Attached files
file | filename |
---|---|
EX-32.2 - Conmed Healthcare Management, Inc. | v184646_ex32-2.htm |
EX-31.2 - Conmed Healthcare Management, Inc. | v184646_ex31-2.htm |
EX-32.1 - Conmed Healthcare Management, Inc. | v184646_ex32-1.htm |
EX-31.1 - Conmed Healthcare Management, Inc. | v184646_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
|
||
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934.
|
|
For
the quarterly period ended March 31, 2010
|
||
OR
|
||
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934.
|
|
For
the transition period
from
to
|
Commission
File Number:
|
0-27554
|
Conmed
Healthcare Management, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
|
42-1297992
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
7250 Parkway Dr., Suite 400
Hanover, MD
|
21076
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(410) 567-5520
|
(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 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
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
YES ¨ NO
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated filer ¨
|
Accelerated
filer ¨
|
Non-Accelerated
filer ¨
|
Smaller
reporting company x
|
(Do not
check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES ¨ NO
x
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date:
Number of Shares Outstanding
|
||
Class
|
May 13, 2010
|
|
Common
Stock, $0.0001 par value per share
|
12,630,822
|
CONMED
HEALTHCARE MANAGEMENT, INC.
TABLE
OF CONTENTS
Page
|
|
PART I. FINANCIAL
INFORMATION
|
|
ITEM
1. FINANCIAL STATEMENTS (UNAUDITED)
|
|
Consolidated
Balance Sheets
|
|
March
31, 2010 and December 31, 2009
|
1
|
Consolidated
Statements of Operations
|
|
For
the three months ended March 31, 2010 and 2009
|
2
|
Consolidated
Statements of Cash Flows
|
|
For
the three months ended March 31, 2010 and 2009
|
3
|
Consolidated
Statements of Shareholders’ Equity
|
|
For
the three months ended March 31, 2010
|
4
|
Notes
to Consolidated Financial Statements
|
5
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|
10
|
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
15
|
ITEM
4(T). CONTROLS AND PROCEDURES
|
15
|
PART
II. OTHER
INFORMATION
|
|
ITEM
1. LEGAL PROCEEDINGS
|
16
|
ITEM
1A. RISK FACTORS
|
16
|
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
16
|
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
|
16
|
ITEM
4. RESERVED
|
16
|
ITEM
5. OTHER INFORMATION
|
16
|
ITEM
6. EXHIBITS
|
16
|
SIGNATURES
|
17
|
i
ITEM
1.
|
FINANCIAL
STATEMENTS
|
CONMED
HEALTHCARE MANAGEMENT, INC.
CONSOLIDATED
BALANCE SHEETS
March 31, 2010
(unaudited)
|
December 31,
2009
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 11,691,498 | $ | 11,056,143 | ||||
Accounts
receivable
|
2,871,873 | 2,278,074 | ||||||
Prepaid
expenses
|
617,393 | 865,261 | ||||||
Deferred
taxes
|
111,000 | 102,000 | ||||||
Total
current assets
|
15,291,764 | 14,301,478 | ||||||
PROPERTY
AND EQUIPMENT, NET
|
646,329 | 605,578 | ||||||
DEFERRED
TAXES
|
1,377,000 | 1,381,000 | ||||||
OTHER
ASSETS
|
||||||||
Service
contracts acquired, net
|
848,000 | 984,000 | ||||||
Non-compete
agreements, net
|
424,895 | 436,667 | ||||||
Goodwill
|
6,263,705 | 6,263,705 | ||||||
Deposits
|
11,549 | 11,549 | ||||||
Total
other assets
|
7,548,149 | 7,695,921 | ||||||
$ | 24,863,242 | $ | 23,983,977 | |||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 1,705,625 | $ | 1,489,498 | ||||
Accrued
expenses
|
4,751,365 | 4,146,940 | ||||||
Taxes
payable
|
209,783 | 550,000 | ||||||
Deferred
revenue
|
930,819 | 1,018,645 | ||||||
Total
current liabilities
|
7,597,592 | 7,205,083 | ||||||
DERIVATIVE
FINANCIAL INSTRUMENTS
|
1,343,134 | 1,299,450 | ||||||
SHAREHOLDERS’
EQUITY
|
||||||||
Preferred
stock, no par value; authorized 5,000,000 shares; issued and outstanding
zero shares as of March 31, 2010 and December 31, 2009
|
— | — | ||||||
Common
stock, $0.0001 par value, authorized 40,000,000 shares; issued and
outstanding 12,629,572 shares as of March 31, 2010 and December 31,
2009
|
1,263 | 1,263 | ||||||
Additional
paid-in capital
|
37,989,331 | 37,829,900 | ||||||
Accumulated
deficit
|
(22,068,078 | ) | (22,351,719 | ) | ||||
Total
shareholders' equity
|
15,922,516 | 15,479,444 | ||||||
$ | 24,863,242 | $ | 23,983,977 |
See
Notes to Unaudited Financial Statements
Page - 1
-
CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
For the Three
Months Ended
March 31, 2010
|
For the Three
Months Ended
March 31, 2009
|
|||||||
Service
contract revenue
|
$ | 14,751,971 | $ | 12,419,241 | ||||
HEALTHCARE
EXPENSES:
|
||||||||
Salaries,
wages and employee benefits
|
8,215,300 | 6,987,854 | ||||||
Medical
expenses
|
3,139,742 | 2,381,933 | ||||||
Other
operating expenses
|
494,713 | 384,205 | ||||||
Total
healthcare expenses
|
11,849,755 | 9,753,992 | ||||||
Gross
profit
|
2,902,216 | 2,665,249 | ||||||
Selling
and administrative expenses
|
2,003,131 | 1,815,527 | ||||||
Depreciation
and amortization
|
319,529 | 634,821 | ||||||
Total
operating expenses
|
2,322,660 | 2,450,348 | ||||||
Operating
income
|
579,556 | 214,901 | ||||||
OTHER
INCOME (EXPENSE)
|
||||||||
Interest
income
|
18,069 | 28,628 | ||||||
Interest
(expense)
|
— | (5,205 | ) | |||||
Gain
(loss) on fair value of derivatives
|
(43,684 | ) | 866 | |||||
Total
other income (expense)
|
(25,615 | ) | 24,289 | |||||
Income
before income taxes
|
553,941 | 239,190 | ||||||
Income
tax expense
|
270,300 | 121,000 | ||||||
Net
income
|
$ | 283,641 | $ | 118,190 | ||||
EARNINGS
PER COMMON SHARE
|
||||||||
