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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
COMMISSION FILE NUMBER 0-27123
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MEDIQUIK SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 74-2876711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4295 SAN FELIPE
SUITE 200
HOUSTON, TEXAS 77027
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 888-1919
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 .
--- ---
As of December 8, 1999 there were outstanding 5,944,803 shares of
Common Stock, $.001 par value per share, of the registrant.
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<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
September 30, 1999 (Unaudited) and December 31, 1998 2
Statements of Operations (Unaudited)
Three Months Ended September 30, 1999 and 1998, Nine Months Ended
September 30, 1999 and the Period from April 7, 1998
(Date of Incorporation) to September 30, 1998 3
Statements of Changes in Stockholders' Equity (Deficit) 4
Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1999 and the Period from
April 7, 1998 (Date of Incorporation) to September 30, 1998 5
Notes to Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
</TABLE>
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MEDIQUIK SERVICES, INC.
BALANCE SHEETS
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1999 1998
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 29,429 $ 7,578
Accounts receivable - trade 146,059 43,824
Accounts receivable - other 16,426 6,961
Advances 16,000
Inventory 19,694 79,093
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Total current assets 211,608 153,456
PROPERTY AND EQUIPMENT:
Office equipment 49,270 249
Less accumulated depreciation (5,040) (29)
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Total property and equipment 44,230 220
INVESTMENT - MP Total Care 250,001
GOODWILL AND OTHER ASSETS 1,177,736 61,651
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TOTAL $ 1,683,575 $ 215,327
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $223,556 $153,656
Accrued expenses 314,211 100,908
Notes payable 139,680 280,000
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Total current liabilities 677,447 534,564
MINORITY INTEREST 4,264
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock - $.001 par value 25,000,000 shares authorized; 5,896,807 shares
issued and outstanding at September 30, 1999 and
4,849,173 shares issued and outstanding at December 31, 1998 5,897 4,849
Additional paid-in capital 4,141,744 505,768
Accumulated deficit (3,145,777) (829,854)
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Total stockholders' equity (deficit) 1,001,864 (319,237)
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TOTAL $ 1,683,575 $ 215,327
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</TABLE>
See accompanying notes to financial statements.
2
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MEDIQUIK SERVICES, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
THREE MONTHS ENDED ENDED APRIL 7, 1998 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
-------------------
1999 1998 1999 1998
REVENUE:
<S> <C> <C> <C> <C>
Sales $ 111,144 $ 18,122 $ 827,496 $ 18,122
Other revenues 14,534 19,036
--------- --------- ----------- -----------
Total revenue 125,678 18,122 846,532 18,122
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COST OF SALES -
Purchase - strips and lancets 72,437 16,215 677,796 16,215
--------- --------- ----------- -----------
Total cost of sales 72,437 16,215 677,796 16,215
--------- --------- ----------- -----------
GROSS PROFIT 53,241 1,907 168,736 1,907
OPERATING EXPENSES:
Salaries - officer 199,397 82,952 277,320 82,952
Consulting fees 65,498 73,201 1,570,920 107,201
Other 348,327 68,694 655,311 103,488
--------- --------- ----------- -----------
Total operating expenses (613,222) (224,847) (2,503,551) (293,641)
--------- --------- ----------- -----------
LOSS FROM OPERATIONS (559,981) (222,940) (2,334,815) (291,734)
OTHER INCOME (EXPENSE):
Interest income 2,795
Other income 5,276 46,480
Interest expense (4,875) (30,383)
--------- --------- ----------- -----------
Total other income 401 18,892
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NET LOSS $(559,580) $ (222,940) $(2,315,923) $ (291,734)
--------- --------- ----------- -----------
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BASIC AND DILUTED LOSS PER SHARE $(0.10) $(0.05) $ (0.43) $ (0.07)
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BASIC WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 5,782,307 4,188,219 5,412,089 4,115,787
