ITEM 1. BUSINESS
Nursecare Health Centers, Inc. (the "Company") was organized in 1969 and for most of its existence provided skilled nursing, convalescent and rehabilitation care in the operation of two health care facilities. Virtually all of the Company's revenue for all years of its existence had been derived from these services.
The two facilities, Union Forge Nursing Home, Inc. and the Northwood Nursing and Convalescent Home, Inc. were separately incorporated and operated as wholly-owned subsidiaries of the Company. The Union Forge Nursing Home, Inc., located in Hunterton County, New Jersey, was sold in 1989. The Northwood Nursing and Convalescent Home, Inc. was sold in 1994.
In 1995, the Company formed the Pinnacle Healthcare Group, Inc., a wholly-owned subsidiary of the Company which provides long-term care consulting to long-term care facilities. This includes assistance in achieving regulatory compliance and providing the highest level of quality care through education and staff awareness. Constant new regulations in the long-term health care industry requires continuing education of staff and maintaining compliance with the ever changing regulations.
ITEM 2.
ITEM 2. PROPERTIES
Company's headquarters are located in leased space of Three Station Square, Paoli, Pennsylvania, 19301. Registrant occupies approximately one thousand and forty-five (1,045) square feet on the second floor of this office building, which constitutes approximately fourteen percent (14%) of the rental space on that floor. The Registrant's lease runs for a one (1) year term from February 1995, to February, 1996. The annual rental for the year ending December 31, 1995, was $12,475.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
LICENSURE
All legal proceedings previously described in the Company's Reports to the Commission were settled before the end of the fiscal year ending December 31, 1995 with the exception of the following:
Nursecare Health Centers, Inc., et al. v. Realty-Vest Financial Corp., et al., Court of Common Pleas, Philadelphia County, June Term 1993, No. 1485. This action (the "Nursecare Action") was brought by the Company in the Philadelphia Court of Common Pleas for compensatory and punitive damages in excess of $50,000 arising from the allegedly inept, dishonest and fraudulent acts and omissions of certain former managers of a skilled care nursing home facility previously owned by Northwood from early 1990 through March 1993 and from certain defendants' breach of a contract for the sale of the Northwood facility. The Company alleges that the former managers physically damaged the Northwood facility, failed to submit properly documented claims for reimbursement for resident services to third-party payers, diverted Northwood funds for unauthorized uses, committed other acts of malfeasance that caused the Company financial loss and otherwise failed to fulfill their obligations under the contract for sale of the Northwood facility. The Company has sought damages for the defendants' breach of contract, breach of trust, breach of fiduciary duty, negligence, fraud, negligent misrepresentation, conversion, waste of premises, and under theories of individual liability of certain of the organizational defendants' officers and partners by virtue of their participation in the acts and omissions which injured the Company and piercing the corporate veil. The Company and the other plaintiffs also seek an award of their attorneys' fees and costs in an unspecified amount.
The defendants have asserted counterclaims against the Company (the "Counterclaims") and a third-party action against Northeastern Investment Company ("Northeastern") (the parent of Nursecare) and one of Nursecare's officers, James Hubbert, in his individual capacity (the "Third-Party Action"). Defendants allege in the Counterclaim that the Company, among others, breached a contract for the sale of the Northwood facility to them and committed various torts preventing the consummation of the sale of the Northwood facility and interfering with their management of the facility. In particular, the defendants allege in the Counterclaim that the Company committed fraud and negligently misrepresented material facts in connection with the attempt by Realty-Vest to purchase the Northwood facility beginning in 1989. The defendants further allege that these actions constitute a breach of the sales contract, and that the Company is liable to indemnify defendants for financial losses defendants allegedly incurred as a result of the Company's alleged actions. The defendants further allege that the Company, among others, tortuously converted Medicaid receivables and a reserve bank account for its own purposes. Defendants further allege that the Company, among others, tortuously interfered with their relationship with Northwood employees. The defendants seek compensatory and punitive damages in excess of $50,000 and an award of their attorneys' fees and costs in an unspecified amount.