Basic
|
$ | 0.02 | $ | 0.01 | ||||
Diluted
|
$ | 0.02 | $ | 0.01 | ||||
WEIGHTED-AVERAGE
SHARES OUTSTANDING
|
||||||||
Basic
|
12,629,572 | 12,471,928 | ||||||
Diluted
|
14,205,098 | 13,529,197 |
See
Notes to Unaudited Financial Statements
Page - 2
-
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
For the Three
Months Ended
March 31, 2010
|
For the Three
Months Ended
March 31, 2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income
|
$ | 283,641 | $ | 118,190 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||
Depreciation
|
69,418 | 43,821 | ||||||
Amortization
|
250,111 | 591,000 | ||||||
Stock-based
compensation
|
159,431 | 159,269 | ||||||
(Gain)
loss on fair value of derivatives
|
43,684 | (866 | ) | |||||
Deferred
income taxes
|
(5,000 | ) | — | |||||
Changes
in working capital components
|
||||||||
(Increase)
in accounts receivable
|
(593,799 | ) | (550,009 | ) | ||||
Decrease
in prepaid expenses
|
247,868 | 152,578 | ||||||
Increase
in accounts payable
|
216,127 | 272,945 | ||||||
Increase
in accrued expenses
|
604,425 | 338,422 | ||||||
(Decrease)
in income taxes payable
|
(340,217 | ) | (253,097 | ) | ||||
Increase
(decrease) in deferred revenue
|
(87,826 | ) | 78,561 | |||||
Net
cash provided by operating activities
|
847,863 | 950,814 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase
of property and equipment
|
(65,240 | ) | (25,813 | ) | ||||
Asset
purchase
|
(147,268 | ) | — | |||||
Net
cash (used in) investing activities
|
(212,508 | ) | (25,813 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Payments
on line of credit
|
— | (100,000 | ) | |||||
Payments
on loans
|
— | (18,015 | ) | |||||
Proceeds
from exercise of warrants
|
— | 6,000 | ||||||
Net
cash (used in) financing activities
|
— | (112,015 | ) | |||||
Net
increase in cash and cash equivalents
|
635,355 | 812,986 | ||||||
CASH
AND CASH EQUIVALENTS
|
||||||||
Beginning
|
11,056,143 | 7,472,140 | ||||||
Ending
|
$ | 11,691,498 | $ | 8,285,126 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||
Cash
payments for interest
|
$ | — | $ | 5,205 | ||||
Income
taxes paid
|
615,837 | 374,097 | ||||||
See
Notes to Unaudited Financial Statements
Page - 3
-
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
|
Preferred
Stock
|
Common
Stock
|
Additional Paid-
in Capital
|
Accumulated
Deficit
|
Total
|
||||||||||||||||
Balance
at December 31, 2009
|
$ | — | $ | 1,263 | $ | 37,829,900 | $ | (22,351,719 | ) | $ | 15,479,444 | |||||||||
Net
Income
|
— | — | — | 283,641 | 283,641 | |||||||||||||||
Stock
option expense
|
— | — | 159,431 | — | 159,431 | |||||||||||||||
Balance
at March 31, 2010
|
$ | — | $ | 1,263 | $ | 37,989,331 | $ | (22,068,078 | ) | $ | 15,922,516 |
See
Notes to Unaudited Financial Statements
Page - 4
-
CONMED
HEALTHCARE MANAGEMENT, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1.
|
Basis
of Presentation
|
The
accompanying unaudited consolidated financial statements of Conmed Healthcare
Management, Inc. (together with its consolidated subsidiaries, “Conmed”, the
“Company”, “we”, “us”, or “our”, unless otherwise specified or the context
otherwise requires) contained herein have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (the “SEC”) for
interim reporting requirements of Form 10-Q and Rule 8-03 of Regulation S-X.
Accordingly, the financial information and disclosures normally included in the
financial statements prepared annually in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) have been condensed
or omitted. Readers of this report should, therefore, refer to the consolidated
financial statements and notes included in our Annual Report on Form 10-K for
the year ended December 31, 2009, filed with the SEC on March 25,
2010.
In the
opinion of management, all adjustments (consisting of normal and recurring
adjustments) which are considered necessary to fairly present our financial
position and our results of operations as of and for these periods have been
made.
Our
interim results of operations for the three months ended March 31, 2010 are not
necessarily indicative of the results of operations to be expected for a full
year.
In
January 2010, we purchased approximately $45,000 and $102,000 of fixed assets
and intangible assets, respectively, from a small mobile imaging company to
expand the base of services that we provide to our customers, as such services
were previously subcontracted. This acquisition did not have a
material impact on our financial position or results of operations and therefore
additional proforma information has not been presented.
NOTE
2.
|
New
Accounting Standards
|
In
January 2010, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value
Measurements. The update provides amendments to FASB Accounting
Standards Codification 820-10, Fair Value, which requires
entities to disclose separately the amounts of significant transfers in and out
of Level 1 and Level 2 fair value measurements and describe the reasons for the
transfers. In addition, the update requires entities to present
separately information about purchases, sales, issuances and settlements in the
reconciliation for fair value measurements using significant unobservable inputs
(Level 3). The disclosures related to Level 1 and Level 2 fair value
measurements became effective for us in 2010 and the disclosures related to
Level 3 fair value measurements are effective for us in 2011. The
update requires new disclosures and will have no impact on our consolidated
financial position, results of operations or cash flows.
