SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
COMMISSION FILE NUMBER 0-26168
CAREADVANTAGE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1849794
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
485-C Route 1 South, Iselin, New Jersey 08830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 602-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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
--- ---
83,112,207
Number of shares of Common Stock outstanding as of June 30, 2000
Transitional Small Business Disclosure Format
Yes___ No X
---
<PAGE>
CareAdvantage, Inc. and Subsidiaries
Form 10-QSB
For the six months ended June 30, 2000
I N D E X
---------
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 2000 (Unaudited) and December 31, 1999 (Audited)..... 2
Condensed Consolidated Statements of Operations -
Three and Six-months ended June 30, 2000 and June 30, 1999
(Unaudited)................................................... 3
Condensed Consolidated Statements of Cash Flows - Six months
ended June 30, 2000 and June 30, 1999 (Unaudited)............. 4
Notes to Condensed Consolidated Financial Statements.......... 5
(Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 11
Part II - Other Information
Item 1. Legal Proceedings............................................. 11
Item 2. Changes in Securities......................................... 11
Item 3. Defaults Upon Senior Securities............................... 11
Item 4. Submission of Matters to a Vote of Security Holders........... 11
Item 5. Other Information ............................................ 11
Item 6. Exhibits and Reports on Form 8-K.............................. 11
Signature.............................................................. 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
CAREADVANTAGE, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 2000 1999
Unaudited Audited
---------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,492,000 $ 1,615,000
Accounts receivable for services:
Stockholder 1,361,000 1,135,000
Other 250,000 173,000
Other current assets 321,000 220,000
------- -------
Total current assets 3,424,000 3,143,000
Property and equipment, at cost less accumulated depreciation 703,000 845,000
Intangible assets 1,207,000 1,283,000
Other assets 86,000 102,000
------ -------
Total Assets $ 5,420,000 $ 5,373,000
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 456,000 $ 313,000
Due to stockholder 693,000 393,000
Due to customer 839,000 902,000
Accrued salaries and employee benefits 615,000 841,000
Accrued expenses and other current liabilities 280,000 332,000
Deferred revenue, current 0 98,000
---------- -----------
Total current liabilities 2,883,000 2,879,000
Due to stockholder, less current portion 0 300,000
Total Liabilities 2,883,000 3,179,000
----------- ---------
Stockholders' equity:
Preferred stock-par value $.10 per share;
authorized 10,000,000 shares; none issued
Common stock-par value $.001 per share;
authorized 103,600,000 shares; issued
and outstanding 83,112,207 and 82,189,883 83,000 82,000
Additional capital 22,117,000 22,062,000
Accumulated deficit (19,663,000) (19,950,000)
------------ -----------
Total Stockholders' Equity 2,537,000 2,194,000
--------- ----------
Total Liabilities and Stockholders' Equity $ 5,420,000 $ 5,373,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
<TABLE>
<CAPTION>
CAREADVANTAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $4,338,000 $3,795,000 $8,887,000 $7,829,000
Costs of services 2,216,000 2,214,000 4,455,000 4,246,000
---------- ---------- ---------- ----------
Gross margin 2,122,000 1,581,000 4,432,000 3,583,000
--------- --------- ---------- ----------
Operating expenses:
Selling, general and administration 1,899,000 1,863,000 3,808,000 3,791,000
Depreciation and amortization 182,000 211,000 359,000 415,000
--------- --------- --------- ---------
Total operating expenses 2,081,000 2,074,000 4,167,000 4,206,000
--------- --------- --------- ---------
Operating income/(loss) 41,000 (493,000) 265,000 (623,000)
Net interest income/(expense) 9,000 10,000 23,000 17,000
--------- --------- --------- ---------
Net income/(loss) 50,000 (483,000) 288,000 (606,000)
========= ========= ========= =========
Net income/(loss)
per share of common stock-basic and diluted $.00 ($.01) $.00 ($.01)
==== ===== ==== =====
Weighted average number
of common shares outstanding -
Basic 83,042,000 82,190,000 82,898,000 82,190,000
========== ========== ========== ==========
Diluted 91,490,000 82,190,000 92,659,000 82,190,000
========== ========== ========== ==========
</TABLE>
3
<PAGE>
CAREADVANTAGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30, June 30,
2000 1999
----------- -----------
Cash flows from operating activities:
Net profit/(loss) ............................ $ 288,000 $ (606,000)
Adjustments to reconcile net profit/(loss)
to net cash (used by)/provided from
operating activities:
Depreciation and amortization ................ 446,000 668,000
Compensation due to option issuance .......... 25,000 32,000
Deferred revenue ............................. (98,000) (87,000)
Change in assets and liabilities:
Due to/from customers/stockholders ........... (303,000) 40,000
Other assets ................................. (85,000) 19,000
Accounts payable ............................. 144,000 (41,000)
Accrued expenses and other liabilities ....... (341,000) (380,000)
----------- -----------
Net cash provided from/(used by)
operating activities ......................... 76,000 (355,000)
----------- -----------
Cash flows from investing activities:
Capital expenditures ......................... (229,000) (282,000)
----------- -----------
Net cash (used by) investing
activities ................................... (229,000) (282,000)
----------- -----------
Cash flows from financing activities:
Proceeds from Exercise of Stock Options ...... 30,000 0
Principal payments to stockholder ............ 0 (405,000)
Principal payments under long-term debt ...... 0 (319,000)
----------- -----------
Net cash provided from/(used by) financing
Activities ................................... 30,000 (724,000)
----------- -----------
Net (decrease)/increase in cash ............. (123,000) (1,361,000)
Cash - beginning of fiscal year .............. 1,615,000 3,355,000
----------- -----------
Cash - end of period ......................... $ 1,492,000 $ 1,994,000
=========== ===========
The accompanying notes are an integral part of these statements.
4
<PAGE>
CAREADVANTAGE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A--Basis of preparation:
Fiscal Year Change:
-------------------
On June 8, 1999, CareAdvantage, Inc. ("CAI" or the "Company") changed its fiscal
year from one ending October 31 to a calendar year ending December 31.
The consolidated financial statements have been prepared by the Company and have
not been audited by the Company's independent auditors. The accompanying
financial statements include all adjustments (which include only normal
recurring adjustments) which in the opinion of management are necessary to
present fairly the financial position, results of operations and cash flows at
June 2000 and for all periods presented.
Certain information and note disclosures required to be included in the
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included with the Company's December 31, 1999 Annual Report on Form 10-KSB. The
results of operations for the period ended June 30, 2000 are not necessarily
indicative of operating results to be expected for the full year.
Note B--Per share data:
Net income per share has been computed based on the weighted average number of
shares outstanding during the periods. Common stock equivalents have not been
included in 1999 as they are not dilutive.
Note C--Contingencies:
Potential uninsured exposure to litigation:
a) ROBERT T. CARUSO V. JOHN J. PETILLO, VINCENT M. ACHILLARE, LAWRENCE A.
WHIPPLE, AND HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY, INC. ET AL.,
which was filed in Superior Court of New Jersey on August 12, 1998. Messrs.
Petillo, Achillare and Whipple were officers of the Company and may have
claims for indemnification for expenses and for any judgments against them
in this case. Mr. Caruso was a consultant to the Company. The complaint
alleges breach of contract, fraud, conspiracy, promissory estoppel and
negligent misrepresentation in connection with, among other things, the
termination of Mr. Caruso's consulting arrangement with the Company. The
Plaintiff seeks treble damages for unspecified amount and claims actual
damages in the approximate amount of $1.8-2.0 million. The Company received
notice from two of its insurance carriers denying coverage on this matter,
but the Company plans to vigorously contest these coverage decisions. The
Company received a written claim for indemnification from defendants
Petillo and Achillare and, subject to their having acted in good faith, the
Company has agreed to indemnify them and defendant Whipple and to pay their
reasonable defense costs. The parties to this litigation are currently
taking discovery. Until discovery has been completed, the Company has
insufficient information regarding its potential exposure in this matter.
