CompCare to Purchase Mental-Health Provider
Comprehensive Care Corp., a health-care management company, said Wednesday that it plans to buy Mustard Seed Corp., a Pennsylvania provider of mental-health and substance-abuse services.
The acquisition, which must be approved by CompCare shareholders, would boost the Costa Mesa company’s annual revenue by roughly 70%, to $55 million, said Drew Q. Miller, its chief operating officer. Mustard Seed, a privately held company that serves about 140,000 people, has been losing money recently, though officials declined to offer details.
CompCare plans to use common stock from its 9.4 million-share pool of unissued, authorized shares to acquire Fort Washington-based Mustard Seed, Miller said.
The proposed purchase comes as the company faces other challenges in its attempt to turn itself around financially. It has been waiting five months for the Securities and Exchange Commission to approve its payout plan to holders of $9.5 million worth of its bonds in default since 1994.
Miller attributed the delay to problems assembling audited financial reports from Arthur Andersen & Co., which dropped CompCare as a client last May, and Ernst & Young, which replaced Andersen as the company’s auditor soon after. In an SEC filing this week, the company said Andersen intends to review CompCare’s audited reports for fiscal years 1993 and 1994 to determine whether they should be modified.
Meanwhile, CompCare is pressing ahead with attempts to extricate itself from its traditional business of operating money-losing health-care facilities, focusing, instead, on managing treatment programs. It has lined up buyers for its two hospitals in Costa Mesa and San Diego, Miller said.
The company also plans to move its corporate staff this spring from temporary quarters at the Costa Mesa hospital on West Bay Street to Bayside Drive in Corona del Mar. Chriss Street, CompCare’s president and chief executive officer, operates his own investment company in separate offices at the Corona del Mar site.
Excluding revenue from Mustard Seed, CompCare expects to report sales of about $32 million for the fiscal year ending May 31, up 10% from the prior year, Miller said.
The company posted a profit of $718,000 in the second quarter ended Nov. 30, but lost $590,000 for the first six months. Miller said the company expects to report a loss for the entire year. CompCare lost $11.5 million last year.