NOTE
3.
|
Common
Stock Options
|
The Board
of Directors has adopted, and our stockholders have approved, the 2007 Stock
Option Plan, as amended (the “2007 Plan”). The 2007 Plan provides for the grant
of up to 2,350,000 incentive stock options, nonqualified stock options and
restricted stock units. The 2007 Plan is administered by the independent members
of the Board of Directors, which has the authority and discretion to determine:
the persons to whom the options will be granted; when the options will be
granted; the number of shares subject to each option; the price at which the
shares subject to each option may be purchased; and when each option will become
exercisable. The options generally vest over three to four years and expire no
later than ten years from the date of grant.
During
the three months ended March 31, 2010 and 2009, we recorded stock-based
compensation expense net of reversals for forfeited options totaling $159,431
and $159,269, respectively.
During
the three months ended March 31, 2010, options were granted to purchase 76,000
shares of common stock at an average exercise price of $3.13 per share and an
average grant date fair value of $2.15 per share. Additionally,
during the three months ended March 31, 2010, options to purchase 3,750 shares
of common stock were forfeited, options to purchase 1,000 shares of common stock
were cancelled and, as of March 31, 2010, 259,583 shares remain available for
grant.
As of
March 31, 2010, stock based compensation expense not yet recognized in income
totaled $845,920, which is expected to be recognized over a weighted-average
remaining period of 1.03 years.
Page - 5
-
NOTE
4.
|
Common
Stock Warrants
|
Pre-Acquisition
Warrants
In
connection with the acquisition of Conmed, Inc. on January 26, 2007, we issued
warrants to purchase an aggregate of 250,000 shares of common stock to warrant
holders of the Company’s predecessor exercisable at $0.30 per
share. The warrants vested immediately and expire October 23,
2010.
Investor
Warrants
In
connection with the acquisition of Conmed, Inc. on January 26, 2007, we issued
to investors warrants to purchase an aggregate of 1,500,000 shares of common
stock, exercisable at $0.30 per share and warrants to purchase an aggregate of
500,000 shares of common stock, exercisable at $2.50 per share. The
warrants vested immediately and expire March 13, 2012.
Placement
Agent Warrants
In
connection with the acquisition of Conmed, Inc. on January 26, 2007, we issued
to Maxim Group LLC, our exclusive placement agent, a warrant to purchase 300,000
shares of common stock, exercisable at $2.75 per share. The warrants
vested immediately and expire January 26, 2012.
Consultant
Warrants
In
connection with the purchase of all of the assets of Emergency Medicine
Documentation Consultants, P.C., a provider of medical services in northwest
Oregon, in 2008, we issued warrants to two consultants to purchase an aggregate
of 80,000 shares of common stock at an exercise price of $1.85 per share. The
warrants vested immediately and expire February 28, 2013.
Summary
The
following table summarizes the warrant activity for the three months ended March
31, 2010:
Pre-
Acquisition
Warrants
|
Investor
Warrants
@ $0.30
per share
|
Investor
Warrants
@ $2.50
per share
|
Placement
Agent
Warrants
|
Consultant
Warrants
|
Total
|
|||||||||||||||||||
Exercise
price
|
$ | 0.30 | $ | 0.30 | $ | 2.50 | $ | 2.75 | $ | 1.85 | $ | 1.32 | ||||||||||||
Warrants
outstanding as of December 31, 2009
|
223,000 | 813,000 | 496,667 | 300,000 | 80,000 | 1,912,667 | ||||||||||||||||||
Warrants
exercised
|
— | — | — | — | — | — | ||||||||||||||||||
Warrants
outstanding as of March 31, 2010
|
223,000 | 813,000 | 496,667 | 300,000 | 80,000 | 1,912,667 |
The
following table summarizes the warrant activity for the three months ended March
31, 2009:
Pre-
Acquisition
Warrants
|
Investor
Warrants
@ $0.30
per share
|
Investor
Warrants
@ $2.50
per share
|
Placement
Agent
Warrants
|
Consultant
Warrants
|
Total
|
|||||||||||||||||||
Exercise
price
|
$ | 0.30 | $ | 0.30 | $ | 2.50 | $ | 2.75 | $ | 1.85 | $ | 1.25 | ||||||||||||
Warrants
outstanding as of December 31, 2008
|
225,000 | 980,000 | 500,000 | 300,000 | 80,000 | 2,085,000 | ||||||||||||||||||
Warrants
exercised
|
— | 20,000 | — | — | — | 20,000 | ||||||||||||||||||
Warrants
outstanding as of March 31, 2009
|
225,000 | 960,000 | 500,000 | 300,000 | 80,000 | 2,065,000 |
Page - 6
-
NOTE
5.
|
Fair
Value of Warrants
|
As a
result of adopting derivative accounting for warrants, effective January 1,
2009, 1,705,000 of our issued and outstanding common stock purchase warrants
previously treated as equity were no longer afforded equity
treatment. These common stock purchase warrants do not trade in an
active securities market, and as such, we estimate the fair value of these
warrants using the Black-Scholes option pricing model and all changes in the
fair value of these warrants are recognized currently in earnings until such
time as the warrants are exercised, amended or expire.
