UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended 6/30/00
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
(No Fee Required)
For the transition period from _________ to ________
Commission file number 0-27123
MEDIQUIK SERVICES, INC.
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(Name of small business issuer in its charter)
Delaware 74-2876711
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State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4295 San Felipe, Suite 200, Houston, Texas 77027
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(Address of principal executive offices) (Zip Code)
(713) 888-1919
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(Issuer's telephone number)
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(Former name, former address and formal fiscal year, if
changed since last report)
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 |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes |_| No |_|
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APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
6,392,539 shares of the Company's Common Stock issued and outstanding at June
30, 2000.
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Transitional Small Business Disclosure Format (Check one):Yes |_|; No |X|
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MEDIQUIK SERVICES, INC.
The undersigned registrant hereby amends the following items of its
Quarterly Report on Form 10-QSB/A for the fiscal quarter ended June 30, 2000, as
set forth in the pages attached hereto (see Note 8 to the Financial Statements):
Page
PART I. FINANCIAL INFORMATION 3
ITEM 1
FINANCIAL STATEMENTS 3
Consolidated Condensed Balanced Sheets (Unaudited)
June 30, 2000 and December 31, 1999 3
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended June 30, 2000 and 1999,
Six Months Ended June 30, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Condensed Financial Statements 6
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 10
PART II. OTHER INFORMATION 14
ITEM 2
CHANGES IN SECURITIES AND USE OF PROCEEDS 14
ITEM 5
OTHER INFORMATION 15
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
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<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(As restated,
see Note 8)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 147,781 $ 47,424
Accounts receivable, net of allowance of $199,975
and $88,702, respectively 321,064 141,695
Inventory 106,519 21,737
----------- -----------
Total current assets 575,364 210,856
PROPERTY AND EQUIPMENT:
Office equipment and other 202,259 74,850
Less accumulated depreciation (11,402) (7,215)
----------- -----------
Total property and equipment 190,857 67,635
OTHER ASSETS 232,191 143,407
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TOTAL $ 998,412 $ 421,898
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 1,058,309 $ 199,479
Accrued expenses 241,529 598,208
Notes payable and subordinated debentures 801,195 85,000
----------- -----------
Total current liabilities 2,101,033 882,687
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - 1,000,000 shares authorized, none issued
and outstanding
Common stock - $.001 par value, 25,000,000 shares authorized;
6,392,539 and 6,032,007 shares issued and outstanding at
June 30, 2000 and December 31, 1999, respectively 6,393 6,033
Additional paid-in capital 4,812,030 4,143,311
Accumulated deficit (5,921,044) (4,610,133)
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Total stockholders' (deficit) (1,102,621) (460,789)
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TOTAL $ 998,412 $ 421,898
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
-------------------------- ---------------------------
2000 1999 2000 1999
(As restated, (As restated,
see Note 8) see Note 8)
<S> <C> <C> <C> <C>
SALES $ 385,540 $ 242,875 $ 707,469 $ 720,854
COST OF SALES 300,964 191,336 578,627 605,359
----------- ----------- ----------- -----------
Gross profit 84,576 51,539 128,842 115,495
OPERATING EXPENSES:
Salaries - officers 218,772 38,962 252,475 77,923
Consulting fees 141,981 680,271 310,689 1,505,422
Other 509,175 168,777 871,197 306,984
----------- ----------- ----------- -----------
Total operating expenses 869,928 888,010 1,434,361 1,890,329
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (785,352) (836,471) (1,305,519) (1,774,834)
OTHER INCOME (EXPENSE):
Interest income 1,486 2,795
Other income 29,257 41,204
Interest expense (2,273) (12,754) (5,392) (25,508)
----------- ----------- ----------- -----------
Total other (expense) income (2,273) 17,989 (5,392) 18,491
----------- ----------- ----------- -----------
NET LOSS $ (787,625) $ (818,482) $(1,310,911) $(1,756,343)
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER
SHARE $ (0.12) $ (0.15) $ (0.21) $ (0.34)
=========== =========== =========== ===========
BASIC WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 6,315,204 5,395,191 6,235,457 5,157,350
=========== =========== =========== ===========
DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 6,315,204 5,395,191 6,235,457 5,157,350
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