The Nursecare Action still is in the discovery stages. The parties are in the process of conducting settlement negotiations. The parties tentatively have negotiated a settlement under which the defendants would pay the Company $280,000 plus interest over 20 months and provide certain other consideration under the terms of the proposed tentative settlement. Neither the Company nor any other entity or person named in the Counterclaim or the Third-Party Action would pay the defendants anything under the terms of the proposed settlement.
If settlement is not reached in the near future, the Company intends to prosecute this action vigorously. At this time, however, we are unable to express any opinion as to the likely outcome of this litigation.
The Company believes that all of the allegations against it and related persons and entities in the Counterclaim and the Third-Party Action are baseless and without merit and that the Company and all of the other persons and entities named in the Counterclaim and the Third-Party Actions have meritorious defenses to all such claims. If settlement is not reached in the near future, the Company intends to resist the Counterclaim and, to the extent that the Third-Party Action implicates the Company's interests, the Third-Party Action vigorously. At this time, however, we are unable to express any opinion as to the likely outcome of this litigation.
The Company previously tendered the defense of the Counterclaim to two of its insurers, the Continental Insurance Company ("Continental") and Pacific Employers Insurance Company ("Pacific Employers"). Continental has denied coverage, for which, among other acts and omissions, the Company has brought suit against Continental. See below. Pacific Employers has not yet determined whether it will provide the Company with a defense or indemnity.
Northwood Nursing and Convalescent Home, Inc. and Nursecare Health Centers, Inc. v. The Continental Insurance Co., U.S.D.C., E.D. Pa., C.A. No. 94-CV-6706. This action (the "Coverage Action") was brought by the Company against one of its insurance companies, Continental, in the United States District Court for the Eastern District of Pennsylvania. In this action, the Company seeks declaratory relief and damages in excess of $50,000. The Company alleges that Continental contracted to defend and indemnify the Company with regard to certain of the liabilities and losses that form the basis for their claims in the Nursecare Action (see above). The Company has alleged that Continental breached the insurance contract and Continental's obligations of good faith and fair dealing in its handling of the claims. The Company has alleged further that Continental is liable to the Company under Pennsylvania's bad faith insurance practices statute, under which the Company can recover punitive damages, attorneys' fees and enhanced interest.
On or about October 24, 1995, the Court entered a summary judgment in favor of Continental and against the Company. The Company filed an appeal of the Court's grant for the Third Circuit, captioned Northwood Nursing and Convalescent Home, Inc. and Nursecare, Inc. v. The Continental Insurance Co., U.S. Court of Appeals, 3rd Circuit, No. 95-2003 (the "Appeal").
The Company has reached a settlement with Continental under which Continental will pay the Company $10,000 and provide certain other consideration in exchange for the Company's withdrawal of the Appeal. Continental and the Company have filed a stipulation for the withdrawal of the Appeal in light of the settlement. The stipulation awaits Court approval.
Nursecare Health Centers, Inc. and Northwood Health, Inc. v. American Insurance Administrators a/k/a "AIA" and Donald R. Wert, individually and as President of American Insurance Administrators, Inc., Court of Common Pleas, Philadelphia Co., November Term 1994, No. 2112. This action was brought by the Company against the insurance agent ("AIA") which placed the Company's commercial coverage with Continental and Pacific Employers during the time period that the defendants in the Nursecare Action (see above) managed the nursing care facility previously owned by Northwood. The Complaint was filed in the Court of Common Pleas of Philadelphia County. The Company alleges that AIA and its principal, Donald Wert ("Mr. Wert"), failed to place insurance coverage adequate to insure the nursing home facility and negligently certified that AIA had placed adequate insurance coverage. The Company has brought claims against AIA and Mr. Wert for breach of contract, breach of fiduciary duty, negligent misrepresentation, fraud, professional negligence, and tortious interference with contractual relations. The Company seeks damages in excess of $50,000 and an award of its attorneys' fees and costs in an unspecified amount.