b) In December 1999 the Company was impleaded as a third-party defendant in a
lawsuit entitled HORIZON HEALTHCARE OF NEW JERSEY, INC. VS. ALLIED
SPECIALTY CARE SERVICES, INC., pending in the United States District Court
for the District of New Jersey. This lawsuit seeks damages arising out of
an agreement between Horizon Healthcare of New Jersey, Inc. ("Horizon") and
Allied Specialty Care Services, Inc. ("Allied"). One of the claims made by
Horizon is that it is entitled to damages on account of Allied's agreement
to repay certain monies ("Risk Amounts") to Horizon in the event certain
charges for medical claims exceeded certain capitation amounts. Allied's
third-party complaint against the Company seeks to enforce an agreement
among Horizon, Allied and the Company wherein it is claimed that the
Company agreed to pay Allied one-half of any Risk Amounts that Allied
"owed" to Horizon, but no more than certain funds received by the Company
on account of such agreement. (A copy of the agreement among Horizon,
Allied and the Company has been filed as Exhibit 10(e) to Form 10-QSB dated
April 30, 1997.) The Company has previously established a reserve that
management believes is sufficient to satisfy any liability the Company may
have on account of Allied's claim. The parties have informally agreed to
settle their respective claims at a cost to the Company consistent with the
reserve. However, until such agreement has been executed, there can be no
assurance that such claims have been settled.
5
<PAGE>
CAREADVANTAGE, INC.
NOTES TOTHE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note D - Supplemental Cash Flow Information:
Below is supplemental cash flow information related to the six months ended June
30, 2000 and June 30, 1999:
June 30,
2000 1999
---- ----
Income taxes paid 41,000 104,000
Interest paid 0 42,000
Note E - Stock Option Grant and 1996 Stock Option Plan Amendment
On January 8, 1999, the Board of Directors of the Company ("Board") granted
stock options for 3,600,000 shares of Common Stock of the Company to David
Noone, its Chief Executive Officer, in connection with Mr. Noone's employment
agreement. The options have an exercise price of $.03 per share and a term of 10
years. Options for 1,800,000 shares shall become exercisable as follows: (a) 1/3
on December 31, 1999; and (b) the remaining 2/3 shall become exercisable in
equal monthly amounts over the period January 1, 2000, to December 31, 2001.
Options for the remaining 1,800,000 shares originally were to become exercisable
over a period of 3 years commencing January 8, 2000 if certain performance
criteria were met. On February 24, 1999, the Board approved an amendment to
these options. Under the terms of this amendment the options for the remaining
1,800,000 shares shall become exercisable in three equal annual installments on
the fourth, fifth and sixth anniversary of the date of grant subject to
acceleration upon achievement of certain performance targets. The Company
realized compensation costs related to this amendment of approximately $252,000
and is amortizing this cost over the six-year vesting period of the options. In
connection with this grant, the Board amended the Company's 1996 Stock Option
Plan (the "Stock Option Plan") to provide the Board (or a Committee thereof)
with increased discretion in the terms and conditions of stock options it may
award.
On January 26, 1999, the Board granted stock options, constituting an aggregate
of 10,556,000 shares of Common Stock of the Company, to various employees, a
director and a former employee of the Company. The options have an exercise
price of $.08 per share and a term of 10 years subject to earlier termination
upon certain events. A portion of the options vests immediately and the
remainder vests over 3 years. In connection with these grants, the Board amended
the Stock Option Plan to increase the number of shares authorized for issuance
from 10% to 18% of the Company's authorized Common Stock, and it amended the
Company's 1996 Directors Stock Option Plan (the "Directors Stock Option Plan")
to provide the Board with increased discretion in the terms and conditions of
stock options it may award.
In addition, on January 26, 1999, the Board amended the Company's Certificate of
Incorporation to increase the number of shares of the Company's Common Stock
authorized for issuance from 90,000,000 shares to 103,600,000 shares.
On July 7, 1999, the Company's stockholders approved the foregoing amendments to
the Company's Stock Option Plan, the amendments to the Company's Directors Stock
Option Plan and the amendment to the Company's Certificate of Incorporation.
Note F - Exercise of Stock Option
During the six months ended June 30, 2000, certain employees exercised options
that resulted in the issuance of 922,324 shares of common stock.
