-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CwGXZ3W47J124+q/EuLNMM8+e2IZqOzGhlI4ldFAvn4zhwG+uEpvagxE64GZxl5J 8OqzzWmEXxz5CkReJ0ZHgQ== 0000354761-98-000006.txt : 19980519 0000354761-98-000006.hdr.sgml : 19980519 ACCESSION NUMBER: 0000354761-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980518 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KUALA HEALTHCARE INC CENTRAL INDEX KEY: 0000354761 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 222362097 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09255 FILM NUMBER: 98626864 BUSINESS ADDRESS: STREET 1: 900 SYLVAN AVE CITY: ENGLEWOOD CLIFFS STATE: NJ ZIP: 07632 BUSINESS PHONE: 2015674600 MAIL ADDRESS: STREET 1: 910 SYLVAN AVENUE CITY: ENGLEWOOD STATE: NJ ZIP: 07632 FORMER COMPANY: FORMER CONFORMED NAME: CONTINENTAL HEALTH AFFILIATES INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FOR KUALA HEALTHCARE, INC. - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 1998 Commission File Number 0-11895 KUALA HEALTHCARE, INC. Formerly named Continental Health Affiliates, Inc. (Exact name of registrant as specified in its charter) Delaware 22-2362097 (State of other jurisdiction (I.R.S. Employer Identification Number) incorporation or organization) 910 Sylvan Avenue, Englewood Cliffs, NJ 07632 (Address of principal executive offices) (201) 567-4600 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such short 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 As of May 14, 1998, the Registrant had outstanding 3,408,000 shares of its $.06 par value Common Stock. KUALA HEALTHCARE, INC. Index Part I - Financial Information: Page Item 1 Consolidated Balance Sheets at March 31, 1998 (Unaudited) and June 30, 1997..........................................................3 Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 1998 and 1997............................................. 4 Consolidated Statements of Operations (Unaudited) for the nine months ended March 31, 1998 and 1997....................................................5 Consolidated Statements of Cash Flows (Unaudited) for the nine months ended March 31, 1998 and 1997......................................... 6 - 7 Notes to Unaudited Consolidated Financial Statements................... 8 - 10 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................11- 14 Part II - Other Information.................................................. 15 Signatures................................................................. 16
KUALA HEALTHCARE, INC. Consolidated Balance Sheets (Dollars in thousands) March 31, June 30, 1998 1997 (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents...............................................$ 373 $ 3,796 Patients' funds......................................................... 147 188 Accounts receivable, net of allowances for uncollectible accounts of $3,005 and $4,252.................................................. 13,985 13,346 Inventories............................................................. 2,332 1,861 Deferred income taxes................................................... 702 702 Prepaid expenses and other current assets............................... 1,496 803 ----------- --------- Total current assets................................................ 19,035 20,696 Property and equipment, at cost, net of accumulated depreciation and amortization of $6,064 and $4,916................................... 47,119 46,991 Goodwill, net of accumulated amortization................................. 128 139 Other assets.............................................................. 3,889 3,524 ----------- -------- Total assets........................................................$ 70,171 $ 71,350 =========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term borrowings...................................................$ 51 $ 105 Current portion of long term debt....................................... 4,072 5,686 Income taxes payable.................................................... 513 437 Accounts payable........................................................ 10,416 9,696 Other current liabilities............................................... 4,083 4,260 ----------- --------- Total current liabilities........................................... 19,135 20,184 Long-term debt, net of current portion ................................... 41,095 41,129 Mandatorily redeemable preferred stock (includes $512 current portion).... 1,334 1,989 ----------- --------- Total liabilities................................................... 61,564 63,302 ----------- --------- Minority interest in subsidiary ........................................ 2,720 2,424 Commitments and contingencies Stockholders' equity: Preferred stock, $.02 par value; $100 liquidation preference; 1,000,000 shares authorized; 13,884 shares outstanding ......................... 1 1 Series A 11% Convertible Preferred stock $.02 par value, $1,000 liquidation preference, 34 shares outstanding..................................... 34 34 Common stock, $.06 par value; 15,000,000 shares authorized; 3,408,000 and 3,373,033 shares outstanding ..................................... 208 206 Additional paid-in capital.............................................. 23,577 23,401 Accumulated deficit..................................................... (17,933) (18,018) ----------- --------- Total stockholders' equity.......................................... 5,887 5,624 ----------- --------- Total liabilities and stockholders' equity..........................$ 70,171 $ 71,350 =========== ========= See accompanying notes to consolidated financial statements