This action is in the pleading and discovery stages. The parties have negotiated a tentative settlement under which AIA, Mr. Wert and their insurance carrier, Utica Mutual Insurance Company, would pay the Company $41,250 and provide certain other consideration in exchange for a release.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS
A shareholders meeting took place on August 10, 1995 pursuant to notice. The only matter to be voted upon by the shareholders was the election of Directors for the following year. The Directors then in office were elected by a unanimous vote.PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDERS MATTERS
(a) Market. There is no active market for Registrant's Common Stock. The Company is aware that private sales between security holders occur from time to time by way of private negotiation. The Registrant is not involved in such transactions and the price established is between the individuals involved. The Company is aware that securities brokers from time to time will negotiate sales of the Company's stock. The Company does not participate in any such transactions, has not listed any of its shares on any securities exchange and does not know how or what prices are established. Otherwise, to the Company's knowledge, no stock exchange or brokerage firm makes a market in its securities although purchases and sales of its shares reportedly take place from time to time. As of December 31, 1995, the Company had 484 shareholders.
(b) Dividends. The Registrant has never paid a cash, stock or property dividend. The Company's policy has been to reinvest its earnings.
PART II
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Prior to November 30, 1994 the Company operated two nursing facilities with 210-bed capacity. Of the 210 beds, 148 were in Philadelphia, Pennsylvania (Northwood) and 62 beds were in Clinton Township, New Jersey (Union Forge). The Union forge was sold on February 7, 1990. From February, 1990 to November, 1994 only the Northwood was operational. On November 30, 1994 the Northwood was sold.
The Company has been wrapping up the affairs of the Northwood. There is no comparison of the revenue and income from discontinued operations of the Northwood and continuing operation. The continuing operations primarily exist of the 1995 start up on The Pinnacle Healthcare Group, Inc. The Company has been concentrating its efforts in the marketing and developing of this new venture. The Pinnacle Healthcare Group, Inc. is a long term care consulting firm dedicated to helping long term care facilities achieve regulatory compliance by providing the highest level of quality care through education and staff awareness.
We recognize that with the advent of new regulations, survey format and reimbursement methodology, keeping a facility's staff educated and up to date, while remaining in compliance, is a challenge. Therefore, we have developed a wide range of programs that will not only educate each facility's staff on how to identify problem areas, but will also give them the tools and training necessary to implement interventions which will maintain regulatory compliance and increase the facility's profit margin.
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
NURSECARE HEALTH CENTERS, INCORPORATED AND SUBSIDIARIES
PART II - ITEM 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company's accountants, Zelenkofske & Axelrod & Co., Ltd., certified public accountants. During 1995 there was no change in the Company's accountants nor were there any disagreements with the accountants on accounting and financial disclosure.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company has five (5) members of its Board of Directors who are listed below including Executive Offices held by each, if any. As noted in the table below, four (4) members of the Board have been serving in the capacity for twenty-three (23) years.
Principal Director Shares Percent Officer Name Occupation Since Age Nursecare of Class - --------------------- -------------------- ----- --- --------- -------- James F. Hubbert President 1969 57 5,000 .9% Nursecare Health Centers, Inc.
Frank H. Slattery CPA 1971 56 5,000 .9% Colucci & Slattery, P.C. Horsham, PA Secretary-Treasurer of Nursecare Health Centers, Inc. Since 1981 (and Treasurer Since 1979)
Harry Wolfington Half-A-Car, Inc. 1971 58 5,000 .9% 308 Lancaster Avenue Wynnwood, PA
Joseph Zoll President,. Co-Owner 1971 56 40,935 7.42% Associates For Research, Testing and Certifying Children and Adults Ascertaining Learning Potential of Disability Also, Marketing and Analysis Survey Firm
F. Joseph Loeper, Jr. Pennsylvania 1990 52 -0- -0- State Senator Majority Leader Pennsylvania Senate
ITEM 11.
