<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
Commission File No. 0-24110
NEWCARE HEALTH CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 86-0594391
- ------------------------------ ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
6000 Lake Forrest Drive, Suite 315, Atlanta, Georgia 30328
------------------------------------------------------------
(Address of Principal Executive Offices including zip code)
(404) 252-2923
------------------------------
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has 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 [ ]
There were 12,128,525 shares of the Registrant's Common Stock outstanding as
of March 31, 1998.
<PAGE>
NEWCARE HEALTH CORPORATION
FORM 10-Q
INDEX
-----
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Statements of Operations for
the Three Months Ended March 31, 1998 and 1997 3
Unaudited Consolidated Balance Sheets as of March 31,
1998 and Audited December 31, 1997 4
Unaudited Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 5. OTHER INFORMATION 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 13
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<PAGE>
NEWCARE HEALTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
March 31, March 31,
1998 1997
(Unaudited) (Unaudited)
----------- ----------
Revenues
Patient service revenue $12,519,328 $6,672,893
Management service revenue 725,063 --
Other income 406,962 94,825
----------- ----------
13,651,353 6,767,718
Operating expenses
Cost of patient services 10,257,864 5,047,393
Lease expense 531,245 167,237
General and administrative 3,027,458 968,890
Provision for bad debts 518,940 267,150
Depreciation and amortization 531,646 245,252
----------- ----------
14,867,153 6,695,922
----------- ----------
Operating income (loss) (1,215,800) 71,796
Interest expense 1,604,825 320,924
----------- ----------
Loss from continuing operations (2,820,625) (249,128)
Income tax benefit 960,000 --
----------- ----------
Loss before discontinued operations
and extraordinary item (1,860,625) (249,128)
Loss from discontinued operations -- (77,852)
----------- ----------
Loss before extraordinary item (1,860,625) (326,980)
Extraordinary item -- 289,872
----------- ----------
Net loss $(1,860,625) $ (37,108)
=========== ==========
Basic and diluted net income (loss)
per common share from:
Loss before discontinued operations
and extraordinary item $ (.16) $ (.02)
Discontinued operations -- (.01)
Extraordinary item -- .03
----------- ----------
Net loss $ (.16) $ .00
=========== ==========
Weighted average number of common-
shares outstanding 11,942,970 10,667,524
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NEWCARE HEALTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
March 31, December 31,
1998 1997
(Unaudited)
----------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 474,954 $ 2,297,599
Accounts receivable, net 6,298,994 4,569,319
Management fees receivable 384,657 --
Other receivables 47,601 160,113
Notes receivables - related parties 1,064,250 1,039,500
Due from related party 2,955,000 1,201,063
Marketable securities (available for
sale) and other investments 12,898,906 10,083,000
Restricted investments, current 400,315 469,119
Inventory 175,190 132,680
Deferred taxes 1,047,204 412,204
Acquisition deposit 6,750,000 --
Prepaid expenses and other
current assets 904,889 873,130
----------- -----------
Total current assets 33,401,960 21,237,727
Property and equipment, net 48,299,628 42,972,686
Other assets
Deferred loan costs, net 1,762,383 999,057
Goodwill, net 1,688,484 1,057,096
Organizational costs, net 28,197 31,596
Deposits 688,909 926,511
Restricted investments, less current
portion 148,351 1,543,686
----------- -----------
Total other assets 4,316,324 4,557,946
----------- -----------
Total assets $86,017,912 $68,768,359
=========== ===========
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<PAGE>
NEWCARE HEALTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
1998 1997
(Unaudited)
----------- ------------
Current liabilities
Current maturities of long-term debt $ 4,746,610 $ 1,380,735
Borrowings under line of credit 3,523,514 3,189,755
Note payable-acquisition deposit 6,750,000 --
Brokerage investment margin payable 6,911,968 6,740,653
Accounts payable 4,843,787 6,163,548
