U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the quarter ended March 31, 1997
Commission file number 1-12564
_________________
Ages Health Services Inc.
______________________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Massachusetts 04 - 3102249
_____________________________________ _______________________________________
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
800 Hingham Street, Suite 103 S, Rockland, MA 02370
______________________________________________________________________________
(Address of principal executive offices)
617 - 871- 6550
______________________________________________________________________________
(Issuer's telephone number)
N/A
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
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
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
_____ _____
The number of shares outstanding of registrant's no par value common stock,
at April 30, 1997,was 2,580,100.
Transitional small business disclosure format (check one):
Yes No X
_____ _____
AGES Health Services Inc.
INDEX
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION *
______________________________
Item 1. - Financial Statements Page
Number
______
<S> <C>
Balance Sheets
at March 31, 1997 and September 30, 1996............................. 3 - 4
Statements of Operations
for the three months and six months ended March 31, 1997 and 1996.... 5
Statements of Cash Flows
for the six months ended March 31, 1997 and 1996..................... 6 - 7
Notes to Financial Statements......................................... 8 - 10
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 10 - 12
PART II - OTHER INFORMATION
___________________________
Item 1. - Legal Proceedings................................................. 12
Item 2. - Changes in Securities See Item 5................................. 12
Item 5. - Other Matters..................................................... 12
Item 6. - Exhibits and Reports on Form 8-K.................................. 12
Signatures.................................................................. 13
<F*> The financial information at September 30, 1996 has been derived from
the Company's audited financial statements at that date. All other
information is unaudited.
</TABLE>
AGES HEALTH SERVICES INC.
Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31 September 30,
1997 1996*
-------- -------------
Assets
<S> <C> <C>
Current:
Cash and cash equivalents $ 144,457 $ 25,548
U.S. Treasury Notes - 1,480,785
Accounts receivable, less allowance for uncollectible
accounts of $473,468 and $570,000 2,164,782 2,018,537
Prepaid expenses 55,482 49,013
Current portion of long-term note receivable related
to discontinued operations 7,702 5,000
Deferred taxes 15,000 15,000
------------------------
Total current assets 2,387,423 3,593,883
------------------------
Property and equipment, net of accumulated depreciation of
$166,305 and $131,251 177,681 193,472
------------------------
Deferred financing costs, net of accumulated amortization of
$8,237 and $1,030 - 7,207
------------------------
Long-term note receivable related to discontinued
operations, less current portion 10,320 14,726
------------------------
$2,575,424 $3,809,288
========================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Short-term borrowings $1,525,938 $1,695,750
Accounts payable 307,271 210,237
Dividends payable 25,000 10,000
Accrued expenses 506,347 832,375
Current portion of long-term debt and loans payable 215,780 192,375
------------------------
Total current liabilities 2,580,336 2,940,737
Long-term debt and notes payable, less current portion 299,118 328,077
Deferred income taxes 15,000 15,000
------------------------
Total liabilities 2,894,454 3,283,814
------------------------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, 12% cumulative, nonparticipating, $1,000
per share liquidation value, without par value; 100,000
shares authorized, 250 shares issued and outstanding 250,000 250,000
Common stock, without par value; 4,500,000 shares
authorized; 2,580,100 shares issued and outstanding 3,375,897 3,375,897
Accumulated deficit (3,944,927) (3,082,224)
Unrealized loss on marketable securities - (18,199)
------------------------
Total stockholders' equity (deficit) (319,030) 525,474
------------------------
$2,575,424 $3,809,288
========================
See accompanying notes to financial statements.
<F*> The balance sheet at September 30, 1996 has been derived from the
audited financial statements at that time. All other information is
unaudited.