--------- --------- ----------- -----------
--------- --------- ----------- -----------
DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 5,782,307 4,188,219 5,448,921 4,115,787
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
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MEDIQUIK SERVICES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
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<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT TOTAL
BALANCE APRIL 7, 1998 (Date of Incorporation)
<S> <C> <C> <C> <C> <C>
Proceeds from issuance of Founders' shares 110,000 $ 110 $ 110
Acquisition of MediQuik Services LLC assets 2,750,000 2,750 2,750
Proceeds from issuance of warrants $ 11,000 11,000
Issuance of warrants for consulting services 117,961 118 235,922 236,040
Issuance of restricted stock 1,000,000 1,000 1,000
Conversion of Convertible Debt 75,000 75 2,925 3,000
Acquisition of Cash Flow Management Inc. 662,165 662 662
Proceeds from exercise of warrants and
issuance of common stock 134,047 134 255,921 256,055
Net loss $ (829,854) (829,854)
--------- -------- --------- ---------- ---------
BALANCE DECEMBER 31, 1998 4,849,173 4,849 505,768 (829,854) (319,237)
Repurchase of unexercised warrants (12,880) (12,880)
Proceeds from issuance of common stock 425,000 425 849,575 850,000
Issuance of common stock under consulting
agreements 220,634 221 890,283 890,504
Issuance of warrants for consulting services 463,100 463,100
Proceeds from issuance of common stock 38,000 38 102,562 102,600
Acquisition of Scardello Marketing Group LLC
assets 330,000 330 1,237,170 1,237,500
Issuance of common stock under consulting
agreements 24,000 24 77,976 78,000
Issuance of common stock under
employment agreement 10,000 10 28,190 28,200
Net loss (2,315,923) (2,315,923)
--------- -------- --------- ---------- ----------
BALANCE SEPTEMBER 30, 1999 (UNAUDITED) 5,896,807 $ 5,897 $ 4,141,744 $(3,145,777) $ 1,001,864
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</TABLE>
See accompanying notes to financial statements.
4
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MEDIQUIK SERVICES, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
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<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED APRIL 7, 1998 TO
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,315,923) $(291,734)
Adjustment for noncash transactions:
Common stock and warrants issued for services 1,492,048
Depreciation and amortization 46,261 26
Minority Interest 4,264
Net changes in assets and liabilities:
Accounts receivable (111,700) (2,866)
Advances 16,000 (129,000)
Inventory 59,399 (1,977)
Accounts payable 69,900 33,297
Accrued expenses 213,303 10,428
Other assets 59,721 (3,000)
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Net cash used in operating activities (466,727) (384,826)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (49,021) (249)
Investment in MP Total Care (250,001)
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Net cash used in investing activities (299,022) (249)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 147,000
Repayment of indebtedness (165,000)
Proceeds from sale of common stock 952,600 283,954
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Net cash provided by financing activities 787,600 430,954
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NET INCREASE IN CASH 21,851 45,879
CASH, Beginning of period 7,578
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CASH, End of period $ 29,429 $ 45,879
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SUPPLEMENTAL CASH FLOW DISCLOSURES -
Interest paid $ 16,362
NONCASH TRANSACTIONS:
Debt converted to stock 3,000
Stock issued in MediQuik Services LLC acquisition 2,750
Acquisition of Scardello Marketing Group LLC 1,216,896
</TABLE>
See accompanying notes to financial statements.
5
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MEDIQUIK SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITY - MediQuik Services, Inc. ("MediQuik")
was organized in Delaware on April 7, 1998. On April 7, 1998, MediQuik
issued an aggregate of 2,750,000 shares of its common stock to designees
of MediQuik Services, LLC in consideration of the transfer of certain
assets of MediQuik from MediQuik Services, LLC. Effective December 31,
1998, MediQuik was merged with and into Cash Flow Marketing, Inc., a
Delaware corporation ("Cash Flow"), which, as the surviving corporation,
subsequently changed its name to MediQuik Services, Inc. (the "Company").