Accrued expenses 3,972,868 3,288,527
Due to related parties 3,457,890 2,776,177
----------- -----------
Total current liabilities 34,206,637 23,539,395
Long-term debt 40,025,987 39,754,836
Minority interest in subsidiary 13,900 13,900
Commitments and contingencies
Convertible debentures 5,000,000 --
Shareholders' equity
Common stock, $.02 par value;
50,000,000 shares authorized;
12,128,525 and 11,372,524 issued
and outstanding, respectively 242,570 227,450
Additional paid-in capital 14,111,240 11,579,575
Accumulated deficit (9,035,514) (7,174,889)
Unrealized gain on marketable securities 1,453,092 828,092
----------- -----------
Total shareholders' equity 6,771,388 5,460,228
----------- -----------
Total liabilities and shareholders'
equity $86,017,912 $68,768,359
=========== ===========
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<PAGE>
NEWCARE HEALTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
March 31, March 31,
1998 1997
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,860,625) $ (37,108)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 531,646 245,252
Deferred taxes (960,000) --
Provision for bad debts 518,940 267,150
Decrease (increase) in assets
Accounts receivable (2,248,615) (145,938)
Other receivables (272,145)
Inventories (42,510) (237)
Prepaid expenses (31,759) 70,126
Deposits 237,602 --
Increase (decrease) in liabilities
Accounts payable and accrued expenses (635,420) (82,376)
Changes in other liabilities -- (736,886)
---------- ---------
Net cash used in operating activities (4,762,886) (420,017)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (6,423,116) (226,098)
Payments of deferred costs (826,787) --
Advances to related parties (1,778,687) --
Change in restricted investments 1,464,139 --
Purchase of investments (1,694,591) --
Acquisition deposit (6,750,000) --
---------- ---------
Net cash used in investing activities (16,009,042) (226,098)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (198,918) (4,717,508)
Advances from related parties 681,713 --
Proceeds from long-term debt 3,835,944 2,812,500
Change in line of credit 333,759 --
Proceeds from notes payable-
Acquisition deposit 6,750,000 --
Proceeds from convertible debentures 5,000,000 --
Proceeds from issuance of common stock 2,546,785 --
---------- ---------
Net cash provided by (used in)
financing activities 18,949,283 (1,905,008)
---------- ---------
Net decrease in cash (1,822,645) (2,551,123)
Cash and cash equivalents at beginning
of period 2,297,599 3,198,700
---------- ---------
Cash and cash equivalents at end of
period $ 474,954 $ 647,577
========== =========
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<PAGE>
NEWCARE HEALTH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
These consolidated financial statements and the notes thereto should be read
in conjunction with the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
File No. 0-24110.
In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements contain all necessary adjustments to present
fairly the financial position, the results of operations and cash flows for
the periods reported. All adjustments are of a normal recurring nature.
NOTE 2. ACCOUNTS RECEIVABLE AND COST REIMBURSEMENTS
Accounts receivable and reported revenue include net amounts reimbursed
by Medicaid under the provisions of cost reimbursement formulas in effect.
The Company operates under a prospective payment system with Medicare, under
which annual rates are assigned based on estimated reimbursements.
Differences between estimated provisions and final settlement are reflected as
adjustments to future rates.
NOTE 3. INVENTORY
Inventory consists primarily of health care supplies and is stated at
the lower of cost (determined using the first-in, first-out method) or market
value.
NOTE 4. RELATED PARTY TRANSACTIONS
In July 1997, the Company loaned $990,000 to several of the Company's
Directors, Officers and other related parties. The proceeds were used to
purchase stock from several former shareholders. The loans bear a 10%
interest rate and are due on June 30, 1998. As of March 31, 1998, the
outstanding principal balance plus accrued interest of $74,250 totaled
$1,064,250.
The Company had net borrowings from related parties of $502,890 and
$1,575,114, at March 31, 1998 and December 31, 1997, respectively.