</TABLE>
AGES HEALTH SERVICES INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended March 31, ended March 31,
------------------------ ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net patient service revenue $1,652,931 $2,041,385 $3,275,966 $3,937,299
Cost of patient services 1,328,782 1,430,081 2,573,004 2,763,788
----------------------------------------------------
Gross profit on patient services 324,149 611,304 702,962 1,173,511
----------------------------------------------------
General and administrative expenses 775,181 571,779 1,454,559 1,073,723
Amortization of acquisition-related costs - 15,536 - 39,484
Amortization of deferred financing costs 6,178 - 7,207 -
----------------------------------------------------
Operating expenses 781,359 587,315 1,461,766 1,113,207
----------------------------------------------------
Operating income (loss) (457,210) 23,989 (758,804) 60,304
Interest expense, net 40,269 19,319 70,700 43,976
----------------------------------------------------
Operating loss on continuing operations (497,479) 4,670 (829,504) 16,328
Loss on disposal of discontinued operations - - - (3,217)
----------------------------------------------------
Net income (loss) (497,479) 4,670 (829,504) 13,111
Preferred stock dividends (7,500) (7,500) (15,000) (15,000)
----------------------------------------------------
Net income (loss) applicable to common stock $ (504,979) $ (2,830) $ (844,504) $ (1,889)
====================================================
Net income (loss) per share of common stock $ (.20) - $ (.33) -
====================================================
Weighted average number of shares of
common stock outstanding 2,580,100 2,580,100 2,580,100 2,580,100
</TABLE>
See accompanying notes to financial statements.
AGES HEALTH SERVICES INC.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the six months
ended March 31,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (829,504) $ 13,111
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation and amortization 42,261 69,917
Provision for losses on accounts receivable 275,502 62,797
Deferred consulting costs - 18,000
Loss on sale of marketable securities 16,294 938
Changes in operating assets and liabilites:
Accounts receivable (421,747) (530,169)
Prepaid expense (6,469) (5,417)
Accounts payable 97,034 150,612
Accrued expenses (326,028) (63,909)
-------------------------
Net cash used for operating activities (1,152,657) (284,120)
-------------------------
Cash flows from investing activities:
Proceeds from sale of marketable securities 1,464,491 499,062
Purchase of marketable securities - (499,062)
Purchase of property and equipment (19,263) (24,471)
Principal payments from note receivable 1,704 2,248
-------------------------
Net cash provided by (used for) investing activities 1,446,932 (22,223)
-------------------------
Cash flows from financing activities
Repayments of short-term borrowings (169,812) 214,329
Principal payments on other notes payable (5,554) (4,757)
Dividends paid on preferred stock - (10,000)
-------------------------
Net cash provided by (used for) financing activities (175,366) 199,572
-------------------------
Net increase (decrease) in cash and cash equivalents 118,909 (106,771)
Cash and cash equivalents, beginning of period 25,548 126,878
-------------------------
Cash and cash equivalents, end of period $ 144,457 $ 20,107
=========================
</TABLE>
See accompanying notes to financial statements.
AGES HEALTH SERVICES INC.
Notes to Financial Statements
1. Basis of Presentation
The financial statements as of March 31, 1997 and 1996 are unaudited
but include all adjustments (consisting of normal, recurring adjustments)
which the Company considers necessary for a fair presentation of such
interim financial statements. The accompanying financial statements and
notes are presented as permitted by Form 10-QSB and do not contain certain
information included in the Company's annual audited financial
statements and notes thereto. The results of operations for the six
months ended March 31, 1997 will not be indicative of the results to be
expected for the entire year ending September 30, 1997, due to the sale of
substantially all of the Company's operating assets to Arbour Elder
Services, Inc. pursuant to an Asset Purchase Agreement dated February 1,
1997 ("the Agreement"), which closed May 4, 1997. (see Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operation,
Management Agreement and Sale of Assets).
2. U.S. Treasury Notes
Short term investments in U.S. Treasury Notes are considered
available-for-sale securities, and therefore are accounted for at fair
market value. Unrealized gains and losses are recorded as a component of
Stockholders' Equity. Realized gains and losses are recognized in the
results of operations. On January 16, 1997, the Company redeemed its two
$500,000 U.S. Treasury Notes prior to their maturity date. The notes
matured at less than full face value. Less transaction costs, the
redemption yielded $964,882 of cash, which was used to pay off short term
borrowings and interest due under the Company's brokerage borrowing
agreement and to provide $33,019 of working capital.
3. Short-Term Borrowings
Short-term borrowings at March 31, 1997 of $1,525,938, were due to
Arbour Elder Services, Inc. under terms the Agreement. Principal and
interest payments on the borrowings were suspended pending the close of the
Agreement, which closing took place effective May 4, 1997. (see Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operation, Management Agreement and Sale of Assets).