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<TABLE>
<CAPTION>
Six Months
Ended
June 30,
--------------------------
2000 1999
(As restated,
see Note 8)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,310,911) $(1,756,343)
Adjustment for noncash transactions:
Common stock and warrants issued for services 228,249 1,340,724
Depreciation and amortization 27,705 7,641
Provision for losses on accounts receivable 111,273
Net changes in assets and liabilities:
Accounts receivable and other assets (287,612) (44,161)
Inventory (84,782) 77,651
Accounts payable 872,330 5,726
Accrued expenses (356,679) 6,850
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Net cash used in operating activities (800,427) (361,912)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (39,716) (37,422)
Investment in MP total care (250,001)
----------- -----------
Net cash used in investing activities (39,716) (287,423)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of indebtedness (85,000) (150,000)
Proceeds from borrowing 700,000
Proceeds from sale of common stock 317,500 850,000
Proceeds from sales of interests in subsidiary 8,000
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Net cash provided by financing activities 940,500 700,000
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NET INCREASE IN CASH AND CASH EQUIVALENTS 100,357 50,665
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 47,424 7,578
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 147,781 $ 58,243
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES -
Interest paid $ 5,395 $ 16,362
=========== ===========
NONCASH TRANSACTIONS:
Short-term debt issued for purchase of software $ 101,195
Return to vendor of software package 13,500
Debt converted to stock $ 3,000
Stock issued in MediQuick Services LLC acquisition 2,750
Stock issued to minority shareholders of ChronicRX for their 20%
interest 115,330
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIQUIK SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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1. BASIS OF PRESENTATION
The interim consolidated condensed financial statements and notes thereto
of MediQuik Services, Inc. and its subsidiary (collectively, the "Company" or
"MediQuik") have been prepared by management without audit pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). Accordingly,
the accompanying financial statements reflect all adjustments that, in the
opinion of management, are necessary for a fair presentation of results for the
periods presented. Such adjustments are of a normal recurring nature. Certain
information and notes normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to the SEC's rules and
regulations. However, management believes that the disclosures presented herein
are adequate to make the information not misleading. The accompanying
consolidated condensed financial statements and notes should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999.
The preparation of these condensed consolidated financial statements
required the use of estimates and judgments that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the periods. Actual results could differ from these estimates.
The results of operations for any interim period are not necessarily indicative
of results for the full year.
2. EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share," ("SFAS 128") 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 consolidated
statement of operations. Basic EPS amounts are calculated using the average
number of common shares outstanding during each period. As of June 30, 2000,
there were warrants to purchase 532,500 shares of common stock at an exercise
prices of $2.00 per share. In addition, on June 30, 2000, the Company granted
options to purchase 773,863 shares of common stock at exercise prices ranging
from $1.75 - $2.00 with terms of two to four years. As of June 30, 1999, there
were warrants to purchase 250,000 shares of common stock at exercise prices
ranging from $3.00 - $4.00 per share. Since the Company incurred a loss for all
periods presented, these securities have been excluded from the calculation of
diluted EPS, as they are anti-dilutive to basic EPS.
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<PAGE>
3. SUBSIDIARY
In May 1999, MediQuik formed an 80% owned subsidiary known as
ChronicRX.com to provide Internet-based pharmacy services. In June 2000, the
Company purchased the remaining approximate 20% interest from the investors
through an exchange of shares of the Company at $1.75 per share. As of June 30,
2000, ChronicRX.com has become a wholly owned subsidiary of the Company.
ChronicRX.com will focus on the chronic care niche market and will specialize in
prescription and nonprescription medicines and management products used to treat
chronic diseases of all kinds.
4. EQUITY TRANSACTIONS
Warrants - During the six months ended June 30, 2000, in connection with
the sale of common stock, the Company issued warrants to purchase 317,500 shares
of common stock at an exercise price of $2.00 per share. The warrants began to
become exercisable in June 2000 and expire in December 2001.