This transaction has been treated as a capital transaction in substance,
rather than a business combination; thus the accounting is similar to a
reverse acquisition but no goodwill and/or intangible has been recorded.
As a result, MediQuik is considered the acquiring entity for financial
statement purposes, and the financial statements for the period prior to
January 1, 1999 are those of MediQuik Services, Inc, not Cash Flow, the
legal acquirer.
The financial statements included herein have been prepared by MediQuik
Services, Inc., a Delaware corporation (the "Company"), without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission, and reflect all adjustments which are, in the opinion of
management, necessary to present a fair statement of the results for the
interim periods on a basis consistent with the audited financial
statements. All such adjustments are of a normal recurring nature. The
results of operations for the interim periods are not necessarily
indicative of the results to be expected for an entire year. Certain
information, accounting policies and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules
and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the Company's audited
financial statements included in the Company's filing on Form 10-SB for
the period ended December 31, 1998.
DERIVATIVES - In June 1998 the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which establishes accounting and reporting standards for derivative
instruments and hedging activities. In June 1999 FASB issued SFAS No. 137,
which delays the effective date for implementation of SFAS 133 to fiscal
years beginning after June 15, 2000. The Company held no derivatives in
1999 or 1998 and believes that SFAS No. 133, when adopted effective
January 1, 2001, will not materially impact its financial position or
results of operations.
2. EARNINGS PER SHARE
The Company has adopted SFAS 128, "Earnings per Share," which establishes
standards for computing and presenting earnings per share ("EPS"). SFAS
128 requires the presentation of "basic" and "diluted" EPS on the face of
the income statement. Basic EPS amounts are calculated using the average
number of common shares outstanding during each period. Diluted earnings
per share assumes the exercise of all stock options and warrants having
exercise prices less than the average market price of the common stock
using the treasury
6
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stock method. No dilutive securities of the Company were outstanding at
December 31, 1998; however, warrants to purchase 250,000 shares of common
stock at exercise prices ranging from $3.00 - $4.00 per share were issued
from February to April 1999. Since the Company incurred a loss for all
periods presented, these dilutive securities have been excluded, as they
would be anti-dilutive to basic EPS.
3. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes,"
("SFAS No. 109") which provides for an asset and liability approach for
accounting for income taxes. Under this approach, deferred tax assets and
liabilities are recognized based on anticipated future tax consequences,
using currently enacted tax laws, attributable to differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases. Due to the Company having significant deferred tax
assets, no tax benefit (expense) was recorded at September 30, 1999. Due
to the uncertainty of the Company's ability to become profitable in the
future, an allowance has been provided to offset the tax benefits of
certain tax assets. Should the Company have net income in future periods
income tax expense will be recorded upon utilization of available deferred
tax assets.
4. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
<S> <C> <C>
Notes payable - bank $ 24,680
Three notes payable, $50,000 each to shareholders with interest
at 9%, payable February 20, 1999 $ 150,000
Note payable to shareholders with interest at 15%,
due on December 31, 1999 15,000 30,000
Ten notes payable, $10,000 each to certain shareholders with
interest at 15%, due on December 31, 1999 100,000 100,000
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$ 139,680 $ 280,000
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</TABLE>
During June 1999, the Company made a $15,000 principal payment. In
addition, the Company acquired a note payable of $24,680 due to a bank.
In July 1999 the Company obtained a $100,000 line of credit from a bank.
Repayment of such line of credit has been guaranteed by an officer of the
Company.
5. EQUITY TRANSACTIONS
In July 1999 the Company issued and sold 38,000 shares of common stock for
$2.70 per share.
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From July to September 1999, 34,000 shares of common stock were
distributed as compensation to management and consultants; the fair value
of these shares is $106,200 and is recorded as compensation expense.
6. RELATED PARTY TRANSACTIONS
The Company has certain outstanding receivable and payable balances with
related parties. The receivable and payable amounts are derived from sales
in the ordinary course of business and the payable amounts relate to
certain consulting services.