Investor
Warrants @ $0.30 per share
Black-Scholes assumptions
|
March 31, 2010
|
December 31, 2009
|
||||||
Expected
life (years)
|
1.4 | 1.5 | ||||||
Expected
volatility
|
76.77 | % | 79.59 | % | ||||
Risk-free
interest rate
|
1.5 | % | 1.4 | % | ||||
Expected
dividend yield
|
0.0 | % | 0.0 | % |
Investor
Warrants @ $2.50 per share
Black-Scholes assumptions
|
March 31, 2010
|
December 31, 2009
|
||||||
Expected
life (years)
|
1.4 | 1.5 | ||||||
Expected
volatility
|
76.77 | % | 79.59 | % | ||||
Risk-free
interest rate
|
1.5 | % | 1.4 | % | ||||
Expected
dividend yield
|
0.0 | % | 0.0 | % |
The
following tables summarize the warrant activity subject to fair value accounting
for the three months ended March 31, 2010:
Investor
Warrants @
$0.30 per
share
|
Investor
Warrants @
$2.50 per
share
|
Total
|
||||||||||
Warrants
outstanding subject to fair value accounting as of December 31,
2009
|
221,430 | 496,667 | 718,097 | |||||||||
Warrants
exercised
|
— | — | — | |||||||||
Warrants
amended
|
— | — | — | |||||||||
Warrants
outstanding subject to fair value accounting as of March 31,
2010
|
221,430 | 496,667 | 718,097 |
Investor
Warrants @
$0.30 per
share
|
Investor
Warrants @
$2.50 per
share
|
Total
|
||||||||||
Fair
value of warrants outstanding as of December 31, 2009
|
$ | 615,280 | $ | 684,170 | $ | 1,299,450 | ||||||
Realized
loss on warrants
|
— | — | — | |||||||||
Unrealized
loss on warrants
|
28,507 | 15,177 | 43,684 | |||||||||
Fair
value of warrants transferred to equity upon amendment
|
— | — | — | |||||||||
Fair
value of warrants exercised
|
— | — | — | |||||||||
Fair
value of warrants outstanding as of March 31, 2010
|
$ | 643,787 | $ | 699,347 | $ | 1,343,134 |
As of
March 31, 2010, we had outstanding warrants to purchase an aggregate of
1,912,667 shares of common stock, of which warrants to purchase 718,097 shares
of common stock were subject to derivative accounting for warrants, at an
average exercise price of $1.82, and we have reserved shares of our common stock
for issuance in connection with the potential exercise thereof.
Page - 7
-
NOTE
6.
|
Fair
Value Measurements
|
The
Company is required to disclose the fair value measurements required by the fair
value measurement guidance. The derivative financial instruments
recorded at fair value in the balance sheets as of March 31, 2010 and December
31, 2009 are categorized based upon the level of judgment associated with the
inputs used to measure their fair value.
The
following tables summarize the financial liabilities measured at fair value on a
recurring basis segregated by the level of valuation inputs within the fair
value hierarchy utilized to measure fair value:
As of March 31, 2010
|
||||||||||||||||
Total
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
Significant other
observable inputs
(Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||||||||||||
Derivative
financial instruments
|
$ | 1,343,134 | $ | — | $ | — | $ | 1,343,134 |
As of December 31, 2009
|
||||||||||||||||
Total
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
Significant other
observable inputs
(Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||||||||||||
Derivative
financial instruments
|
$ | 1,299,450 | $ | — | $ | — | $ | 1,299,450 |
Equity-linked
financial instruments consist of stock warrants issued by the Company that
contain a strike price adjustment feature. In accordance with
derivative accounting for warrants, we calculated the fair value of warrants
using the Black-Scholes option pricing model and the assumptions used are
described in Note 5, “Fair Value of Warrants”. During the three
months ended March 31, 2010 and 2009, we recognized a $43,684 unrealized loss
and an $866 unrealized gain, respectively, related to the change in fair value
of the financial instruments which is included in Other Income on the Statement
of Operations.
Page - 8
-
The
following table reflects the activity for liabilities measured at fair value
using Level 3 inputs for the three months ended March 31:
2010
|
2009
|
|||||||
Balance
as of January 1
|
$ | 1,299,450 | $ | 2,766,150 | ||||
Transfers
into level 3
|
— | — | ||||||
Transfers
out of level 3
|
— | — | ||||||
Sales
of equity-linked financial instruments
|
— | (38,924 | ) | |||||
Realized
loss related to the change in fair value
|
— | — | ||||||
Unrealized
(gain) loss related to the change in fair value
|
43,684 | (866 | ) | |||||
Balance
as of March 31
|
$ | 1,343,134 | $ | 2,726,360 |
NOTE
7.
|
Earnings
Per Share
|
The
following table sets forth the computation of basic and diluted earnings
per-share:
For the Three
Months Ended
March 31, 2010
|
For the Three
Months Ended
March 31, 2009
|
|||||||
Numerator:
|
||||||||
Net
income for basic earnings per share
|
$ | 283,641 | $ | 118,190 | ||||
Subtractions:
|
||||||||
Gain
on fair value of derivatives
|
— | 866 | ||||||
Net
income for diluted earnings per share
|
$ | 283,641 | $ | 117,324 | ||||
Denominator:
|
||||||||
Weighted-average
basic shares outstanding
|
12,629,572 | 12,471,928 | ||||||
Assumed
conversion of dilutive securities
|
||||||||
Stock
options
|
442,324 | 32,904 | ||||||
Warrants
|
1,133,202 | 1,024,365 | ||||||
Potentially
dilutive common shares
|
1,575,526 | 1,057,269 | ||||||
Denominator
for diluted earnings per share – Adjusted weighted average
shares
|
14,205,098 | 13,529,197 | ||||||
Earnings
(loss) per common share:
|
||||||||
Basic
|
$ | 0.02 | $ | 0.01 | ||||
Diluted
|
$ | 0.02 | $ | 0.01 |
Common
stock warrants and options outstanding totaling 343,750 and 3,049,898 shares,
respectively, are not included in diluted earnings per common share for the
three months ended March 31, 2010 and 2009, respectively, as they would have an
antidilutive effect on earnings per common share.
