase reflects three additional
months of activity over 1998 and substantial internal growth. Operating income
increased 252%, or $195,000, to $272,000 for the nine months ended September 30,
1999, reflecting increase in gross margins and decrease in operating costs as a
percentage of revenue.
Technology assisted disease management segment had minimal revenue for the
period. We have incurred approximately $758,000 in expenses for the period since
acquisition. We will incur similar costs including amortization of licenses
through the first quarter of 2000 at which time we anticipate generating
revenue.
14
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AS
COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1998
Revenue increased 192% to $10.8 million for the quarter ended September
30, 1999 from $3.7 million for the 1998 period driven by increases in all
business segments except Technology assisted disease management which is further
explained below. Net income increased to $235,000, from a loss of $2.2 million
for the 1998 period. These results were driven by internal growth, reduction in
expenses, and acquisitions which were partially offset by increased interest
including beneficial conversion feature of $132,000.
International Air Ambulance's revenue increased 200%, or $4.2 million, to
$5.6 million for the nine months ended September 30, 1999, driven by the
acquisition of Air Response, Inc. and internal growth. Operating income
increased by $373,000 to $224,000 for the nine months ended September 30, 1999,
reflecting the acquisition of Air Response, increased utilization of aircraft
and decrease in overall operating costs as a percentage of revenue due to the
synergies.
Physical and Occupational Rehabilitation's revenue increased 767% or $2.3
million to $2.6 million for the nine months ended September 30, 1999, driven by
the acquisition of Your Good Health Network, effective October 15, 1998 and
internal growth, but is offset by the sale of Valley Pain Centers, Inc.
Operating income increased by $68,000 to $9,000 reflecting the acquisition of
Your Good Health Network and internal growth but offset by the reduction in
profits due to the sale of Valley Pain.
Pharmacy revenue increased 50%, or $451,000, to $1,345,000 for the nine
months ended September 30, 1999, due to internal growth. Operating income
decreased 97%, or $56,000, to $2,000 for the nine months ended September 30,
1999, due to higher costs for pharmaceutical drugs and an increase in overhead
to accommodate the infrastructure necessary for significantly higher volume.
Technology Assisted Disease Management segment had minimal revenue for the
period. We have incurred approximately $791,000 in expenses for the period since
acquisition. We will incur similar costs including amortization of licenses
through the first quarter of 2000 at which time we anticipate generating
revenue.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities - The Company's net cash flow from
operating activities resulted in deficits of $1.7 million and $3.9 million for
the nine months ended September 30, 1999 and 1998, respectively. The $2.2
million decrease is due primarily to the increase in profitability before
non-cash items, such as depreciation and amortization.
Cash used in investing activities - The Company's net cash used in
investing activities for the nine months ended September 30, 1999 was $1.6
million as compared to net cash used in investing activities for the nine months
ended September 30, 1998 of $1.4 million. This is due primarily to an increase
in equipment purchases relating to aircraft.
Cash flow from financing activities - The Company's net cash flows from
financing activities during the nine months ended September 30, 1999 decreased
by $1.9 million to $3.4 million from $5.3 million during the nine months ended
September 30, 1998, due primarily to an increase in private placement proceeds
received during the nine months ended September 30, 1999 and net advances on the
line of credit.
During the nine months ended September 30, 1999, the Company, pursuant to
a private placement, sold $1.9 million of 12% convertible debentures. The
proceeds are to be used for general working capital purposes. All of these
debentures were converted into common stock as of September 30, 1999.
15
<PAGE>
During the quarter ended September 30, 1999, the Company, pursuant to a
private placement and approval by the Company's shareholders, sold $850,000 of
10% convertible debentures together with 847,000 three year warrants at
substantially $1.25 per share. Subsequent to September 30, 1999, the Company
sold $3,220,000 of convertible debentures together with 1,188,000 three year
warrants. The proceeds are to be used for general working capital purposes.
The Company had a working capital deficiency of $6 million at September
30, 1999 compared to working capital deficiency of $2.5 million at December 31,
1998. The increase in working capital deficiency is due to the Company
generating a substantial portion of its revenue utilizing long-term assets which
are financed by short-term liabilities.
The Company's capital requirements in connection with its business plans
will be significant. The Company believes that net proceeds of future
anticipated securities offerings, and giving effect to revenues which are
projected to be realized from operations, should be sufficient to fund ongoing
operations and its business plan. Notwithstanding, there is no assurance that
such anticipated offerings will be undertaken, and if undertaken, will be
successful or that such proceeds derived therefrom, will in fact be sufficient
to fund operations and meet the needs of the Company's business plans.
Year 2000 Costs
In July 1996, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a consensus on Issue 96-14 that costs associated with
modifying computer software for the year 2000 be expended as incurred. The
Company has made several acquisitions and is assessing the extent of the
necessary modification to their computer software but anticipates that it will
not have a material effect on the Company's financial statements.
16
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is engaged in litigation with various parties regarding
matters of dispute which have arisen in the normal course of business. In each
instance of litigation where there is a material amount at dispute the Company
has the benefit of indemnification from a third party.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In July 1999, the Company issued 118,223 shares of the Company's common
stock to officers and employees in repayment of loans valued at $.60 per share
or $70,934. The Company believes these transactions were exempt from
registration pursuant to Section 4(2) of the Securities Act as an isolated
transaction by an issuer not involving a public offering.
In August 1999, the Company issued 34,090 additional shares of the
Company's common stock for the balance due on an acquisition for the assets of a
rehabilitation company valued at $37,500. The Company believes this transaction
was exempt from registration pursuant to Section 4(2) of the Securities Act as
an isolated transaction by an issuer not involving a public offering.