NOTE 5. LONG-TERM DEBT
Long-term debt consisted of the following at March 31, 1998 and December 31,
1997:
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<PAGE>
March 31, December 31,
1998 1997
----------- ------------
Amounts outstanding under Revenue Bonds
secured by nursing facilities $ 5,715,000 $ 5,715,000
Other debt secured by retirement,
hospitals and nursing facilities 38,960,600 35,313,535
Other debt 96,997 107,036
----------- -----------
44,772,597 41,135,571
Less: current maturities 4,746,610 1,380,735
----------- -----------
Total long-term debt $40,025,987 $39,754,836
=========== ===========
NOTE 6: FACILITY ACQUISITIONS
In January 1998, the Company acquired in a sale and leaseback
transaction, a 124-unit assisted living facility in New Port Richie, Florida.
The purchase and sales price for this facility was $5.9 million. The
Company's lease on this facility is initially through December 31, 2012, with
options to extend the lease for two additional five-year periods.
In January 1998, the Company also acquired a 120-bed long-term care
facility in Venice, Florida. The purchase price of $4,790,000 was funded by a
$3,000,000 bridge note from HCFP Funding II, Inc. (HCFP) and $1,790,000 from
cash on hand. The bridge note, which is secured by the property acquired,
bears interest at 4% over the prime rate and is due on April 27, 1998. On
April 21, 1998, the Company refinanced the bridge note with a $4,800,000 note
at 11.25% interest with a twenty year amortization period.
Also in January 1998, the Company entered into an agreement to purchase
four long-term care facilities in Massachusetts in bankruptcy proceedings for
$6,750,000 plus the cost of the outstanding bond debt on three of the
facilities. During February 1998, the Company paid $1,387,064 for all of the
outstanding bonds (face value of $3,120,000) on these three facilities. The
Company expects that this purchase will be financed by a loan from HCFP,
however, no binding agreement regarding the funding has been reached. HCFP has
deposited the $6,750,000 in an escrow account under the jurisdiction of the
bankruptcy court, but retains the option to withdraw the funds. The
acquisition of these long-term care facilities is contingent on the approval
of the State of Massachusetts licensing authorities which is expected in the
second quarter of 1998, as well as the approval of the bankruptcy trustee.
During the interim, the Company is managing these four long-term care
facilities. Information concerning these long term care facilities is
summarized below:
NAME OF FACILITY LOCATION NUMBER OF BEDS
---------------- -------- --------------
Meadowood Health Care South Hadley, MA 120
Summerfield Elms Manor Chicopee, MA 60
Summerfield Pine Manor Springfield, MA 92
Summerfield Oak Manor Holyoke, MA 60
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<PAGE>
In February 1998, the Company entered into agreements under which the
Company agreed to take over the rights and obligations of the lessees of five
long-term care facilities in Texas. The Company is paying approximately
$450,000 for the assignment of these leases. The facilities individually
range from 62 to 185 beds (total 531 beds) and the leases expire on various
dates through May 31, 2017.
NOTE 7: SUBSEQUENT EVENTS
The Company has agreed to acquire eight long-term care facilities in
Texas, which have a total of 1,088 beds, for $18,500,000. The Company is
presently working out final details of the agreement and expects to close the
transaction in the second quarter of 1998.
The Company has renegotiated the terms of the previously announced
proposed merger with Iatros Health Network, Inc. The two companies have
entered into a non-binding letter of intent for the acquisition of Iatros' for
$8,000,000. The transaction is subject to execution of a definitive merger
agreement and approval of the shareholders of both companies.
Effective April 1, 1998, the Company began leasing the Pecan Manor
Nursing Home, a 60-bed long-term care facility in Statesboro, Georgia. The
Company also had an agreement to purchase this facility for $1,800,000 and
acquired this facility on May 1, 1998. The Company immediately entered into a
sale and lease back arrangement for the value of the acquired facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997
Revenues from continuing operations for the three months ended March 31,
1998 totaled $13,651,353 and more than doubled the $6,767,718 reported for the
three months ended March 31, 1997. The principal reason for the significant
increase from last year was due to the number of facilities operated in the
current period versus a year ago. For the March 1998 quarter the Company
operated 27 facilities versus only 11 facilities in the March 1997 quarter.