NOTE
8.
|
Income
Tax Matters
|
Our
effective tax rates were 48.8% and 50.6% during the three months ended March 31,
2010 and 2009, respectively, which differs from the expected tax rate of 39.0%
primarily due to permanent differences related to stock-based compensation and
derivatives related to warrants. For the three months ended March 31,
2010, we recorded income tax expense of $270,300 and for the three months ended
March 31, 2009, we recorded income tax expense of $121,000.
Page - 9
-
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Information included in this section
and elsewhere in this Quarterly Report on Form 10-Q contains forward-looking
statements regarding the business, operations and financial condition of Conmed
Healthcare Management, Inc. (together with its consolidated subsidiaries, the
“Company”, “we”, “us”, or “our” unless otherwise specified or the context
otherwise requires) within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). This information may involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from our future results,
performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, and other statements that are not
historical facts, are generally identifiable by use of the words "may," "will,"
"should," "expect," "anticipate," "estimate," "believe," "intend," “plan,”
“potential” or "project" or the negative of these words or other variations on
these words or comparable terminology. These forward-looking statements are
based on assumptions that may be incorrect, and there can be no assurance that
these projections included in these forward-looking statements will come to
pass. Our actual results could differ materially from those expressed or implied
by the forward-looking statements as a result of various factors. We caution you
not to place undue reliance on these forward-looking statements. Such
forward-looking statements relate only to events as of the date on which the
statements are made. These forward-looking statements involve certain risks and
uncertainties that are subject to change based on various factors (many of which
are beyond the Company's control) including, without limitation, the Company's
ability to increase revenue and to continue to obtain new contracts; the
incurrence of start-up costs associated with new contracts; contract
renewals and extensions; inflation exceeding the Company’s projection of the
inflation rate of cost of services under multi-year contracts; the ability to
obtain bonds; decreases in occupancy levels or disturbances at detention
centers; malpractice litigation; the ability to utilize third party
administrators for out-of-facility care; compliance with laws and government
regulations, including those relating to healthcare; investigation
and auditing of our contracts by government agencies; competition;
termination of contracts due to lack of government appropriations; material
adverse changes in economic and industry conditions in the healthcare market;
negative publicity regarding the provision of correctional healthcare services;
dependence on key personnel and the ability to hire skilled personnel; influence
of certain stockholders; increases in healthcare costs; insurance;
completion and integration of future acquisitions; public company obligations;
limited liability of directors and officers; the Company’s ability to meet
the NYSE Amex continued listing standards; and stock price volatility. We
undertake no obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise, even if experience or
future changes make it clear that any projected results or events expressed or
implied therein will not be realized. You are advised, however, to consult any
further disclosures we make in future public statements and press releases.
More detailed information about us
and the risk factors that may affect the realization of forward-looking
statements is set forth in our filings with the Securities and Exchange
Commission (the “SEC”), including our Annual Report on Form 10-K for the year
ended December 31, 2009, filed with the SEC on March 25, 2010. Investors and
security holders are urged to read this document free of charge on the SEC's web
site at www.sec.gov.
General
|
We
provide healthcare services to county and municipal detention centers across the
United States. As a result of the Supreme Court decision in Estelle v. Gamble
(1976), all individuals held against their will are required to be provided with
community standard healthcare. Under this requirement, correctional institutions
are required to provide healthcare services for their inmates. We are a
specialist in the provision of these services, having provided correctional
healthcare services since 1984. We began providing correctional
healthcare services in the State of Maryland, and currently serve county and
municipal correctional facilities in thirty-eight counties in seven
states: Arizona, Kansas, Maryland, Oklahoma, Oregon, Virginia and
Washington. Our services have expanded to include mental health, pharmacy and
out-of-facility healthcare services.
Critical
Accounting Policies
|
The
discussion and analysis of our financial condition and results of operations are
based upon our condensed consolidated financial statements. These condensed
consolidated financial statements have been prepared following the requirements
of accounting principles generally accepted in the United States (“GAAP”) for
interim periods and require us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing basis, we
evaluate our estimates, including those related to revenue recognition and
related medical expense accruals and amortization and potential impairment of
intangible assets and goodwill and stock-based compensation expense. As these
are condensed consolidated financial statements, one should also read expanded
information about our critical accounting policies and estimates provided in
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations”, included in our Annual Report on Form 10-K for the year ended
December 31, 2009, filed with the SEC on March 25, 2010. There have been no
material changes to our critical accounting policies and estimates from the
information provided in our Form 10-K for the year ended December 31,
2009.
Page - 10
-
Recently
Adopted Accounting Standards
|
In
January 2010, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value
Measurements. The update provides amendments to FASB Accounting
Standards Codification 820-10, Fair Value, which requires
entities to disclose separately the amounts of significant transfers in and out
of Level 1 and Level 2 fair value measurements and describe the reasons for the
transfers. In addition, the update requires entities to present
separately information about purchases, sales, issuances and settlements in the
reconciliation for fair value measurements using significant unobservable inputs
(Level 3). The disclosures related to Level 1 and Level 2 fair value
measurements became effective for us in 2010 and the disclosures related to
Level 3 fair value measurements are effective for us in 2011. The
update requires new disclosures and will have no impact on our consolidated
financial position, results of operations or cash flows.
Results
of Operations
|
Three
Months Ended March 31, 2010 compared to Three Months Ended March 31,
2009
The
following discussion of financial results below is derived from unaudited
financial statements for the three months ended March 31, 2010 and
2009.