6
<PAGE>
CAREADVANTAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Cautionary Statements:
Statements in this Form 10-QSB may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995
("PSLRA"), including statements concerning management's plans, intentions and
expectations with respect to future financial performance and future events,
particularly relating to revenues from performance-based services and
re-negotiations of existing and new contracts with customers. Many of these
statements involve known and unknown risks, uncertainties and contingencies,
many of which are beyond our control, which could cause actual results and
outcomes to differ materially from those expressed in this 10-QSB. Although we
believe that our plans, intentions and expectations reflected in these
forward-looking statements are reasonable, we can give no assurance that our
plans, intentions or expectations will be achieved. For a more complete
discussion of these risk factors, please see "Cautionary Statements" in Item 6
of the Company's Form 10-KSB for the fiscal year ended December 31, 1999.
GENERAL OVERVIEW:
The Company is a holding company which, through its subsidiaries, CareAdvantage
Health Systems, Inc. ("CAHS") and Contemporary HealthCare Management, Inc.
("CHCM"), is in the business of providing health care cost containment services
designed to enable health care insurers and other health service organizations
to reduce the costs of medical services provided to their subscribers. The
services provided include utilization review in medical/surgical cases where
pre-authorization is required for hospitalization and for certain in-patient and
outpatient procedures, case management and disease management. The Company's
services have been principally provided to several of Blue Cross/Blue Shield
("BCBS") health services organizations in the Northeastern United States.
The Company had a service agreement with Horizon BCBSNJ that expired on June 30,
2000. Although the precise terms of a contract renewal have not yet been agreed
upon, the Company has been informed by Horizon BCBSNJ that Horizon BCBSNJ will
continue to contract with the Company for care management services for the
indemnity portion of the business at least until January 1, 2001. The indemnity
portion of the business accounts for approximately 90% of the total Horizon
BCBSNJ contract revenues on an annual basis.
RESULTS OF OPERATIONS:
The following discussion compares the Company's results of operations for the
six and three months ended June 30, 2000, with those for the six and three
months ended June 30, 1999. The Company's consolidated financial statements and
notes thereto included elsewhere in this report contain detailed information
that should be referred to in conjunction with the following discussion.
Three Months Ended June 30, 2000, Compared to Three Months Ended June 30, 1999
Revenues:
The Company's total operating revenues for the three-month periods ended June
30, 2000 and June 30, 1999 were approximately $4,338,000 and $3,795,000,
respectively. This represents an increase of approximately $543,000 for the
three-month period ended June 30, 2000 from the corresponding period of the
prior year. The increase for the three months ended June 30, 2000 is largely due
to increased revenue of approximately $540,000 due to increased membership on a
major account.
Cost of services:
The Company's total direct cost of services for the three-month periods ended
June 30, 2000 and June 30, 1999 was approximately $2,216,000 and $2,214,000,
respectively. This represents an increase of approximately $2,000 for the
three-month period ended June 30, 2000 over the corresponding period of the
prior year. This increase in the cost of services for the three-month period
ended June 30, 2000 was primarily due to increases in personnel costs of
approximately $147,000 offset by a decrease in travel costs of approximately
$21,000, a decrease in professional costs of approximately $22,000, a decrease
7
<PAGE>
CAREADVANTAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
of approximately $2,000 in communication costs and a decrease in depreciation
and amortization expense of approximately $100,000.
Operating expenses:
Selling, general, and administrative:
The Company's total selling, general, and administrative costs for the
three-month periods ended June 30, 2000 and June 30, 1999 were approximately
$1,899,000 and $1,863,000, respectively. This represents an increase of
approximately $36,000 for the three-month period ended June 30, 2000 over the
corresponding period of the prior year. This increase for the three-month period
ended June 30, 2000 is largely due to increases in personnel costs of
approximately $54,000, including severance costs of approximately $90,000, , and
other general and administrative costs of approximately $71,000, offset by
decreases in professional costs of approximately $78,000. Management has taken
and intends to take additional steps to reduce general and administrative costs.
There is no assurance, however, that the Company will be successful in reducing
general and administrative costs by any significant amount.