On September 1, 1999, the Company issued 7,399,996 shares of the Company's
common stock for the purchase of CyberCare Inc. valued at 1.125 per share. The
Company believes this transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act as an isolated transaction by an issuer not
involving a public offering.
During the quarter ended September 30, 1999, the Company issued 290,462
shares of the Company's common stock for exercises of stock options and warrants
with a total value of $106,500. The Company believes these transactions were
exempt from registration pursuant to Section 4(2) of the Securities Act as an
isolated transaction by an issuer not involving a public offering.
During the nine months ended September 30, 1999, the Company used
6,918,001 shares of the Company's common stock for conversion of subordinated
debentures totaling $5,000,000. The Company believes these transactions were
exempt from registration pursuant to Section 4(2) of the Securities Act as an
isolated transaction by an issuer not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on August 26, 1999.
The stockholders of the Company voted and approved the following:
1. The following directors were elected:
FOR AGAINST
a. Michael F. Morrell 23,794,746 81,196
b. Paul C. Pershes 23,789,571 86,371
c. Theodore J. Orlando 23,789,671 86,271
d. Terry Lazar 23,791,746 84,196
e. Glen Barber 23,789,671 86,271
17
<PAGE>
f. Dana J. Pusateri 23,789,671 86,271
g. Louis R. Capece 23,789,571 86,371
h. John E. Haines 23,794,746 81,196
2. The issuance of additional shares of the Company for the purpose of
acquiring all of the capital stock of CyberCare, Inc. under the terms of
that Stock Exchange Agreement by and between the Company and CyberCare,
Inc. dated July 5, 1999.
FOR AGAINST ABSTAIN
14,973,829 106,493 37,744
3. The amendment to the Company's Articles of Incorporation to change the
name of the Company from Medical Industries of America, Inc. to
Cyber-Care, Inc.
FOR AGAINST ABSTAIN
23,717,673 103,915 54,354
4. The amendment to the Company's Articles of Incorporation to increase the
number of shares of common stock from 100 million to 200 million.
FOR AGAINST ABSTAIN
23,478,913 343,085 53,944
5. The Company's 1999 Incentive Stock Option Plan.
FOR AGAINST ABSTAIN
14,236,668 758,289 123,109
6. The Company's 1999 Officers and Directors Stock Option Plan.
FOR AGAINST ABSTAIN
14,088,609 895,700 133,757
7. The Company's 1999 Employee Stock Option Purchase Plan.
FOR AGAINST ABSTAIN
14,717,536 302,111 98,419
8. The appointment of Ernst & Young, LLP as the Company's independent
auditors
FOR AGAINST ABSTAIN
23,606,213 48,593 48,956
9. Amendment to the plan of merger with Air Response, Inc. whereby the
Company will issue a series of debentures convertible into its common
stock in replacement of promissory notes.
FOR AGAINST ABSTAIN
10,877,679 119,699 3,948,508
18
<PAGE>
10. The sale to investors of debentures and warrants pursuant to a private
offering with Connecticut Capital Markets, LLC., the placement agent,
where the issuance of the Company's common share upon the conversion or
exercise of the debentures or warrants could result in the Company issuing
shares of its common stock to the investors in the amounts of 20% or more
of the Company's issued and outstanding common stock as of the record
date.
FOR AGAINST ABSTAIN
14,147,850 683,501 114,535
11. The sale, pursuant to a three-year $25 million equity line funding
commitment with Swartz Capital & Partners, LLC of the Company's common
stock and warrants which, if converted, could result in the Company
issuing shares of its common stock to the investors in amounts of 20% or
more of the company's issued and outstanding common stock as of the record
date.
FOR AGAINST ABSTAIN
14,569,942 285,329 90,615
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
Exhibit 27.1 (1) Financial Data Schedule
(1) Filed herewith
19
<PAGE>
SIGNATURES
In accordance with 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.
CYBER-CARE, INC. F/K/A MEDICAL INDUSTRIES OF AMERICA, INC.
----------------------------------------------------------
(Registrant)
NOVEMBER 12, 1999 By: /s/ MICHAEL F. MORRELL
(Date) Michael F. Morrell, Chairman of the Board &
Chief Executive Officer
NOVEMBER 12, 1999 By: /s/ PAUL C. PERSHES
(Date) Paul C. Pershes, President & Director
NOVEMBER 12, 1999 By: /s/ LINDA MOORE
(Date) Linda Moore, Senior Vice President
NOVEMBER 12, 1999 By: /s/ ARTHUR KOBRIN
(Date) Arthur Kobrin, Senior Vice President
20
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 784,704
<SECURITIES> 0
<RECEIVABLES> 7,911,221
<ALLOWANCES> 1,654,985
<INVENTORY> 204,564
<CURRENT-ASSETS> 8,486,524
<PP&E> 24,390,926
<DEPRECIATION> 3,093,689
<TOTAL-ASSETS> 55,111,625
<CURRENT-LIABILITIES> 14,473,646
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0
0
<COMMON> 97,841
<OTHER-SE> 26,548,329
<TOTAL-LIABILITY-AND-EQUITY> 26,646,170
<SALES> 27,520,587
<TOTAL-REVENUES> 28,943,636
<CGS> 15,497,641
<TOTAL-COSTS> 25,535,438
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<INTEREST-EXPENSE> 2,549,769
<INCOME-PRETAX> 858,429
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<INCOME-CONTINUING> 858,429
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