KUALA HEALTHCARE, INC. Consolidated Statements of Operations (Dollars in thousands, except per share amounts) Three Months Ended March 31, 1998 1997 ---- ---- (Unaudited) Revenues: Nursing home services..................................................$ 8,799 $ 10,159 Infusion therapy and other medical services............................ 7,013 6,935 ---------- --------- Total revenues................................................ 15,812 17,094 ---------- --------- Personnel............................................................ 6,855 8,357 Medical and nutritional product...................................... 3,715 3,355 Health care and lodging.............................................. 2,042 2,480 Selling, general and administrative.................................. 1,740 1,680 Provision for uncollectible accounts................................. (169) 163 Depreciation and amortization........................................ 407 534 --------- --------- Total operating expenses...................................... 14,590 16,569 --------- --------- Income from operations........................................ 1,222 525 Interest and dividend income........................................... 55 14 Interest and other financing costs..................................... (1,183) (1,333) Other income (expense), net............................................ 96 236 Minority interest in earnings of subsidiary............................ (77) (85) --------- --------- Income (loss) before income taxes, extraordinary gains......... 113 (643) Provision for income taxes............................................. 108 147 --------- -------- Income (loss) before extraordinary gains....................... 5 (790) --------- ---------- Extraordinary gains.................................................... -- 1,192 --------- --------- Net income..................................................... 5 402 Preferred dividends.................................................... (39) (35) --------- --------- Net income available to common shareholders...................$ (34) $ 367 ========== ========= Income (loss) per share: Basic Loss before extraordinary gains..................................$ (.01) $ (.26) Extraordinary gains.............................................. -- .37 --------- --------- Net income (loss) available to common shareholders............$ (0.01) $ 0.11 ========= ========= Diluted Loss before extraordinary items..................................$ (.01) (.26) Extraordinary gains.............................................. -- .37 --------- --------- Net income (loss) available to common shareholders............$ (0.01) $ 0.11 ========= ========= Basic weighted average number of common shares........................ 3,376,409 3,198,958 Diluted weighted average number of common shares...................... 3,579,126 3,198,958 See accompanying notes to consolidated financial statements
KUALA HEALTHCARE, INC. Consolidated Statements of Operations (Dollars in thousands, except per share amounts) Nine Months Ended March 31, 1998 1997 ---- ---- (Unaudited) Revenues: Nursing home services..................................................$ 26,774 $ 33,177 Infusion therapy and other medical services............................ 21,599 20,439 ----------- ---------- Total revenues................................................ 48,373 53,616 ----------- ---------- Personnel............................................................ 20,870 25,927 Medical and nutritional product...................................... 11,460 9,449 Health care and lodging.............................................. 6,199 7,431 Selling, general and administrative.................................. 5,023 5,461 Provision for uncollectible accounts................................. 100 746 Depreciation and amortization........................................ 1,177 1,610 ----------- ---------- Total operating expenses...................................... 44,829 50,624 ----------- ---------- Income from operations........................................ 3,544 2,992 Interest and dividend income........................................... 87 68 Interest and other financing costs..................................... (3,734) (4,492) Other income (expense), net............................................ 586 416 Minority interest in earnings of subsidiary............................ (213) (316) --------- ---------- Income (loss) before income taxes, extraordinary gains......... 270 (1,332) Provision for income taxes............................................. 335 535 --------- ---------- Loss from continuing operations before extraordinary gains..... (65) (1,867) ---------- ---------- Extraordinary gains.................................................... 150 2,367 --------- ---------- Net income.................................................... 