4. Taxes on Income
In recognition of the uncertainty regarding the ultimate amount of
income tax benefits to be derived from the Company's net operating loss
carryforward and other deferred tax assets, the Company has provided a
deferred tax asset valuation allowance at March 31, 1997 equal to 100% of
the net operating loss carryforward and a portion of the other deferred tax
assets. Accordingly, the Company has not recognized a tax credit for the
six months ended March 31, 1997 in the accompanying statements of
operations. A current tax provision was not provided for the six months
ended March 31, 1996 due to the availability of the net operating loss
carryforward which was used to offset current taxes due.
5. Net Income (Loss) Per Share of Common Stock
Net income (loss) per share of Common Stock is computed by dividing
net income (loss) applicable to common stockholders by the weighted average
number of common and common equivalent shares outstanding during each period
presented. Common shares issuable upon exercise of outstanding warrants and
options, when dilutive, are included in the computation of shares
outstanding.
6. Cash Flow Information
Payments for interest and income taxes for the six months ended March
31, follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Interest $76,730 $71,525
Income taxes $ - $ -
</TABLE>
A supplemental schedule of noncash investing and financing activities
for the six months ended March 31, follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Preferred Stock dividends accrued 15,000 5,000
Unrealized gain (or loss) on marketable securities - 9,843
</TABLE>
7. Legal Proceedings
The Massachusetts Department of the Attorney General undertook a two
year review of certain of the Company's Medicaid claims related to
diagnostic, consultation and medical services performed at nursing homes
serviced by the Company. The primary focus of the review was to determine
whether the services performed were qualifying reimbursable services. The
Company has maintained that the services provided were appropriate and that
all services were billed correctly. In February of 1997, the Company and
the Attorney General jointly filed a civil settlement agreement to conclude
the dispute concerning Medicaid billings. The Company admitted no liability
or wrongdoing under the terms of the settlement. The terms of the
settlement call for the Company to pay $100,000, which amount the Company
believes approximated its projected legal expenses to conclude the matter
without settlement, and which amount the Company has previously reserved for
the matter. In addition, the Company will donate $25,000 worth of
uncompensated services and training to patients, their families and their
caregivers. At March 31, 1997, the Company had paid $7,690 of the cash
portion of the settlement, and had donated $20,400 worth of uncompensated
services and training.
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Management Agreement and Sale of Assets
---------------------------------------
The Company entered into an Asset Purchase Agreement ("Agreement")
dated February 1, 1997 with Arbour Elder Services, Inc. ("Arbour").
Pursuant to the Agreement the Company is to sell substantially all of its
operating assets. The assets being sold include certain accounts
receivable, contractual and lease rights, licenses and permits to the extent
permitted by law, equipment, and intellectual property rights. The purchase
price for the assets is $1,100,000 in cash of which $100,000 was paid on the
signing of the Agreement, the assumption of liabilities up to $760,000 and a
payment of up to $800,000 based upon the amount of retained accounts
receivable actually collected. Arbour shall be entitled to retain the first
$1,000,000 of accounts receivable collected, and shall remit the next
$800,000 of collections to the Company. Arbour shall retain any net
accounts receivable collected in excess of $1,800,000. The closing of the
transactions contemplated by the Agreement ("Closing") took place May 4,
1997, subsequent to the satisfaction of certain conditions, including
approval of the Stockholders of the Company.
In connection with the Agreement, the Company and Arbour entered into
a Management Agreement ("Management Agreement") pursuant to which Arbour,
effective February 1, 1997, assumed the responsibility for the management of
the operations of the Company. The services to be performed by Arbour
include all services necessary for the operation of such business, such as
hiring and firing personnel, payment of salaries and all other operating
expenses, purchasing of supplies and supervising the operations. Arbour as
manager, and for its compensation, is entitled to retain all revenues from
the services rendered, but is obligated to pay all of the expenses incurred
in connection therewith. The management period ended May 4, 1997 with the
closing of the transactions contemplated by the Agreement. Arbour, as
manager, bears the operating loss for two months of the quarter ended March
31, 1997. A restated Statement of Operations for the six months ended March
31, 1997 showing the effect of Arbour's management obligations with respect
to operations in February and March are included as Exhibit 99.1 (see Item 6,
Exhibits and Reports on Form 8-K).