In addition, management service revenues totaled $725,063 in the current
period related to the two hospitals the Company began managing in the December
1997 quarter. Other income increased to $406,962 in the current quarter from
$94,825 reported in 1997, principally the result of higher interest income.
Operating expenses totaled $14,867,153 in the March 1998 quarter
compared to $6,695,922 in the March 1997 quarter. The cost of patient
services, lease expense, provision for bad debts, and depreciation and
amortization expense rose primarily from the increase in the number of
facilities being operated in the March 1998 quarter versus the March 1997
quarter. All of these expense categories, with the exception of lease
expense, were up approximately double the previous years' expense levels.
Lease expense totaled $531,245 in the March 1998 quarter compared to
$167,237 in the March 1997 quarter. Included in the current period were six
leased facilities, while the previous year's results included only one leased
facility.
Interest expense increased to $1,604,825 in the current period from
$320,924 reported last year, reflecting a higher average level of debt
outstanding.
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<PAGE>
General and administrative costs totaled $3,027,458 in the March 1998
quarter compared to $968,890 in the March 1997 quarter. The main reason for
the increase in this cost category centered around the increase in facility
acquisitions during the past three quarters. Expenses reflecting these
acquisitions included management salaries and related costs, travel expenses,
legal and audit fees, supplies, and corporate insurance. In addition, the
March 1997 quarter included the costs associated with the previous management
team for only part of the period prior to their departure, while the costs of
the current management team were not entirely reflected in the financial
results until subsequent quarters. As a result, the March 1997 quarter
expense levels were well below normal levels.
As a result of the factors described above, the Company experienced a
pre-tax loss from continuing operations of $2,820,625 in the March 1998
quarter compared to a pre-tax loss from continuing operations of $249,128
reported in the March 1997 quarter. After allowance for an income tax benefit
of $960,000 in the current year's results, the net loss for the March 1998
quarter was $1,860,625 ($0.16 basic and diluted per common share) compared to
a net loss of $37,108 (less than one cent basic and diluted per common share)
in the March 1997 quarter. Included in the previous year's results was a loss
from a discontinued business segment of $77,852 and an extraordinary gain of
$289,872 from the early retirement of debt at a discount.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 , the Company had a deficit of $804,677 in working
capital compared to a deficit in working capital of $2,301,668 at December 31,
1997.
For the three months ended March 31, 1998, cash used in operating
activities was $4,762,886 compared to cash used in operating activities of
$420,017 for the three months ended March 31, 1997. The primary reasons for
the increase in cash used in operating activities was the increase in net loss
for the quarter, an increase in accounts and other receivables, a decrease in
accounts payable and accrued expenses, and the provision for deferred taxes.
These were offset to a certain degree by increases in depreciation and
amortization expense and provisions for bad debts, and a decrease in deposits.
Cash used in investing activities totaled $16,009,042 in the current
period versus cash used in investing activities of $226,098 in 1997. The
increase in investing activities was principally the result of purchases of
property and equipment, advances to related parties, and payments of deferred
costs.
Cash provided by financing activities during the March 1998 quarter
totaled $18,949,283 compared to cash used in financing activities of
$1,905,008 during the March 1997 quarter. In the current quarter, cash was
provided by two private placement transactions, a convertible debenture
offering and a common stock offering, which totaled $5,000,000 and $2,546,785,
respectively. In addition, proceeds from long-term debt were $3,835,944,
advances from related parties totaled $681,713, and an additional $333,759 was
drawn on the Company's line of credit. Repayment of long-term debt totaled
$198,918. During the March 1997 quarter, proceeds from long-term debt were
$2,812,500 and repayment of long-term debt totaled $4,717,508.