7. ACQUISITIONS
ACQUISITION OF ASSETS - The Company entered into an agreement to purchase
certain assets of Scardello Marketing Group, LLC ("SMG") on June 18, 1999;
this acquisition was effective and was closed July 1999. The Company
acquired the Exclusive Marketing Representative Agreement ("Marketing
Agreement") between SMG and the Company with a term of five years ending
in 2004, acquired certain computer equipment, and acquired all documents,
materials, target lists, customer lists, and receivables, if any, derived
from the Marketing Agreement. The Company also assumed a note payable of
$25,000 due to a bank but also received the proceeds of such note.
In connection with the acquisition of SMG's assets during July 1999,
330,000 shares of common stock were issued to SMG and the Company forgave
$15,396 in debt due from SMG. The Company acquired the assets of SMG
primarily to obtain rights to the Marketing Agreement and services of the
principal of SMG to further internally develop the Company's business. SMG
shareholders have represented that SMG had no significant operations and
that detailed SMG financial information is not available.
<TABLE>
<CAPTION>
The allocation of purchase price is summarized as follows:
<S> <C>
Book value of net assets acquired at cost $ 3,000
Fair value adjustments -
Fair value of purchased Marketing Agreement and its related items 145,985
----------
Fair value of net assets acquired 148,985
----------
Purchase price:
Acquisition costs 4,000
Fair value of 330,000 shares issued 1,237,500
Debt forgiven 15,396
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Total 1,256,896
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Excess of purchase price over net assets acquired, allocated to goodwill
(amortized over five years) $1,107,911
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</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This management discussion contains certain forward-looking statements
as identified by the use of words like "expects", "believes", and "anticipates"
and other similar phrases. Such statements reflect management's current view of
future financial performance based on certain assumptions, risks and
uncertainties. If any assumptions, risk or uncertainty factors change, such
changes may have a material impact on actual financial results. The Company is
under no obligation to revise any forward-looking statements contained herein,
which are as of the date hereof. Readers are cautioned to not place undue
reliance on any forward-looking statements contained in this discussion.
OVERVIEW
MediQuik is an early stage healthcare services company specializing in
the delivery of medical supplies and chronic disease management programs to
chronically ill patients on behalf of managed care payors.
The Company's business was organized on April 7, 1998, and began
full-time operations in July 1998 as Old MediQuik. Effective December 31, 1998,
Old MediQuik merged with and into Cash Flow Marketing, Inc., with Cash Flow as
the surviving corporation. Cash Flow changed its name to MediQuik Services, Inc.
immediately following the merger. This transaction has been treated as a capital
transaction in substance rather than a business combination; thus, the
accounting is similar to a reverse acquisition but no goodwill and/or
intangibles have been recorded. As a result Old MediQuik is considered the
accounting acquiror for financial statement purposes. Therefore, the financial
statements of the Company for periods prior to January 1, 1999 are the financial
statements of Old MediQuik, not Cash Flow.
MediQuik is seeking to rapidly expand through internal sales growth and
strategic acquisition. During 1998 and through third quarter of 1999, the
Company established: (i) corporate marketing and fulfillment operations; (ii)
contractual relations with product manufacturers; (iii) contractual relations
with specialty service providers; (iv) contractual relationships with insurance
payors and provider networks; (v) a joint venture with a pharmacy products
distribution company; and (vi) initial patient enrollment and fulfillment
operations.
The Company offers comprehensive disease monitoring and maintenance
solutions by providing pharmacy and diagnostic products, disease education,
compliance review and reporting, and personal health resources via the U.S.
Mail, telecommunications, and the Internet. MediQuik is focused on delivering
high quality products and services to chronic disease patients for insurance
organizations that bear the primary financial risk for healthcare treatment.
MediQuik also works directly with health maintenance organizations, preferred
provider organizations, self-insured companies and other third-party payors in
an effort to enhance the quality of life for chronically ill patients and
improve the financial outcomes for managed care payors.