ITEM 11. REMUNERATION OF MANAGEMENT
Nursecare Health Centers, Inc.. does not have any retirement benefits for its Officers or Directors. The table following indicated the aggregate cash and cash equivalent form of remuneration including salaries, Director fees, commissions and bonuses of all Officers of the Company in excess of Fifty Thousand Dollars ($50,000.00) each and all Officers and Directors of the Company as a group.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The first table following sets forth the names as of December 31, 1995, of persons owning of record, directly, indirectly or beneficially more than five percent (5%) of Nursecare Health Centers, Inc. Common Stock.
The second table following sets forth the amount of stock owned of record, beneficially, directly or indirectly, by the Directors and Officers of Nursecare Health Centers, Inc., as a group and individually as appropriate of Northeastern Investment Company, Inc. As of December 31, 1995, Northeastern Investment Company, Inc. had one (1) class of Common Stock outstanding and the total amount issued was one hundred seventy-three thousand five hundred seventy-six (173,576) shares.
Title of Class Amount of Beneficially Owned Percent of Class - -------------- ---------------------------- ---------------- Common Stock* 152,005 87.57 Percent
*James F. Hubbert, President of Nursecare Health Centers, Inc. and Chairman of its Board of Directors, owns 140,000 shares of the above amount. This represents 80.66 percent of the outstanding shares. Northeastern Investment Company, Inc. has authorized Mr. Hubbert to vote its shares of Nursecare Health Centers, Inc., at the Annual Meeting.
ITEM 13.
ITEM 13. CERTAIN RELATIONS AND RELATED TRANSACTIONS
Frank H. Slattery, a director of the Company and a partner in a certified public accounting firm provided some accounting services for the Company during 1995. During the period covered in this report he had a 50% equity interest in the CPA firm.
ITEM 14.
ITEM 14. EXHIBITS
Previously submitted Exhibits are incorporated herein by reference. They include the Articles of Incorporation of the Company, its bylaws, financial statements and material agreements concerning the sale of the Company's two nursing homes.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report of be signed on its behalf by the undersigned therefore duly authorized.
NURSECARE HEALTH CENTERS, INC.
Dated: March 27, 1996 /s/James F. Hubbert President and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant an in the capacities and on the dates indicated.
Dated: March 27, 1996 /s/James F. Hubbert President and Chairman of the Board (Principal Executive Officer)
Dated: March 27, 1996 /s/Frank H. Slattery Secretary, Treasurer and Director
Dated: March 27, 1996 /s/Harry Wolfington Director
Dated: March 27, 1996 /s/Joseph Zoll Director
Dated: March 27, 1996 /s/F. Joseph Loeper, Jr. Director
FOOTNOTES
1. Mr. Hubbert is also the President and Chairman of the Board of Northeastern Investment Company, Inc. and by reason thereof is beneficial owner of the shares held by Northeastern Investment company, Inc. (See ITEM 12.)
2. 5,000 of the shares owned by Mr. Zoll and all shares owned by the other Directors were acquired pursuant to stock options exercised in January, 1987. No other stock options exist.
3. Mr. Hubbert and Mr. Slattery are first cousins.
4. The total percentage of shares owned by the Directors as a group of all outstanding shares of the Company is 10.4%. .
5. The Company maintains life and health insurance for its Officers, as well as, a ,medical and dental protection plan for its President. The President also has use of the Company automobile. The Company reimburses its President for travel relating to Company business. Indirect remuneration includes all payments on account of these benefits.
6. The Board of Directors met on eight (8) occasions in 1995. Of the figure included above, $44,000 was paid to Directors for meetings attended. $51,201 was paid to Colucci & Slattery, P.C. for accounting services. The Company's Assistant Secretary, Treasurer and Board Member Frank H. Slattery is a 50% partner in the firm.