Liquidity and Capital Resources
-------------------------------
During the six months ended March 31, 1997, the Company required cash
of $1,152,657 to fund operating activities primarily as a result of the net
loss from operating activities of $829,504. The Company invested $19,263 in
property and equipment and repaid $169,812 on short-term borrowings during
the six months of Fiscal 1997. The Company's operating cash requirements,
equipment purchases and debt repayment were funded in part by proceeds from
the sale of marketable securities of $1,464,491.
The Company's working capital was ($192,913) at March 31, 1997
compared to $653,146 at September 30, 1996. The Company was not adequately
capitalized at March 31, 1997, to continue current operations. However, the
Company's Management Agreement with Arbour placed the burden of continuing
operations on Arbour for the period on and after February 1, 1997 up to the
close of the transactions contemplated by the Agreement, which took place on
May 4, 1997. A restated Balance Sheet for March 31, 1997, showing the
effect of Arbour's management obligations with respect to operations in
February and March are included as Exhibit 99.2 (see Item 6, Exhibits and
Reports on Form 8-K).
Results of Operations
---------------------
Net patient service revenues decreased by $661,333 or 16.8% from the
first six months of Fiscal 1996 to the first six months of Fiscal 1997, due
to a decrease of $658,679 or 23.4% in the Massachusetts nursing home
program, and to a decrease of $269,160 or 52.8% in the Connecticut nursing
home program.
The Company's cost of patient services as a percentage of net patient
service revenues increased from 70.2% for the first six months of Fiscal
1996 to 78.5% for the first six months of Fiscal 1997. This increase is due
primarily to reorganization of the Company's service delivery model for
therapy services in the Massachusetts nursing home program, where the
Company hired three field managers to oversee and improve quality of care.
Cost of patient services as a percentage of net patient service revenues in
this segment increased from 67.5% for the first six months of Fiscal 1996 to
78.0% for the first six months of Fiscal 1997.
The Company's general and administrative expenses as a percent of net
patient service revenues increased from 27.3% for the first six months of
Fiscal 1996 to 44.4% for the first six months of Fiscal 1997. The increase
is due to increases in professional fees necessary to complete the
agreements with Arbour and the settlement with the Massachusetts Attorney
General, to a $25,000 provision for uncompensated services to be provided in
connection with the civil settlement jointly filed with the Massachusetts
Department of the Attorney General (see Part II, Item 1. Legal Proceedings),
to $40,188 in IRS tax deposit penalties, and to a $178,196 increase in
provision for doubtful accounts. This provision increased from $97,306 or
2.5% of net patient service revenues, to $275,502 or 8.4% of net patient
service revenues. In addition, the reserve for doubtful accounts as a
percent of gross accounts receivable increased from 11% at March 31, 1996 to
18% at March 31, 1997. The provision for doubtful accounts is estimated
based on an ongoing review of collectibility of the Company's accounts
receivable, by state, by pay source. A major factor in the Company's
decision to increase reserves relates to claims submitted to the
Massachusetts Medicaid Program which pays claims on behalf of its
beneficiaries only after all other insurances (Medicare and any intervening
Medicare supplementary insurances) have paid or rejected a claim.
Massachusetts Medicaid has intensified its efforts to identify intervening
insurances and to ensure compliance with regulations regarding payment or
rejection by intervening insurances. These intensified efforts have
increased the proportion of paper claims that must be billed through
multiple payors. This process of submitting paper claims substantially
increases the time and effort involved in securing final payment of unpaid
Medicare balances from the Massachusetts Medicaid Program.
The Company's interest expense, net of interest income, increased by
$26,724 during the first six months of Fiscal 1997 versus the first six
months of Fiscal 1996, as a result of increased short term borrowings.
The Company's net loss applicable to common stock was $844,504 or $.33
per share for the first six months of Fiscal 1997 compared to $1,889 or $.00
per share for the first six months of Fiscal 1996.
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Condensed Balance Sheet of the Company as of March
31, 1997 reflects the financial position of the Company after giving effect to
the disposition of the assets and assumption of the liabilities
pursuant to the Agreement with Arbour and assumes the transaction occurred on
March 31, 1997. The following Pro Forma Condensed Statements of Operations
for the fiscal year ended September 30, 1996 and six months ended March
31, 1997 assume that the transaction occurred on October 1, 1995 and are based
on the operations of the Company for the year ended September 30, 1996 and the
six months ended March 31, 1997, respectively. These Statements of
Operations assume no new business will have been acquired in the relevant
period.