Depreciation and amortization:
The Company's total depreciation and amortization costs for the three-month
periods ended June 30, 2000 and June 30, 1999 were approximately $225,000 and
$355,000, respectively. Approximately $45,000 and $144,000 were included in cost
of services for such periods.
Interest expense:
The Company's total net interest income for the three-month periods ended June
30, 2000 and June 30, 1999 was approximately $9,000 and $10,000, respectively.
This represents a decrease of approximately $1,000 in net interest income for
the three-month period ended June 30, 2000 from the corresponding period of the
prior year. The decrease in net interest income is largely due to decreased
interest costs of approximately $3,000 under the Master Lease Agreement with IBM
Credit Corporation ("IBM"). In addition, the Company realized decreased interest
income of approximately $4,000 from the Company's short-term investments.
Six Months Ended June 30, 2000, Compared to Six Months Ended June 30, 1999
Revenues:
The Company's total operating revenues for the six-month periods ended June 30,
2000 and June 30, 1999 were approximately $8,887,000 and $7,829,000,
respectively. This represents an increase of approximately $1,058,000 for the
six-month period ended June 30, 2000 from the corresponding period of the prior
year. The increase for the six months ended June 30, 2000 is largely due to
increased revenue of approximately $189,000 from the realization of performance
revenues and increased revenue of approximately $885,000 due to increased
membership on a major account.
Cost of services:
The Company's total direct cost of services for the six-month periods ended June
30, 2000 and June 30, 1999 was approximately $4,455,000 and $4,246,000,
respectively. This represents an increase of approximately $209,000 for the
six-month period ended June 30, 2000 over the corresponding period of the prior
year. This increase in the cost of services for the six-month period ended June
30, 2000 was primarily due to increases in personnel costs of approximately
$436,000 , offset by a decrease in travel costs of approximately $42,000, and a
decrease in depreciation and amortization expense of approximately $195,000.
Operating expenses:
Selling, general, and administrative:
The Company's total selling, general, and administrative costs for the six-month
periods ended June 30, 2000 and June 30, 1999 were approximately $3,808,000 and
$3,791,000, respectively. This represents an increase of approximately $17,000
for the six-month period ended June 30, 2000 over the corresponding period of
the prior year. This increase for the six-month period ended June 30, 2000 is
8
<PAGE>
CAREADVANTAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
largely due to increases in personnel costs of approximately $134,000, including
severance costs of approximately $150,000, information and communication costs
of approximately $86,000, offset by decreases in professional costs of
approximately $178,000, and a decrease in other costs of approximately $25,000.
Management has taken and intends to take additional steps to reduce general and
administrative costs. There is no assurance, however, that the Company will be
successful in reducing general and administrative costs by any significant
amount.
Depreciation and amortization:
The Company's total depreciation and amortization costs for the six-month
periods ended June 30, 2000 and June 30, 1999 were approximately $446,000 and
$668,000, respectively. Approximately $89,000 and $282,000 were included in cost
of services for such periods.
Interest expense:
The Company's total net interest income for the six-month periods ended June 30,
2000 and June 30, 1999 was approximately $23,000 and $17,000, respectively. This
represents an increase of approximately $6,000 in net interest income for the
six-month period ended June 30, 2000 from the corresponding period of the prior
year. The increase in net interest income is largely due to decreased interest
costs of approximately $11,000 under the Master Lease Agreement with IBM and
decreased interest costs of approximately $8,000 related to the Horizon BCBSNJ
Note. In addition, the Company realized decreased interest income of
approximately $13,000 from the Company's short-term investments.
LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES:
General overview:
At June 30, 2000, the Company had working capital of approximately $541,000,
stockholders equity of approximately $2,537,000 and an accumulated deficit since
its inception of approximately $19,663,000. By continuing to provide high
quality care cost containment services to its existing customer base of five
BCBS plans, management believes it can continue to market its products to other
BCBS plans. This strategy is particularly significant given the current health
care environment where large third-party payers are merging in an effort to
protect their respective franchises and expand their market reach. The various
BCBS plans throughout the country are no exception to this phenomenon and the
Company believes it can leverage its core competencies to participate in this
consolidating environment.
Management is of the opinion that it must continue to refine its current service
lines in order to continue to add value to existing and potential customers.