85 500 Preferred dividends.................................................... (74) (130) --------- ---------- Net income available to common shareholders...................$ 11 $ 370 ========= ========== Income (loss) per share: Basic Loss before extraordinary gains..................................$ (.04) $ (.65) Extraordinary gains.............................................. .04 .77 --------- ---------- Net income (loss) available to common shareholders............$ .00 $ .12 ========= ========== Diluted Loss before extraordinary gains..................................$ (.04) $ (.65) Extraordinary gains.............................................. .04 .77 --------- ---------- Net income (loss) available to common shareholders........... $ 0.00 $ .12 ========= ========== Basic weighted average number of common shares........................ 3,375,254 3,082,274 Diluted weighted average number of common shares...................... 3,460,669 3,082,274 See accompanying notes to consolidated financial statements
KUALA HEALTHCARE, INC. Consolidated Statements of Cash Flows (Dollars in thousands) Nine Months Ended March 31, 1998 1997 ---- ---- (Unaudited) Operating activities: Net income.........................................................$ 85 $ 500 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization expense........................ 1,177 1,610 Warrants issued for services................................. -- 98 Amortization of deferred financing costs..................... 188 209 Provision for uncollectible accounts......................... 100 746 Amortization of deferred income.............................. -- (72) (Gain) loss on translation of foreign currency debt.......... (34) (154) Minority interest............................................ 213 316 Increase (decrease) in cash from changes in: Patient funds............................................... 41 (4) Accounts receivable......................................... (739) (3,734) Inventories................................................. (471) 332 Prepaid expenses and other current assets................... (693) (207) Other assets................................................ (428) (612) Taxes payable............................................... 76 461 Accounts payable............................................ 720 407 Other current liabilities................................... (177) 1,399 Other liabilities........................................... -- (16) ----------- ----------- Net cash provided by operating activities...................... 58 87 ----------- ----------- Investing activities: Investment in Bach Pharmacy ....................................... 83 -- Expenditures for property and equipment............................ (1,201) (418) Acquisition of Universal Home Infusion............................. -- (608) ----------- ----------- Net cash used in investing activities.......................... (1,118) (608) ------------ ----------- Financing activities: Conversion of trade payables into notes............................ -- 904 Payment on mandatorily redeemable preferred stock.................. (655) -- Payments on debt................................................... (1,668) (2,551) Net proceeds from exercise of common stock options................. 34 42 Payment of preferred dividends..................................... (74) (83) ----------- ----------- Net cash (used in ) provided by financing activities........... (2,363) (1,688) ----------- ----------- Net (decrease ) increase in cash and cash equivalents................$ (3,423) $ (2,209) Cash and cash equivalents, beginning of period....................... 3,796 2,900 ------------ ------------ Cash and cash equivalents, end of period.............................$ 373 $ 691 =========== =========== Supplemental disclosure of cash flow data: Interest paid....................................................$ 2,251 $ 4,145 ============ =========== Income taxes paid................................................$ 105 $ 53 =========== =========== Non cash investing and financing activity: Debt to equity conversion........................................$ --- $ 1,824 Dividend conversion..............................................$ --- $ 47 Stock issued in connection with investment.......................$ 210 $ --- See accompanying notes to consolidated financial statements
KUALA HEALTHCARE, INC. Notes to Consolidated Financial Statements (Unaudited) 1. The Company The Company's operations consist primarily of nursing home and assisted living services, infusion therapy and other medical services. Nursing home and assisted senior housing services include the ownership, leasing, operation and management of nursing homes and assisted senior housing facilities. Infusion therapy and other medical services include enteral and other medical services, primarily for patients in nursing homes, and intravenous and other infusion therapies for patients at home and in nursing homes. The Company is subject to certain risks and uncertainties as a result of changes that could occur in the healthcare industry, including Medicare and Medicaid reimbursement rates. On December 1, 1997, the Company acquired a 75% interest in a limited liability company (LLC) to provide institutional pharmacy services. The minority interest is held by Bach's Drug Store, a Hackettstown, New