The Company believes that its long-term liquidity needs will generally
be met by cash flows from operations and it will be able to, when necessary,
obtain extensions of its current line of credit and/or secure other financing
from the private or public sector. As of March 31, 1998, the Company had
approximately $1,500,000 available under its line of credit.
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<PAGE>
The Company has made commitments to acquire a number of long-term care
facilities during the remainder of 1998. The Company believes that it has or
will have financing arrangements available to complete these acquisitions.
FACILITIES
Listed below are the facilities operated by the Company at March 31,
1998:
Number Occupancy
Skilled Nursing Facilities Location Type of Beds at 3/31/98
Emory Nursing Home Georgia Owned 40 100.0%
Fitzgerald Nursing Center Georgia Owned 167 72.5
Ft. Valley Nursing Center Georgia Owned 75 90.7
Pleasant View Nursing Center Georgia Leased 120 89.2
Whigham Nursing Center Georgia Leased 142 93.7
Windward Nursing Center Georgia Owned 100 90.0
Central Tampa Nursing Home Florida Owned 100 69.0
Dania Nursing Home Florida Owned 88 81.8
Oak Manor Nursing Home Florida Owned 180 90.0
Suncoast Nursing Home Florida Owned 59 78.0
Venice Nursing Pavilion Florida Owned 120 36.7
Victoria Martin Nursing Home Florida Owned 38 84.2
Wakulla Manor Florida Owned 120 95.8
Dallas Nursing & Rehab Center Texas Managed 185 57.9
Park Place Nursing Center Texas Owned 118 77.1
Rosewood Rehab & Care Center Texas Managed 100 86.0
Woodland Park Texas Managed 100 87.0
Meadowood Nursing Home Massachusetts Managed 120 96.7
Elms Nursing Home Massachusetts Managed 60 51.3
Oak Manor Nursing Home Massachusetts Managed 60 83.3
Pine Manor Nursing Home Massachusetts Managed 92 84.0
Totals 2,184 79.9%
Number Occupancy
Assisted Living Facilities Location Type of Units at 3/31/98
Oak Manor Village Asst. Living Florida Owned 224 35.3%
Remington House-New Port Richie Florida Leased 124 82.9
Remington House-Pompano Beach Florida Managed 120 33.2
Totals 468 47.4%
Number Occupancy
Hospitals Location Type of Beds at 3/31/98
Meadowbrook Rehab Hospital Kansas Owned 84 21.4%
Princeton Hospital Florida Managed 150 37.0
TriCity Hospital Texas Managed 131 48.0
Totals 365 37.9%
IMPACT OF PENDING FEDERAL HEALTH CARE LEGISLATION
Management is uncertain what the financial impact will be of the pending
federal health care reform package since the legislation has not been
finalized. However, based on information which has been released to the
public thus far, management does not believe that there will be cuts in
reimbursements paid to nursing homes.
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<PAGE>
Legislative and regulatory action at the state and federal level has
resulted in continuing changes in Medicare and Medicaid reimbursement
programs. The changes have limited payment increases under these programs.
Also, the timing of payments made under Medicare and Medicaid programs are
subject to regulatory action and governmental budgetary constraints. Within
the statutory framework of the Medicare and Medicaid programs, there are
substantial areas subject to administrative rulings and interpretations which
may further affect payments made under these programs. In addition, the
federal and state governments may reduce the funds available under these
programs in the future or require more stringent utilization and quality
review of health care facilities.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 27, 1998, NCHC filed a lawsuit in the United States District
Court for the Northern District of Texas, Dallas Division, against Tri-City
Health Center, Inc., which owns the Tri-City Hospital in Dallas, Texas (the
"Hospital"), requesting injunctive and other relief against the Hospital in
connection with NCHC's management agreement with the Hospital and NCHC's
option to purchase the Hospital. In its Complaint, NCHC alleges that the
Hospital's Board of Directors has wrongfully taken the position that the
management agreement and option are not valid, and that if the management
agreement is valid, that NCHC is in default of that agreement. NCHC also
claims that since March 17, 1998, the Hospital has wrongfully not allowed
NCHC's employees on its premises, and that if any defaults have occurred under
the management agreement that the exclusion of NCHC's employees from the
premises prevents NCHC from curing any defaults as permitted under the
management agreement. NCHC also alleges that the Hospital wrongfully induced
the NCHC employee who had served as the Chief Executive Officer of the
Hospital to resign and become an employee of the Hospital.