PRO FORMA FINANCIAL INFORMATION
AGES HEALTH SERVICES INC.
PRO FORMA CONDENSED BALANCE SHEET AT MARCH 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------
Historical Ages (a) Other (d) Pro Forma
----------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
Assets
Current:
Cash and cash equivalents $ 144,457 $ 0 $ 1,100,000 (b) $ 1,244,457
Accounts receivable, less allowance for uncollectible accounts
of $473,468 2,164,782 2,164,782 800,000 (b) 800,000
Prepaid expenses 55,482 55,482 0 0
Current portion of long-term note receivable related to
discontinued operations 7,702 7,702 0 0
Deferred taxes 15,000 0 (15,000)(c) 0
--------------------------------------------------------------
Total current assets 2,387,423 2,227,966 1,885,000 2,044,457
--------------------------------------------------------------
Property and equipment, net of accumulated depreciation
of $166,305 177,681 177,681 0 0
--------------------------------------------------------------
Long-term note receivable related to discontinued operations,
less current portion 10,320 10,320 0 0
--------------------------------------------------------------
$ 2,575,424 $ 2,415,967 $ 1,885,000 $ 2,044,457
==============================================================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Short-term borrowings $ 1,525,938 $ 0 $ (494,685)(b) $ 1,031,253
Accounts payable 307,271 0 0 307,271
Dividends payable 25,000 0 0 25,000
Accrued expenses 506,347 0 (273,465)(b) 232,882
Current portion of long-term debt and loans payable 215,780 0 (16,922)(b) 198,858
--------------------------------------------------------------
Total current liabilities 2,580,336 0 (785,072)(b) 1,796,264
Long-term debt and loans payable, less current portion 299,118 0 (5,747)(b) 293,371
Deferred income taxes 15,000 0 (15,000)(c) 0
--------------------------------------------------------------
Total liabilities 2,894,454 0 (805,819) 2,088,635
--------------------------------------------------------------
Commitments and contingencies
Stockholders' equity (319,030) 2,415,967 2,690,819 (44,178)
--------------------------------------------------------------
$ 2,575,424 $ 2,415,967 $ 1,885,000 $ 2,044,457
==============================================================
<FN>
- --------------------
<F1> (a) To eliminate the assets of Ages Health Services ("Ages") sold in
connection with the asset purchase agreement with Arbour Elder Services,
Inc.
<F2> (b) To reflect proceeds from the sale of assets consisting of $1,100,000 in
cash plus retention of $800,000 of accounts receivable collections after
the buyer's receipt of the first $1,000,000 of accounts receivable
collected, and assumption by the buyer of $30,819 of future payments on
leases and approximately $760,000 of the Company's other liabilities.
<F3> (c) To reflect the elimination of deferred taxes.
<F4> (d) Does not reflect any adjustment for liabilities (totalling approximately
$750,000) which the Company believes it may be able to settle at amounts
less than their book value.
</FN>
</TABLE>
PRO FORMA FINANCIAL INFORMATION
AGES HEALTH SERVICES INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------
Historical Ages (a) Other Pro Forma
------------ ----------- ------------- ---------
<S> <C> <C> <C> <C>
Net patient service revenue $ 7,214,781 $ 7,214,781 $ 0 $ 0
Cost of patient services 5,295,567 5,295,567 0 0
---------------------------------------------------------
Gross profit on patient services 1,919,214 1,919,214 0 0
---------------------------------------------------------
General and administrative expenses 2,767,182 2,767,182 132,000 (b) 132,000
Amortization of deferred financing costs 45,902 45,902 0 0
---------------------------------------------------------
Operating expenses 2,813,084 2,813,084 132,000 132,000
---------------------------------------------------------
Operating loss (893,870) (893,870) (132,000) (132,000)
Interest expense, net 110,034 110,034 19,800 (b) 19,800
---------------------------------------------------------
Net loss (1,003,904) (1,003,904) (151,800) (151,800)
Preferred stock dividends (30,000) 0 0 (30,000)
---------------------------------------------------------
Net loss applicable to common stock $(1,033,904) $(1,003,904) $(151,800) $(181,800)
=========================================================
Net loss per share of common stock $ (.40) $ (.07)
=========== =========
Weighted average number of shares of common
stock outstanding 2,580,100 2,580,100
<FN>
- --------------------
<F1> (a) To eliminate the revenue and expenses of Ages Health Services Inc.
