TWST: Please begin with a brief historical sketch of the company and a picture of the things you are doing right now.
Mr. Tenwick: AdCare is an Ohio-based corporation that develops, owns and manages long-term care facilities for the elderly and also provides home healthcare services. We currently manage 15 facilities, which includes six nursing homes, seven assisted living facilities and two independent living facilities. Also, we have ownership interests in seven of those facilities. Several years ago, we decided to change our model and start developing for third parties rather than ourselves because we did not have the large amounts of capital that was required. We also discovered that seniors were staying in their homes longer, so we decided to get into the home healthcare business. It made a lot of sense for us — if we could capture some of that market, and provide good service, we felt we would be in a good position to persuade our patients to move into our facilities when they were ready. Last November, AdCare went public and listed on the American Stock Exchange. We have been in business for about 18 years, achieving steady organic growth, and built up an asset base of $25 million with about $25 million in revenue. We have over 900 employees and are looking to expand our operations. In fact, for the past six months, we were pursuing an acquisition and were not able to talk much about the company, but now we're moving ahead aggressively, looking for new management and development contracts, looking for acquisitions and expanding our home healthcare operations.
TWST: What are your competitive advantages versus other companies doing similar things?
Mr. Tenwick: Because of our current size, I believe we can react faster and more personally to opportunities, such as potential management, development or consulting contracts as they become available. I remember one development deal where we won over a much larger company because the client could deal directly with the President of AdCare rather than just being another client or number dealing with the larger companies. Also, many of the larger companies will not fool around with smaller deals or properties that may be attractive to us at our stage in our growth. Since we are small, I believe we are in a better position to leverage our management and asset base to operate a much larger company.
TWST: What are the key elements in your strategy as you look out over the next three to four years?
Mr. Tenwick: The key elements in our strategy are to continue to increase the revenues and cash flows at our existing facilities, find new management and development contracts for long-term care facilities and expand our existing home health care operations. At the same time, we will be looking for healthcare acquisitions and some long-term care facilities. As part of this strategy, we need to find an acquisition loan facility and some additional capital to continue our growth.
TWST: What challenges or problems might you face over the next few years.
Mr. Tenwick: A major challenge for a small company like ours is to find capital. I am talking to banks, Wall Street firms and equity funds to generate interest. AdCare has a small capitalization and many firms will not deal with small companies. Also, at the present time, the price of our stock is selling for less on a total capitalization than the amount of cash we raised with our IPO last November. Based on the price of our stock, in my opinion the market is giving no value for our real estate and home health care operations at this time. We believe that if we can continue to increase revenues and work our acquisition strategy, the market will eventually reflect our value as a company.
TWST: Would you tell us what you think the investment community is missing about you?
Mr. Tenwick: At this point, we are the smallest public company in our space, and have limited visibility on Wall Street. When we went public last November, we raised net of just over $6 million. We have 3.8 million shares that are outstanding and the price of our stock is just over $1. In other words, the market is valuing the total company at under $4 million, or less than the cash raised in the IPO. To list on the American Stock Exchange, you have to have a minimum capitalization of $15 million, not including the value of insiders' shares. We need to get our story out about what we are doing, our progress and our plans for expansion. At least, that is how I see it. The depreciation of our assets to date is more than the market is valuing AdCare. And I continue to believe that real estate appreciates rather than depreciates.. Last month we issued a news release that indicated we sold one of our properties and took a $600,000 profit. I hope the market will eventually value the company at what we believe the value should be.