Jersey Corporation ("Bach's") which contributed its existing business to the LLC. The Company paid $210,000 in Kuala stock to a principal of Bach's in consideration for a four-year employment agreement (at $120,000/year) with the pharmacist of Bach's (the manager of the LLC) and (b) a four-year lease with the shareholders of Bach's to lease the premises (at $18,000/year) where the LLC operates. The Company has guaranteed the employment and lease agreements. On January 27, 1998 shareholders approved a one-for-three reverse split of the Company's common stock. In conjunction with the reverse split, the Company has changed its name to Kuala Healthcare, Inc. and will be listed on the Nasdaq Small Cap market under the symbol "KUAL". Common share and per share amounts in the financial statements reflect the impact of the reverse stock split in all periods. 2. Basis of Presentation The consolidated financial statements include the accounts of Kuala Healthcare, Inc, ("Kuala") and its subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. Kuala owns 58% of the common stock of Infu-Tech, Inc. ("Infu-Tech"); 42% of the common stock of Infu-Tech is publicly traded. The minority interest in the consolidated financial statements represents the minority stockholders' proportionate share of equity in Infu-Tech. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accrual adjustments, considered necessary for a fair presentation have been included. In addition, during the nine months, management reviewed various estimates of certain liabilities and the adequacy of bad debt provisions and recognized a $607,000 benefit in the statements of operations, of which $342,000 was recognized in the current quarter. Furthermore, the Company wrote down the carrying value of its liability for its 6% Swiss franc debt, reflecting unlikelihood of the balance having to be paid. Accordingly, the Company recorded an additional $118,000 adjustment in income. Operating results for the nine month period ended March 31, 1998, are not necessarily indicative of the result that may be expected for year end June 30, 1998. These financial statements and notes should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 1997. 3. Cash and Cash Equivalents Cash and cash equivalents at March 31, 1998 and June 30, 1997 includes $242,000 and $512,000 respectively, held by Infu-Tech. A management and non-competition agreement between Continental and Infu-Tech, which, as extended, expires September 30, 2000, prohibits Infu-Tech from lending money to (or borrowing money from) Kuala. The Company classifies all highly liquid investments with maturities of three months or less when purchased as cash equivalents. 4. Earnings Per Share Options excluded from the computation of diluted earnings per share since such options would not have a diluted effect as the exercise price is above the average market price for the period were as follows: 1998 1997 ---- ---- Options excluded for the three month period ending....... 151,702 716,767 March 31, Options excluded for the nine month period ending March 31,............................................... 313,847 716,767 5. Accounting Pronouncements On April 3, 1998, the AICPA Accounting Standards Executive Committee issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities (SOP 98-5). This statement requires that the costs of start-up activities, including organization costs be expensed as incurred. SOP 98-5 is effective for financial statements for fiscal years beginning after December 15, 1998. The Company will have to implement SOP 98-5 in its financial statements for the fiscal year ending June 30, 2000. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto. RESULTS OF OPERATIONS Three Months ended March 31,1998 Compared with Three Months Ended March 31, 1997 Total revenues were $1,282,000, or 8% lower for 1998 compared with 1997, primarily due to the sale of two facilities whose revenues were included in the prior period and slightly lower occupancy at the existing facilities. Infusion therapy and other medical services revenues increased by $78,000 or 1%, from $6,935,000 in 1997 to $7,013,000 in 1998, primarily due to the inclusion of Bach's pharmacy in 1998 offset by decreased revenues at Infu-Tech. Personnel costs decreased by $1,502,000, or 18%. The reduction is primarily attributable to the sale of two facilities in June 1997, together with overall reduction in staff in the nursing home division. Costs of medical and nutritional products sold to patients and other customers increased by $360,000 or 11%, from $3,355,000 in 1997 to $3,715,000 in 1998. As a percentage of infusion therapy and other medical services revenues, medical and nutritional product costs were 53% in 1998 and 48% in 1997. The increase in the medical and nutritional product costs as a percentage of sales is primarily attributable to Infu-Tech's increased revenues associated with Ceredase, a high cost drug, and margin reductions from operating in a managed care environment. Health care and lodging expenses, which are incurred in connection with nursing home services, decreased by $438,000 or 18%, primarily as a result of the sale of the two facilities. Selling, general and administrative costs increased by $60,000 or 4% as a result of increased legal fees