("Ages") for the entire period.
<F2> (b) To reflect costs that would not have been eliminated due to the sale of
assets and liabilities.
</FN>
</TABLE>
PRO FORMA FINANCIAL INFORMATION
AGES HEALTH SERVICES INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------
Historical Ages (a) Other Pro Forma
----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Net patient service revenue $ 3,275,966 $ 3,275,966 $ 0 $ 0
Cost of patient services 2,573,004 2,573,004 0 0
---------------------------------------------------------
Gross profit on patient services 702,962 702,962 0 0
---------------------------------------------------------
General and administrative expenses 1,454,559 1,454,559 80,300 (b) 80,300
Amortization of deferred financing costs 7,207 7,207 0 0
---------------------------------------------------------
Operating expenses 1,461,766 1,461,766 80,300 80,300
---------------------------------------------------------
Operating loss (758,804) (758,804) (80,300) (80,300)
Interest expense, net 70,700 70,700 9,900 (b) 9,900
---------------------------------------------------------
Net loss (829,504) (829,504) (90,200) (90,200)
Preferred stock dividends (15,000) 0 0 (15,000)
---------------------------------------------------------
Net loss applicable to common stock $ (844,504) $ (829,504) $(90,200) $(105,200)
=========================================================
Net loss per share of common stock $ (.33) $ (.04)
=========== =========
Weighted average number of shares of common
stock outstanding 2,580,100 2,580,100
<FN>
- --------------------
<F1> (a) To eliminate the revenue and expenses of Ages Health Services Inc.
("Ages") for the entire period.
<F2> (b) To reflect costs that would not have been eliminated due to the sale of
assets and liabilities.
</FN>
</TABLE>
PART II Other Information
- --------------------------
Item 1. Legal Proceedings
- ---------------------------
See Note 7 to Financial Statement
Item 2. Changes in Securities
- ------------------------------
See Item 5.
Item 5. Other Matters
- ----------------------
See Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Management Agreement and
Proposed Sale of Assets.
Item 6. Exhibits and Reports on Form 8 - K
- -------------------------------------------
(a) Exhibits -- Exhibit 27 - Financial Data Schedule
-- Exhibit 99.1 - Restated Statement of Operations:
six months ending March 31, 1997
-- Exhibit 99.2 - Restated Balance Sheet at March 31,
1997
(b) Reports on Form 8 - K -- none
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Ages Health Services Inc.
(Registrant)
May 20, 1997 /s/ Henry Goodhue
Date ______________________________ ___________________________
Henry Goodhue
Controller
(principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 144,457
<SECURITIES> 0
<RECEIVABLES> 2,638,250
<ALLOWANCES> 473,468
<INVENTORY> 0
<CURRENT-ASSETS> 2,387,423
<PP&E> 343,986
<DEPRECIATION> 166,305
<TOTAL-ASSETS> 2,575,424
<CURRENT-LIABILITIES> 2,580,336
<BONDS> 0
0
250,000
<COMMON> 3,375,897
<OTHER-SE> (3,944,927)
<TOTAL-LIABILITY-AND-EQUITY> 2,575,424
<SALES> 3,275,966
<TOTAL-REVENUES> 3,275,966
<CGS> 2,573,004
<TOTAL-COSTS> 1,179,057
<OTHER-EXPENSES> 7,207
<LOSS-PROVISION> 275,502
<INTEREST-EXPENSE> 70,700
<INCOME-PRETAX> (829,504)
<INCOME-TAX> 0
<INCOME-CONTINUING> (829,504)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (844,504)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
</TABLE>
Exhibit 99.1
RESTATED FINANCIAL INFORMATION
(showing the effect of the management obligations of
Arbour Elder Services, Inc. with respect to operations in February and
March of 1997)
AGES HEALTH SERVICES INC.