Three Months Ended
March 31, 2010
|
Three Months Ended
March 31, 2009
|
|||||||||||||||
Amount
|
% of
Revenue
|
Amount
|
% of
Revenue
|
|||||||||||||
Service
contract revenue
|
$ | 14,751,971 | 100.0 | % | $ | 12,419,241 | 100.0 | % | ||||||||
HEALTHCARE
EXPENSES:
|
||||||||||||||||
Salaries,
wages and employee benefits
|
8,215,300 | 55.7 | % | 6,987,854 | 56.3 | % | ||||||||||
Medical
expenses
|
3,139,742 | 21.3 | % | 2,381,933 | 19.2 | % | ||||||||||
Other
operating expenses
|
494,713 | 3.4 | % | 384,205 | 3.1 | % | ||||||||||
Total
healthcare expenses
|
11,849,755 | 80.3 | % | 9,753,992 | 78.5 | % | ||||||||||
Gross
profit
|
2,902,216 | 19.7 | % | 2,665,249 | 21.5 | % | ||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||
Selling
and administrative expenses
|
2,003,131 | 13.6 | % | 1,815,527 | 14.6 | % | ||||||||||
Depreciation
and amortization
|
319,529 | 2.2 | % | 634,821 | 5.1 | % | ||||||||||
Total
operating expenses
|
2,322,660 | 15.7 | % | 2,450,348 | 19.7 | % | ||||||||||
Operating
income
|
579,556 | 3.9 | % | 214,901 | 1.7 | % | ||||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||||||
Interest
income
|
18,069
|
0.1 | % | 28,628 | 0.2 | % | ||||||||||
Interest
expense
|
— | 0.0 | % | (5,205 | ) | 0.0 | % | |||||||||
Gain
(loss) on fair value of derivatives
|
(43,684 | ) | (0.3 | )% | 866 | 0.0 | % | |||||||||
Total
other income (expense)
|
(25,615 | ) | (0.2 | )% | 24,289 | 0.2 | % | |||||||||
Income
before income taxes
|
553,941 | 3.8 | % | 239,190 | 1.9 | % | ||||||||||
Income
tax expense
|
270,300 | 1.8 | % | 121,000 | 1.0 | % | ||||||||||
Net
income
|
$ | 283,641 | 1.9 | % | $ | 118,190 | 1.0 | % |
Summary
Net
revenue from medical services provided primarily to correctional institutions
for the three months ended March 31, 2010 and 2009, was $14,751,971 and
$12,419,241, respectively, which represents an increase of $2,332,730 or 18.8%.
Net income was $283,641 or 1.9% of revenue compared to a net income of $118,190
or 1.0% of revenue for the three months ended March 31, 2010 and 2009,
respectively, which represented increased income of $165,451.
Page - 11
-
Revenue
The
addition of service contracts signed with new jurisdictions since January 1,
2009 accounted for $1,527,844 or 65.5% of the increase in revenue for the three
months ended March 31, 2010 compared to the same period for the prior
year. These jurisdictions are as follows: Clark County, WA; Coos
County, OR; Creek County, OK; Garrett County, MD; Kittitas County, WA; Pima
County (Juvenile), AZ; Washington County, MD; and Western Virginia Regional
Jail, VA. Revenue improvement totaling $464,601, or 19.9% of the
increase, resulted primarily from expansion of the services provided under a
number of our existing contracts in which we were providing services prior to
2009. Price increases related to existing service requirements totaled $293,739
or 12.6% of the revenue increase. The remainder of revenue improvement, $46,546
or 2.0% of the increase, was the result of increases in other volume related
activities, primarily associated with an increase in stop/loss reimbursements
due to higher out of facility medical expenditures in excess of stop/loss limits
billed back to counties.
Healthcare
Expenses
Salaries
and employee benefits
Salaries
and employee benefits for healthcare employees were $8,215,300 or 55.7% of
revenue for the three months ended March 31, 2010, compared to $6,987,854 or
56.3% of revenue for the three months ended March 31, 2009. The increase in
spending for salaries and employee benefits of $1,227,446 or 17.6% is due
primarily to the addition of new healthcare employees resulting from new
business. Approximately 76.0% of the increase related to new healthcare
employees required to support the staffing requirements for our new medical
service contracts as detailed above. Additional services related to previously
existing medical service contracts, as well as cost-of-living and wage and
benefit adjustments for existing employees accounted for the remainder of the
increase. The decrease in salaries and employee benefits as a percentage of
revenue is due to a change in the mix of expense for salaries and benefits. In
addition to providing staffing services, the new service contracts primarily
include responsibility for medical services both in and out of the facility as
well as pharmacy services, resulting in a lower ratio of salaries and employee
benefits to revenue.
Medical
expenses
Medical
expenses for the three months ended March 31, 2010 and 2009 were $3,139,742 or
21.3% of revenue and $2,381,933 or 19.2% of revenue, respectively, which
represented an increase of $757,809 or 31.8%. The increase in spending for
medical expenses in absolute dollars reflects increases primarily from new
contracts for medical services both in and out of the facility plus increased
expenditures for pharmacy services. The increase in spending as a percentage of
revenue results, in part, from the new service contracts added since January 1,
2009 that are primarily full service contracts and, as a result, included a
higher proportion of medical expense when compared to existing
contracts. In addition, out of facility hospital expenses were higher
than the prior year, reflecting a return to normal spending levels, due to lower
than normal hospitalization days in the first three months of 2009.
Other
operating expenses
Other
operating expenses were $494,713, or 3.4% of revenue, for the three months ended
March 31, 2010, compared to $384,205, or 3.1% of revenue, for the three months
ended March 31, 2009. The increase of $110,508 in spending is primarily related
to the increase in the number of inmates served as a result of the new service
contracts and reflects increased spending for consulting, professional liability
insurance, office supplies and travel expenses partially offset by a reduction
in employment advertising.
Operating
Expenses
Selling
and administrative expenses
Selling
and administrative expenses for the three months ended March 31, 2010 and 2009
were $2,003,131 or 13.6% of revenue and $1,815,527 or 14.6% of revenue,
respectively. The increased expenditure of $187,604 primarily reflects an
increased investment in additional management and administrative personnel
required to support new contracts and services added in 2009 and
2010. The reduction in spending as a percentage of revenue resulted
from improved economies of scale. Stock based compensation for the
three months ended March 31, 2010 and 2009 was $159,431 and $159,269,
respectively.