Additionally, the Company intends to broaden its services offered with unique
and complementary cost-containment strategies. Management will evaluate each
service with regard to anticipated changes in the health care industry, the cost
to enter any such line of service as well as the availability of competent
resources. To further expand its line of services, the Company intends to pursue
alternatives to its internal products and service development efforts by
entering into strategic alliances and joint ventures as well as through
acquisitions.
Financial condition:
At June 30, 2000, the Company had cash of approximately $1,492,000 and a working
capital surplus of approximately $541,000. At December 31, 1999, the Company had
cash of approximately $1,615,000 and a working capital surplus of approximately
$264,000.
Net cash provided from/(used by) operating activities amounted to approximately
$76,000 and $(355,000) for the six-month periods ended June 30, 2000 and June
30, 1999, respectively. The cash provided from 2000 operating activities is
largely due to an increase in accounts payable of approximately $144,000,
non-cash charges of approximately $471,000 and a $288,000 in net profit, offset
by a decrease in customer receivables of approximately $303,000, a decrease in
accrued expenses and other liabilities of approximately $279,000, a decrease in
deferred revenue of approximately $161,000 and a decrease in other assets of
approximately $84,000.
9
<PAGE>
CAREADVANTAGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net cash used in investing activities amounted to approximately $229,000 and
$282,000 for the six-month periods ended June 30, 2000 and June 30, 1999,
respectively. The decrease in cash used of approximately $53,000 is due to
decreased capital outlays for computer-related equipment incurred during the
six-month period ended June 30, 2000.
Net cash provided/(used) in financing activities amounted to approximately
$30,000 and ($724,000) for the six-month periods ended June 30, 2000 and June
30, 1999, respectively. The decrease in cash used of approximately $754,000 is
largely due to suspended loan payments to a stockholder/customer of
approximately $405,000 and decreased principal payments related to the Master
Lease Agreement with IBM of approximately $319,000, offset by proceeds from
issuance of common stock of approximately $30,000.
While there can be no assurances, management believes that its cash on hand and
projected future cash flows from operations (see discussion below under Capital
Resources) will provide adequate capital resources to support the Company's
anticipated cash needs for the next twelve months.
Capital resources:
Pursuant to the Horizon BCBSNJ Note, the Company owes $693,000 to Horizon BCBSNJ
as of June 30, 2000. The Company has an oral agreement with Horizon BCBSNJ to
suspend payments on the note due to Horizon BCBSNJ through August 2000. The
Company is to resume making payments on September 1, 2000 in equal monthly
installments to repay the debt by March 31, 2001. While there can be no
assurances that future operating results will be sufficient to fund this
obligation of the Company, management expects such amounts to be funded through
operations.
The Company had a credit facility with a bank that provided for a $1,500,000
working capital revolver to be used for general working capital needs, which was
effective through June 30, 2000. The Company did not renew such credit facility.
In September of 1998, the bank issued an irrevocable letter of credit in the
amount of $250,000, for the account of the Company in favor of a vendor as
security for the Company's obligation under a non-cancelable operating lease.
This letter of credit was issued under the Company's credit facility. As of June
30, 2000 the $250,000 irrevocable letter of credit is still outstanding and the
Company is exploring alternative ways to secure such letter of credit.
10
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CAREADVANTAGE, INC.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
As of June 30, 2000, the Company's investments are not significantly impacted by
change in market interest rates. The Company does not believe that changes in
interest rates will have a material impact on future earnings or cash flows
during the next twelve months.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
For a description of legal proceedings, see Note C to the Financial Statements.
With the exception of the legal proceedings described in Note C to the Financial
Statements, there are no material pending legal proceedings other than ordinary
routine litigation incidental to the business of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders during the
last quarter of calendar year ended June 30, 2000.
Item 5. Other Information
None.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
11
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CAREADVANTAGE, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CareAdvantage, Inc
August 9, 2000 /s/ David G. Noone
---------------------------------------
David G. Noone
Chief Executive Officer
August 9, 2000 /s/ R. Christopher Minor
---------------------------------------
R. Christopher Minor
Chief Financial Officer
12
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