RESTATED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Restatement Adjustments
-----------------------
Historical Ages (a) Other Restated
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Net patient service revenue $3,275,966 $1,028,528 $ 0 $2,247,438
Cost of patient services 2,573,004 791,538 0 1,781,466
-----------------------------------------------------
Gross profit on patient services 702,962 236,990 0 465,972
-----------------------------------------------------
General and administrative expenses 1,454,559 418,739 24,728(b) 1,060,548
Amortization of deferred financing costs 7,207 0 0 7,207
-----------------------------------------------------
Operating expenses 1,461,766 418,739 24,728 1,067,755
-----------------------------------------------------
Operating loss (758,804) (181,749) (24,728) (601,783)
Interest expense, net 70,700 20,790 7,425(b) 57,335
-----------------------------------------------------
Net loss (829,504) (202,539) (32,153) (659,118)
Preferred stock dividends (15,000) (5,000) (5,000) (15,000)
-----------------------------------------------------
Net loss applicable to common stock $ (844,504) $ (207,539) $(37,153) $ (674,118)
=====================================================
Net loss per share of common stock $ (.33) $ (.26)
========== ==========
Weighted average number of shares of
common stock outstanding 2,580,100 2,580,100
- --------------------
<Fa> To eliminate the revenue and expenses of Ages Health Services Inc.
("Ages") for February and March
<Fb> To reflect costs that would not have been eliminated due to the
management obligations of Arbour Elder Services, Inc.
</TABLE>
Exhibit 99.2
RESTATED FINANCIAL INFORMATION
(showing the effect of the management obligations of
Arbour Elder Services, Inc. with respect to operations in February and
March of 1997)
AGES HEALTH SERVICES INC.
RESTATED CONDENSED BALANCE SHEET AT MARCH 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Restatement Adjustments
----------------------------
Historical Ages (a) Other Restated
---------- ---------- ------------- ---------------
Assets
<S> <C> <C> <C> <C>
Current:
Cash and cash equivalents $ 144,457 $ 239,737 $ (64,508)(b) $ (159,788)(e)
Accounts receivable, less allowance for uncollectible
accounts of $473,468 2,164,782 172,903 (783,043)(c) 1,208,836
Prepaid expenses 55,482 27,626 (13,556)(d) 14,300
Current portion of long-term note receivable related
to discontinued operations 7,702 2,702 2,702 (c) 7,702
Deferred taxes 15,000 0 0 15,000
---------------------------------------------------------
Total current assets 2,387,423 442,968 (858,405) 1,086,050
---------------------------------------------------------
Property and equipment, net of accumulated depreciation
of $166,305 177,681 (7,962) (11,901)(d) 173,742
---------------------------------------------------------
Long-term note receivable related to discontinued
operations, less current portion 10,320 (3,192) (3,192)(c) 10,320
---------------------------------------------------------
$2,575,424 $ 431,814 $(873,498) $ 1,270,112
=========================================================
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $1,525,938 $1,019,560 $(486,378)(b) $ 20,000
Accounts payable 307,271 (66,270) (120,648)(b) 252,893
Dividends payable 25,000 5,000 0 20,000
Accrued expenses 506,347 (298,797) (211,121)(b) 594,023
Current portion of long-term debt and loans payable 215,780 0 0 215,780
--------------------------------------------------------
Total current liabilities 2,580,336 659,493 (818,147)(b) 1,102,696
Long-term debt and notes payable, less current portion 299,118 (1,942) 0 301,060
Deferred income taxes 15,000 0 0 15,000
--------------------------------------------------------
Total liabilities 2,894,454 657,551 (818,147) 1,418,756
--------------------------------------------------------
Commitments and contingencies
Stockholders' equity (319,030) (225,737) (55,351) (148,644)
--------------------------------------------------------
$2,575,424 $ 431,814 $(873,498) $1,270,112
========================================================
- --------------------
<Fa> To eliminate the assets and liabilities of Ages Health Services Inc.
("Ages") for February and March
<Fb> To reflect cash disbursed and similar adjustments that would not have
been eliminated due to the management obligations of Arbour Elder
Services, Inc.
<Fc> To reflect cash received and similar adjustments that would not have
been eliminated due to the management obligations of Arbour Elder
Services, Inc.
<Fd> To reflect expenses incurred and similar adjustments that would not
have been eliminated due to the management obligations of Arbour Elder
Services, Inc.
<Fe> Certain short term borrowings, accounts payable and accrued expenses
were paid out during the management period by Arbour to fulfill its
obligations in the Agreement and also as an advance against cash due at
closing.
</TABLE>