Depreciation
and amortization
Depreciation
and amortization primarily reflects the amortization of intangible assets
related to the acquisition of Conmed, Inc. in January 2007, the purchase of
medical service contracts from Emergency Medicine Documentation Consultants,
P.C. (“EMDC”) in February 2008 and the acquisition of CMHS in November 2008.
Amortization of service contracts acquired was $153,000, or 1.0% of revenue, for
the three months ended March 31, 2010, compared to $494,000, or 4.0% of revenue,
for the three months ended March 31, 2009. The decrease primarily reflects a
decrease in amortization expense as certain individual service contracts
acquired have become fully amortized. Amortization of non-compete
agreements was $97,111, or 0.7% of revenue, for the three months ended March 31,
2010, compared to $97,000, or 0.8% of revenue, for the three months ended March
31, 2009. Depreciation expense increased to $69,418 for the three months ended
March 31, 2010 compared to $43,821 for the prior year period due primarily to
capital expenditures associated with vehicle purchases as well as purchases of
medical equipment and computers at various facilities.
Page - 12
-
Interest
income
Interest
income was $18,069 for the three months ended March 31, 2010 compared to $28,628
for the same period in 2009. Average cash balances in the first quarter of 2010
were higher compared to the first quarter of 2009, however the lower interest
income reflects reduced short-term interest rates during the
period.
Interest
expense
Interest
expense for the first quarter decreased to $0 in 2010 compared to $5,205 in the
same period in 2009.
Gain
(loss) on fair value of derivatives
As a
result of adopting derivative accounting for warrants effective January 1, 2009,
1,705,000 of our issued and outstanding common stock purchase warrants
previously treated as equity were no longer afforded equity treatment and as a
result they are now recorded as a liability based on fair value
estimates. These common stock purchase warrants do not trade in an
active securities market, and as such, we estimate the fair value of these
warrants using the Black-Scholes option pricing model and all changes in the
fair value of these warrants will be recognized currently in earnings until such
time as the warrants are exercised, amended or expire.
During
the three months ended March 31, 2010 and 2009, we recognized a $43,684
unrealized loss and an $866 unrealized gain, respectively. The
increased expense of $44,550 was the result of the increase in the estimated
fair value of the warrants primarily due to the $0.13 increase in our common
stock from December 31, 2009 to March 31, 2010 compared to no change in our
common stock price from January 1, 2009 to March 31, 2009.
During
the three months ended March 31, 2010, no warrants were exercised. As
of March 31, 2010, we had outstanding warrants subject to derivative accounting
to purchase an aggregate of 718,097 shares of common stock. During
the three months ended March 31, 2009, warrants to purchase 20,000 shares of
common stock were exercised generating $6,000 of net proceeds and having an
aggregate fair value of $38,924 on the exercise dates. As of March
31, 2009, we had outstanding warrants subject to derivative accounting to
purchase an aggregate of 1,685,000 shares of common stock.
The
following table summarizes the change in fair value for the three months ended
March 31:
2010
|
2009
|
|||||||
Fair
value of warrants outstanding as of January 1
|
$ | 1,299,450 | $ | 2,766,150 | ||||
Realized
loss on warrants
|
— | — | ||||||
Unrealized
(gain) loss on warrants
|
43,684 | (866 | ) | |||||
Fair
value of warrants transferred to equity upon amendment
|
— | — | ||||||
Fair
value of warrants exercised
|
— | (38,924 | ) | |||||
Fair
value of warrants outstanding as of March 31
|
$ | 1,343,134 | $ | 2,726,360 |
See Note
5, “Fair Value of Warrants”, for additional information on the warrant activity
subject to fair value accounting for the three months ended March 31,
2010.
Income
tax expense
Our
effective tax rates were 48.8% and 50.6% during the three months ended March 31,
2010 and 2009, respectively, which differs from the expected tax rate of 39.0%
primarily due to permanent differences related to stock-based compensation and
derivatives related to warrants. For the three months ended March 31,
2010, we recorded income tax expense of $270,300 compared to $121,000 for the
three months ended March 31, 2009. The increase in income tax expense
is primarily attributable to the increase in income before income
taxes.
Page - 13
-
Liquidity
and Capital Resources
|
Financing
is generally provided by funds generated from our operating
activities.
Cash
Flow for the three months ended March 31, 2010 compared to the three months
ended March 31, 2009
Cash as
of March 31, 2010 and March 31, 2009 was $11,691,498 and $8,285,126,
respectively. We believe that our existing cash balances and
anticipated cash flows from future operations will be sufficient to meet our
normal operating requirements and liquidity needs for at least the next twelve
months.
Cash
Flows from Operating Activities
Cash flow
from operations for the three months ended March 31, 2010 totaled $847,863,
reflecting a net income of $283,641 plus $517,644 in adjustments for non-cash
expenses such as amortization of $250,111, stock-based compensation of $159,431
and other non-cash expenses of $108,102. Changes in working capital
components generated an additional $46,578, reflective of increases in accounts
payable of $216,127 and accrued expenses of $604,425, as well as a decrease in
prepaid expenses of $247,868 partially offset by an increase in accounts
receivable of $593,799 and decreases in income taxes payable of $340,217 and
other working capital components of $87,826. The increase in accounts
payable resulted primarily from the timing of vendor payments in relation to
quarter end. The increase in accrued expenses resulted primarily from
the addition of new healthcare employees required to support the increased
staffing requirements from our new medical service contracts in addition to the
wage accrual covering one additional day as compared to the three months ended
December 31, 2009 partially offset by a reduction in accrued medical expenses
and a reduction in other corporate expense accruals. The decrease in
income taxes payable resulted primarily from the payment of scheduled estimated
taxes partially offset by accruals of estimated taxes payable. The
decrease in prepaid expenses resulted primarily from a reduction in prepaid
professional liability insurance. We prepaid our primary annual
professional liability insurance policy in October 2009 and we expense the
prepaid amounts ratably from the annual policy period of October through
September. The increase in accounts receivable resulted primarily
from new medical service contracts added in 2010 as well as an increase in
receivables for medical expenditures in excess of stop/loss limits.