NCHC has requested that the court declare that the management agreement
and option are valid and that the actions taken by the Hospital are wrongful.
NCHC is also requesting that the court enter a preliminary injunction against
the Hospital enjoining it from taking actions contrary to the management
agreement, requiring it to allow NCHC to resume management of the Hospital,
and to prohibit the Hospital from employing NCHC's former employee. The
Complaint also seeks to recover NCHC's attorney's fees and costs from the
Hospital.
As of May 15, 1998, the hospital had not filed an answer to the
Complaint.
ITEM 2. CHANGES IN SECURITIES.
SALES OF RESTRICTED SECURITIES. During the quarter ended March 31, 1998,
the Company issued restricted securities as follows:
In January 1998, the Company sold 166,667 Units, each Unit consisting of
four shares of Common Stock and two Warrants to purchase Common Stock, to one
accredited investor at a purchase price of $15.00 per Unit. Each Warrant is
exercisable to purchase one share of Common Stock at $5.00 per share until
October 30, 2000. In connection with such sales the Company paid cash
commissions to Bathgate McColley Capital Group LLC in the amount of $150,000.
With respect to this sale, the Company relied on Section 4(2) of the Act,
and Rule 506 of Regulation D promulgated thereunder. The investor was given a
copy of a Private Placement Memorandum containing information concerning the
Company, a Form D was filed with the SEC and the Company complied with the
other
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<PAGE>
applicable requirements of Rule 506. The investor signed a subscription
agreement in which he represented that it was purchasing the shares for
investment only and not for the purpose of resale or distribution. The
appropriate restrictive legends were placed on the certificates and stop
transfer orders were issued to the transfer agent.
In March 1998, the Company issued 89,332 shares of its Common Stock to
an accredited investor upon the exercise of an option for $200,103.68 in cash.
With respect to this sale, the Company relied on Section 4(2) of the Act. The
purchaser is a sophisticated investor and represented that he was purchasing
the shares for investment only and not for the purpose of resale or
distribution. The appropriate restrictive legend was placed on the
certificate and stop transfer instructions were issued to the transfer agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K
during the three months ended March 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWCARE HEALTH CORPORATION
Date: May 19, 1998 By /s/ James H. Sanregret
James H. Sanregret,
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ------------------------------
27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3-5 of the
Company's Form 10-QSB for the year to date, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 647,577
<SECURITIES> 0
<RECEIVABLES> 4,396,854
<ALLOWANCES> 0
<INVENTORY> 27,999
<CURRENT-ASSETS> 5,686,450
<PP&E> 23,942,366
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,622,612
<CURRENT-LIABILITIES> 18,503,536
<BONDS> 0
<COMMON> 213,350
0
0
<OTHER-SE> 4,893,229
<TOTAL-LIABILITY-AND-EQUITY> 30,622,612
<SALES> 6,767,718
<TOTAL-REVENUES> 6,767,718
<CGS> 5,047,393
<TOTAL-COSTS> 5,047,393
<OTHER-EXPENSES> 1,648,529
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 320,924
<INCOME-PRETAX> (249,128)
<INCOME-TAX> 0
<INCOME-CONTINUING> (249,128)
<DISCONTINUED> (77,852)
<EXTRAORDINARY> 289,872
<CHANGES> 0
<NET-INCOME> (37,108)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
</TABLE>