partially offset by savings due to the sale of the two facilities. Following a focused effort to collect old receivables, there was a review of the existing allowance. As a result of the review, the company determined that the existing allowance at March 31, 1998 exceeded anticipated collections and reduced the allowance by $342,000. Other income, net, of $96,000 resulted from the write down of the carrying value of certain liabilities of $62,000 and an unrealized foreign currency translation gain of $34,000. Other income, net of $236,000 in 1997 consisted of the re-evaluation of accruals of $162,000 and an unrealized foreign currency translation gain of $74,000. Minority interest in earnings of subsidiary of $77,000 in 1998 represents the portion of the net income of Infu-Tech and Bach's Pharmacy Services allocable to minority stockholders. The provision for income taxes of $108,000 in 1998 and $147,000 in 1997 reflects a full tax charge for Infu- Tech, a 58% owned subsidiary which files its own federal tax return. In March 1997, the Company agreed to convert certain liabilities into Common Stock of the Company. The transaction resulted in an increase to shareholders equity of $2,542,000 of which $1,192,000 is reflected as an extraordinary gain for the three months ended March 31, 1997. The net loss applicable to common shareholders in 1998 was $34,000 or $.01 per share compared to a net income available to common shareholders in 1997 of $367,000 or $.11 per share. Nine Months ended March 31, 1998 Compared with Nine Months Ended March 31, 1997 Total revenues were $5,243,000, or 10% lower for 1998 compared with 1997, primarily due to the sale of two facilities whose revenues were included in the prior period and slightly lower occupancy at the existing facilities. Infusion therapy and other medical services revenues increased by $1,160,000 or 6%, from $20,439,000 in 1997 to $21,599,000 in 1998 primarily due to the inclusion of Bach's Pharmacy Services in 1998. Personnel costs decreased by $5,057,000, or 20%. The reduction is primarily attributable to the sale of two facilities in June 1997, together with overall reduction in staff in the nursing home division. Costs of medical and nutritional products sold to patients and other customers increased by $2,011,000 or 21%, from $9,449,000 in 1997 to $11,460,000 in 1998. As a percentage of infusion therapy and other medical services revenues, medical and nutritional product costs were 53% in 1998 and 46% in 1997. The increase in the medical and nutritional product costs as a percentage of sales is primarily attributable to the inclusion of Bach's Pharmacy Services and Infu-Tech's increased revenues associated with Ceredase, a high cost drug, a capitation agreement, and margin reductions from operating in a managed care environment. Health care and lodging expenses, which are incurred in connection with nursing home services, decreased by $1,232,000 or 17%, primarily as a result of the sale of the two facilities. Selling, general and administrative costs decreased by $438,000 or 8% as a result of the sale of the two facilities partially offset by increased legal fees. Following a focused effort to collect old receivables, there was a review of the existing allowance. As a result of the review, the company determined that the existing allowance at March 31, 1998 exceeded anticipated collections and reduced the allowance by $607,000. Other income , net, of $586,000 resulted from the write-off of accounts payable of $460,000, the re-evaluation of certain liabilities of $98,000 and an unrealized foreign currency translation gain of $34,000. Other income, net of $416,000 in 1997 primarily consisted of an unrealized foreign currency translation gain of $154,000; amortization of $72,000 of a $628,000 payment received by the Company in 1992 as consideration not to provide nursing services in California, Arizona or Tennessee for a period of five years and the re-evaluation of accruals. Minority interest in earnings of subsidiary of $213,000 in 1998 represents the portion of the net income of Infu-Tech and Bach's Pharmacy Services allocable to minority stockholders. Minority interest in earnings of subsidiary of $316,000 in 1997 represents the portion of net income of Infu-Tech allocable to minority stockholders. The provision for income taxes of $335,000 in 1998 and $535,000 in 1997 reflects a full tax charge for Infu- Tech, a 58% owned subsidiary which files its own federal tax return. In March 1997, the Company agreed to convert certain liabilities into Common Stock of the Company. The transaction resulted in an increase to shareholders equity of $2,542,000 of which $1,192,000 is reflected as an extraordinary gain during the three months ended March 31, 1997. The net income available to common shareholders in 1998 was $11,000 or $.00 per share compared to net income available to common shareholders in 1997 of $370,000 or $.12 per share. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1998, the Company had stockholders' equity of $5,887,000 and total liabilities of $61,566,000. At March 31, 1998 debt amounted to $46,501,000 of which approximately $35,000,000 relates to mortgages on three of the nursing homes. Debt also includes a mortgage secured by a facility of $2,196,000 due October 1, 1997. This mortgage has been extended while refinancing is completed. Other debt included SFr 582,030 (approximately $382,000) carrying value of the principal amount of 6% Swiss franc denominated bonds which remain unpaid although they matured on June 27, 1995 (the "Bonds"); SFr 619,500 (approximately $407,000) principal amount of 8% Swiss franc denominated bonds due June 27, 1998; $1,213,000 principal amount of 8% notes due 1999; and $3,400,000 principal amount of 6% notes due 2003. When the Bonds matured on June 27, 1995, SFr 2,900,000 (approximately $2,525,000) principal amount, together with accrued interest of SFr 174,000 (approximately $152,000), was outstanding. Between June 30, 1995 and June 30, 1996, the Company acquired SFr 2,164,000 principal amount of Bonds, including accrued interest on those Bonds, for a total of SFr 1,122,375 and $315,000 plus a SFr 619,500 note maturing in June 1998. As of December 31, 1997 the Company had acquired an additional SFr 110,000 principal amount of bonds (with interest) for $88,500. Reflective of management's view that it is unlikely the entire principle amount of the Swiss Francs balance will be presented for payment,since approximately three years have elapsed, the Company wrote down this liability by approximately one-third in fiscal 1998. As a result, $118,000 of additional income was recorded in the nine months ending March 31, 1998, $94,000 of which was recorded in the current quarter. The Company's cash and cash equivalents balance decreased from $3,796,000 at June 30, 1997 to $373,000 at March 31, 1998. Included in the March 31, 1998 balance is $242,000 held by Infu-Tech. A management and non-competition agreement with Infu-Tech, which, as extended, expires September 30, 2000, prohibits Infu-Tech from lending money to (or borrowing money from) the remainder of the Company. Net cash of $58,000 was provided by operating activities. At March 31, 1998, the balance in net accounts receivable for Infu-Tech was 5% higher than the balance at June 30, 1997 attributed to higher revenues. Infu-Tech's net accounts receivable has increased from 102 days sales at June 30, 1997 to 105 days sales at March 31, 1998, primarily as a result of continued slow payments from Medicare and managed care companies. Medicare payments have been delayed due to changes in reimbursement policies, while managed care companies have experienced delays in processing payments due to their higher volume of claims. The Company has no arrangements under which it can make borrowings. At March 31, 1998, the Company had a working capital deficit of $100,000. In addition, the Company was required to pay $512,000 to redeem preferred stock. Excluding Infu-Tech, which had working capital of $5,251,000, the Company had a working capital deficit of $5,351,000. Further, at March 31, 1998, Infu-Tech's cash and cash equivalents of $242,000 were $270,000 less than the balance of $512,000 at June 30, 1997. During the nine months ended March 31, 1998, the Company repaid $1,668,000 of debt, redeemed $655,000 of mandatorily redeemable preferred stock and paid preferred stock dividends of $74,000. While the Company continues to experience cash flow constraints, it continues to use the sale of assets as a means of meeting ongoing obligations. It has certain assets which can be used for this purpose if needed. KUALA HEALTHCARE, INC. Part II - Other Information Item 1. Legal Proceedings Presently, there are no pending material legal proceedings other than as reported in the Company's Form 10-K for the year ended June 30, 1997. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to Vote of Security Holders On January 27, 1998 shareholders approved a one-for-three reverse split of the Company's common stock. In conjunction with the reverse split, the Company has changed its name to Kuala Healthcare, Inc. and will be listed on the Nasdaq Small Cap market under the symbol "KUAL". The number of shares of common stock of the Corporation which were voted for nominees for election to the Board of Directors were as follows: Nominee Number of Shares ------- ---------------- Joseph M. Giglio 9,919,785 Israel Ingberman 9,919,785 Jack Rosen 9,915,003 Joseph Rosen 9,919,585 Bruce Slovin 9,919,785 Carl D. Glickman 9,919,785 No shares were voted for anyone else. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K A.Reports on Form 8-K during the quarter ended March 31, 1998 ------------------------------------------------------------- None KUALA HEALTHCARE, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Kuala Healthcare, Inc. Date: May 15, 1998 /S/ JACK ROSEN ---------------------------------- -------------- Jack Rosen Chairman and Director (Chief Executive Officer) Date: May 15, 1998 /S/ ISRAEL INGBERMAN ---------------------------------- -------------------- Israel Ingberman Secretary, Treasurer and Director Date: May 15, 1998 /S/ ALLISON K. ALLEN ---------------------------------- -------------------- Allison K. Allen Principal Accounting Officer EX-27 2 FDS --
5 0000354761 KUALA HEALTHCARE, INC. 1,000 9-MOS JUN-30-1998 JUL-01-1997 MAR-31-1998 373 0 16,990 3,055 2,332 19,035 53,183 6,064 70,171 19,135 0 1,334 35 208 5,852 70,171 48,373 48,373 11,460 44,729 0 100 3,734 270 335 (65) 0 150 0 85 .00 .00
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