Cash flow
from operations for the three months ended March 31, 2009 totaled $950,814,
reflecting a net income of $118,190 plus $793,224 in adjustments for non-cash
expenses such as amortization of $591,000 and stock-based compensation of
$159,269. Changes in working capital components generated an
additional $39,400, reflective of increases in accrued expenses of $338,422 and
accounts payable of $272,945, as well as a decrease in prepaid expenses of
$152,578 partially offset by an increase in accounts receivable of $550,009 and
a decrease in income taxes payable of $253,097. The increase in
accrued expenses resulted primarily from the addition of new healthcare
employees required to support the increased staffing requirements from our new
medical service contracts in addition to the wage accrual covering six
additional days as compared to the three months ended December 31, 2008
partially offset by a reduction in accrued medical expenses and a reduction in
other corporate expense accruals. The increase in accounts payable
resulted primarily from the timing of vendor payments in relation to quarter
end. The decrease in income taxes payable resulted primarily from the
payment of scheduled estimated taxes partially offset by accruals of estimated
taxes payable. The increase in accounts receivable resulted primarily
from Pima County’s payment being received after March 31, 2009. The
decrease in prepaid expenses resulted primarily from a reduction in prepaid
professional liability insurance.
Cash
Flows from Investing Activities
Cash flow
from investing activities for the three months ended March 31, 2010 used
$212,508. Purchases of property and equipment used $65,240 primarily
for purchases of vehicles, computers and medical equipment. The
purchase of all of the assets of a small mobile imaging company used
$147,268.
Cash flow
from investing activities for the three months ended March 31, 2009 used
$25,813, primarily for purchases of computers and medical
equipment.
Cash
Flows from Financing Activities
Cash flow
from financing activities for the three months ended March 31, 2010 used cash of
$0.
Cash flow
from financing activities for the three months ended March 31, 2009 used cash of
$112,015. Payments on the line of credit were $100,000 and payment on
loans were $18,015 which was partially offset by proceeds from warrant exercises
of $6,000.
Loans
As of
March 31, 2010, we had no outstanding loans.
Page - 14
-
Off
Balance Sheet Arrangements
We are
required to provide performance and payment guarantee bonds to county
governments under certain contracts. As of March 31, 2010, we have three
performance bonds totaling $8,042,424 and two payment bonds for $2,855,537,
totaling $10,897,961. The surety issuing the bonds has recourse against our
assets in the event the surety is required to honor the bonds.
Contractual
Obligations
The
following table presents our expected cash requirements for contractual
obligations outstanding as of March 31, 2010:
Total
|
Current
|
2 – 3
Years
|
4 – 5 Years
|
Thereafter
|
||||||||||||||||
Equipment
Leases
|
$ | 109,862 | $ | 47,207 | $ | 58,804 | $ | 3,851 | $ | — | ||||||||||
Automobile
Leases
|
31,977 | 27,158 | 4,819 | — | — | |||||||||||||||
Office
Space Leased
|
426,469 | 158,327 | 268,142 | — | — | |||||||||||||||
Total
Contractual Cash Obligations
|
$ | 568,308 | $ | 232,692 | $ | 331,765 | $ | 3,851 | $ | — |
Effects
of Inflation
We do not
believe that inflation and changing prices over the past three years have had a
significant impact on our revenue or results of operations.
Potential
Future Service Contract Revenue
As of
March 31, 2010, we have entered into 60 agreements with county governments to
provide medical and healthcare services primarily to county and municipal
correctional facilities. Most of these contracts are for multiple years and
include option renewal periods which are, in all cases, at the county's option.
The original terms of the contracts are from one to nine years. These medical
service contracts have potential future service contract revenue of $187 million
as of March 31, 2010, with a weighted-average term of 4.1 years, of which
approximately $65 million relates to the initial contract period and
approximately $122 million relates to the option renewal periods.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
The
information in this Item is not required to be provided by Smaller Reporting
Companies pursuant to Regulation S-K.
ITEM
4(T).
|
CONTROLS
AND PROCEDURES
|
Evaluation of Disclosure Controls
and Procedures. Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this report. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures as of the end of the
period covered by this report were effective such that the information required
to be disclosed by us in reports filed under the Exchange Act is
(i) recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms and (ii) accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding
disclosure.
Changes in Internal Control over
Financial Reporting. During the most recently completed fiscal quarter,
there has been no change in our internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Page - 15
-
PART
II. OTHER INFORMATION
ITEM
1.
|
LEGAL
PROCEEDINGS
|
There are
no material changes in the legal proceedings pending against us.
ITEM
1A.
|
RISK
FACTORS
|
The
information in this Item is not required to be provided by Smaller Reporting
Companies.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
None
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None
ITEM
4.
|
RESERVED
|
ITEM
5.
|
OTHER
INFORMATION
|
None
ITEM
6.
|
EXHIBITS
|
31.1
|
Section
302 Certification of Principal Executive Officer
|
|
31.2
|
Section
302 Certification of Principal Financial Officer
|
|
32.1
|
Section
906 Certification of Principal Executive Officer
|
|
32.2
|
Section
906 Certification of Principal Financial
Officer
|
Page - 16
-
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Conmed
Healthcare Management, Inc.
|
|
May
13, 2010
|
|
By /s/ Richard W. Turner
|
|
Richard
W. Turner, Ph.D.
|
|
Chairman
and Chief Executive Officer
|
|
(principal
executive officer)
|
|
May
13, 2010
|
|
By /s/ Thomas W. Fry
|
|
Thomas
W. Fry
|
|
Chief
Financial Officer and Secretary
|
|
(principal
financial officer and principal accounting
officer)
|
Page - 17
-