The Company seeks to provide disease management products and services
to patients who: (i) require disease treatment and maintenance for long periods
of time; (ii) require medical testing products and prescription medications; and
(iii) require extensive disease education and self-management tools.
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The Company is currently serving patients with diabetes and is
developing new disease management programs for other high cost, chronic
diseases, such as respiratory disease and congestive heart failure. MediQuik is
focusing on certain diseases with large afflicted patient populations where
clinical research indicates that active management will improve the health
condition of the patient and reduce the financial burden for managed care
payors.
MediQuik offers patients and managed care plans a single source for
disease management products, mail-order medications, personalized education, 24
hour nurse assistance, and quarterly patient counseling. The Company provides a
complete line of blood glucose monitoring systems, testing strips, lancets,
swabs, insulin pumps, compliance and wound care products for diabetes patients,
and the Company is adding new products and services to complement the existing
disease management programs. The Company also provides billing and collection
activities on behalf of the patient to the healthcare plan.
Research indicates that patients who actively manage certain chronic
disease factors experience reduced disease complications and an enhanced quality
of life. The Company believes that a coordinated disease management program,
including convenient product delivery and billing, personalized patient
education, routine disease counseling, immediate access to healthcare
professionals, and ongoing compliance testing will improve clinical and
financial outcomes for patients and managed care payors.
Although initial Company revenues were derived primarily through
product sales, the Company has expanded beyond product delivery and has become a
full disease management provider working to improve patient care and reduce
costs to managed care payors. The Company currently offers managed care
agreements based on fee-for-service and capitated fee arrangements.
MediQuik receives patients primarily through agreements with managed
care plans and provider networks. According to published reports, an estimated
85% of privately insured U.S. citizens were in some type of managed care plan in
1997, an increase from 48% in 1992. With the significant increase in managed
care enrollment, the Company believes that patient referrals should increasingly
be generated through the managed care plans.
REVENUE FROM OPERATIONS
The Company commenced operations in July 1998 and received its initial
revenue in August 1998. For the period from April 7, 1998 to September 30, 1998,
the Company reported revenue of $18,122. Total revenue increased to $846,532 for
the nine months ended September 30, 1999. The Company reported revenue of
$18,122 for the three months ended September 30, 1998. Total revenue increased
to $125,678 for the three months ended September 30, 1999.
Revenue growth was primarily derived from diagnostic product sales to
managed care plans, providers and patients. The Company expected and experienced
increased revenue from direct sales to managed care plans and decreased revenue
from sales to other managed care providers during the third quarter of 1999. The
Company expects and experienced significant improvement in gross margin
percentages with increased direct managed care plan revenues. To date, the
Company has not relied on cash flow from operations to fund its initial
operating activities.
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GROSS PROFIT
The Company commenced operations in July 1998 and received its initial
gross profit in August 1998. For the period from April 7, 1998 to September 30,
1998, the Company reported gross profit of $1,907 or 10.5% of revenue for the
period. Gross profit increased to $168,736 or 19.9% of revenue, for the nine
months ended September 30, 1999. For the three month period ending September 30,
1998, the Company reported gross profit of $1,907 or 10.5% of revenue. Gross
profit increased to $53,241 for the three months ended September 30, 1999
representing 42.4% of revenue prior to sales commissions.
Gross profit was derived from diagnostic product sales to managed care
payors and patients. The increase in the gross profit percentage for 1999 is the
result of volume purchase discounts and discounts for immediate payment upon
delivery terms. The Company expected and experienced a significant increase in
gross profit percentage with increased direct sales to managed care plans during
the third quarter.
OPERATING EXPENSES
For the period from April 7, 1998 to September 30, 1998, operating
expenses were $293,641. The operating expenses for 1998 and 1999 reflect
increased consulting fees related to the issuance of common stock for services
rendered to the Company. Operating expenses increased to $2,503,551 for the
nine months ended September 30, 1999, reflecting initiation of the Company's
operating activities. For the three month period ending September 30, 1998,
the Company reported operating expense of $224,847. Operating expenses
increased to $613,222 for three month period ending September 30, 1999.
The increase in operating expenses is primarily associated with the
initiation of operating business activities including marketing and selling
expenses, general and administrative costs and the hiring and training of staff.
The increased operating expenses is also associated with start-up activities of
ChronicRx.com, an 80% owned Internet disease management and pharmacy subsidiary.
NET LOSS
The Company experienced a net loss of $291,734 for the period from
April 7, 1998 to September 30, 1998, primarily attributed to the development of
the Company's business operations. The majority of the increase in the net loss
from 1998 to 1999 reflects increased consulting fees related to the issuance of
common stock for services rendered to the Company. Net loss increased to
$2,315,923 for the nine months ended September 30, 1999. For the three months
ended September 30, 1998, the net loss was $222,940. The Company experienced
a net loss of $559,580 for the three months ended September 30, 1999. The
Company expects the net loss to significantly decrease with increased
revenues and gross profits from its business operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company had an aggregate of $29,429 in cash as of September 30,
1999. The Company has $115,000 of 15% subordinated debentures due in December
1999. The debentures are owed to significant shareholders of the Company. The
Company has accrued expenses of $314,211 and accounts payable of $223,556 as of
September 30, 1999. The accrued expenses include accrued wages to Company
officers and insiders who are significant shareholders in the Company and
estimated legal expenses through September 30, 1999.
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Accounts receivable were $162,485 as of September 30, 1999. Accounts
receivable are primarily derived from payments due to the Company by managed
care plans and providers. Standard medical billing cycles for managed care plans
average between 45-60 days. The Company expects to experience similar billing
cycles as direct managed care plan business increases.
The Company had a $25,000 line of credit as of September 30, 1999. The
Company expects to seek additional lines of credit to finance inventory purchase
requirements associated with revenue growth.
As revenues increase, the Company expects working capital requirements
to increase. The Company expects to pursue additional equity and debt financing
to meet future working capital requirements.
YEAR 2000 READINESS
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in the
year 2000, these date code fields will need to accept four digit entries in
order to distinguish dates beginning "20" from dates beginning "19". As a
result, computer systems and/or software used by many companies will need to be
upgraded to comply with "Year 2000" requirements. This is commonly known as the
"Year 2000 Issue". The Company is presently evaluating the impact of the Year
2000 Issue as it affects its business operations and interfaces with customers
and vendors. The Company believes that its greatest Year 2000 risk is related to
reimbursement from managed care payors. Risk also exists relative to the flow of
inventory from vendors, including strips, monitors, lancets, and nurse triage,
and relative to the fulfillment of orders. Minimal risks are associated with the
Company's information technologies, financial systems and internal
communications.
The Company has developed an internal team, consisting of Grant Gables,
Dale Tony, and Larry Wedekind, (the "Team") to assess the Company's Year 2000
readiness. The Team has completed a detailed inventory and risk assessment of
all systems and business operations and has confirmed the Year 2000 readiness of
most of the Company's suppliers, including Bayer, the Company's primary supplier
of products. The Team is continuing to evaluate the Year 2000 readiness of the
Company's smaller suppliers and will increase the inventory of products from any
supplier that does not confirm its Year 2000 readiness. The Team engaged outside
systems consultants to evaluate the Company's internal computer systems. After
performing an upgrade on the Company's software, the consultants approved the
Company's hardware and software systems as Year 2000 compliant.
The Team has surveyed all of its managed care payors in an effort to
assess their Year 2000 readiness. All have responded that they are Year 2000
compliant. Nonetheless, as the Company deems the risk of non-payment by these
payors to be its greatest Year 2000 risk, the Company is attempting to increase
its cash reserves to cover any delay in its receipt of payment from these
managed care payors.
The Company believes that the Year 2000 project compliance will cost
approximately $5,000, of which it has already spent $1,000. The Company is
committed to providing the necessary resources for Year 2000 compliance.
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Prior to year end 1999, the Company plans to develop Year 2000
contingency plans for continuing operations in the event of disruptions due to
the Year 2000 Issue. There can be no assurance, however, that all instances of
noncompliance which could have a material adverse effect on the Company's
operations or financial condition have been identified. Additionally, there can
be no assurance that the systems of other companies with which the Company
transacts business will be corrected on a timely basis, or that such failure, or
a correction which is incompatible with the Company's information systems, would
not have a material adverse effect on the Company's operations or financial
condition.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS. The following exhibits are filed as part of this
report:
INDEX TO EXHIBITS
Exhibit No.
- --------------
11.1 -- Computation of Earnings Per Share.
27.1 -- Financial Data Schedule.
(B) Reports on Form 8-K............................................None
14
<PAGE>
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.
MEDIQUIK SERVICES, INC.,
A DELAWARE CORPORATION
(REGISTRANT)
Date 12/13/99 /S/ GRANT M. GABLES
--------------- -------------------------------------------
Grant M. Gables
President and principal financial officer
15
<PAGE>
EXHIBIT - 11.1
MEDIQUIK SERVICES, INC
COMPUTATION OF EARNINGS PER SHARE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months and
Three Months Ended Period Ended
September 30, September 30,
----------------------- --------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Basic common and common equivalent shares outstanding,
beginning of period 5,494,807 4,138,564 4,849,173
Weighted average shares and equivalent shares outstanding:
Issuance of Founders' shares 117,939
Acquisition of MediQuik Services LLC assets 2,948,460
Issuance of restricted stock 1,023,432
Conversion of Convertible Debt 26,222 13,707
Proceeds from issuance of warrants and common stock 23,433 12,249
Proceeds from issuance of common stock 322,070
Issuance of common stock under consulting agreements 143,960
Proceeds from issuance of common stock 31,804 10,718
Acquisition of Scardello Marketing Group LLC 233,153 78,571
Issuance of common stock under consulting agreements 15,913 5,363
Issuance of common stock under employment agreement 6,630 2,234
---------- --------- ---------- ---------
Basic weighted average common and common equivalent
shares outstanding, end of period 5,782,307 4,188,219 5,412,089 4,115,787
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Dilutive common stock options and warrants 36,832
---------- --------- ---------- ---------
Diluted weighted average common and common equivalent
shares outstanding 5,782,307 4,188,219 5,448,921 4,115,787
---------- --------- ---------- ---------
---------- --------- ---------- ---------
NET LOSS $ (559,580) $ (222,940) $(2,315,923) $(291,734)
----------- ----------- ----------- ---------
BASIC LOSS PER SHARE: $ (0.10) $ (0.05) $ (0.43) $ (0.07)
--------- ----------- ---------- ---------
--------- ----------- ---------- ---------
DILUTED LOSS PER SHARE: $ (0.10) $ (0.05) $ (0.43) $ (0.07)
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 29,429
<SECURITIES> 0
<RECEIVABLES> 162,485
<ALLOWANCES> 0
<INVENTORY> 19,694
<CURRENT-ASSETS> 211,608
<PP&E> 49,270
<DEPRECIATION> 5,040
<TOTAL-ASSETS> 1,683,575
<CURRENT-LIABILITIES> 677,447
<BONDS> 139,680
0
0
<COMMON> 5,897
<OTHER-SE> 995,967
<TOTAL-LIABILITY-AND-EQUITY> 1,683,575
<SALES> 827,496
<TOTAL-REVENUES> 846,532
<CGS> 677,796
<TOTAL-COSTS> 677,796
<OTHER-EXPENSES> 2,503,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,383
<INCOME-PRETAX> (2,315,923)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,315,923)
<EPS-BASIC> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