Private Stock Offerings - The Company issued 158,750 shares of common
stock and warrants for $317,500 during the six months ended June 30, 2000.
Other Equity Transactions - During the six months ended June 30, 2000, the
Company issued 135,879 shares of common stock with a fair value of approximately
$228,249 to various consultants and employees of the Company. The Company also
issued 65,903 shares with a value of $115,330 to the minority shareholders of
ChronicRX.com in order to acquire the remaining 20% interest in their
subsidiary.
5. COMMITMENTS AND CONTINGENCIES
Lost Share Certificate - During July 1999, the Company authorized and
issued a certificate for 330,000 shares of common stock to Scardello Marketing
Group ("SMG"). The certificate was issued with a restricted legend on the face.
As of April 5, 2000, the Company has not been able to locate it. As a result,
the Company placed the certificate on hold with the stock transfer agent
immediately upon realization that the certificate was lost during 1999. The
Company authorized and issued an additional certificate for 330,000 shares of
common stock to SMG. SMG confirmed that it received only the second certificate.
The Company does not believe that the originally issued shares will ever be
located and presented in exchange for value and, accordingly, a total of 330,000
shares was considered outstanding to SMG as of June 30, 2000 and December 31,
1999. The restriction of the shares and the hold placement with the stock
transfer agent are bases for the Company's opinion. The Company intends to
cancel such certificate during 2000.
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<PAGE>
6. LETTER OF INTENT
On March 31, 2000, the Company signed a letter of intent with MiraQuest
Capital Holdings, Inc. (MiraQuest) to issue to MiraQuest an amount of common
stock equal to the amount of the Company's outstanding stock, including shares
due certain employees, contractors, consultants and any unexercised warrants and
options, just prior to the issuance. The intent is to convey to MiraQuest a 50%
ownership of the common stock of the Company on a fully diluted basis. At
closing, MiraQuest will additionally purchase a number of shares of voting
preferred stock sufficient to provide MiraQuest with a target of 70% to 80%
ownership. The letter of intent allows for convertible debt as an alternative to
or supplement to preferred stock. It is anticipated that this transaction will
become effective on August 28, 2000.
In return for the Company's common and preferred stock, MiraQuest will
provide to the Company a minimum of $2 million cash net of any advances and
MiraQuest stock for the remaining sum required to equal the valuation of the
Company. The Company has received $800,000 in advances from MiraQuest as of June
30, 2000. These advances are in the form of cash loans secured by the Company's
common stock in accordance with the provisions of the current terms of the
Company's private stock offering.
7. FUNDING REQUIREMENTS
The Company's principal cash requirements to date have been to fund
working capital in order to support growth of net sales. Because revenue from
operations has been inadequate to completely fund these requirements, the
Company has supplemented its revenue from operations with proceeds from its
private offerings of securities, loans and extensions of credit from vendors in
order to meet its working capital requirements. The Company anticipates that as
revenue from sales to managed care plans increases, the Company will be able to
satisfy all of its funding requirements for operations from such revenue.
8. RESTATEMENT
In July 1999, the Company terminated the Exclusive Marketing
Representative Agreement ("Marketing Agreement") between Scardello Marketing
Group, LLC ("SMG") and the Company and acquired certain assets of SMG. In
connection with the termination of the Marketing Agreement, the Company issued
restricted common stock to SMG. These shares were originally valued at $3.75 per
share based on the average stock price quoted on the Over-the-Counter Bulletin
Board from the date the agreement with SMG was signed until the closing of the
transaction. The Company originally accounted for the transaction as a business
combination under Accounting Principles Board Opinion 16 and the excess of the
purchase price over the fair value of the assets acquired was allocated to
goodwill.
Subsequent to the issuance of the Company's consolidated condensed
financial statements as of and for the three and six months ended June 30, 2000,
the Company's management determined that the transaction should not have been
recorded as a business combination and that goodwill associated with terminating
the Marketing Agreement should not have been recorded. Additionally, the
Company's management determined
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<PAGE>
that the shares of common stock issued in connection with the acquisition should
have been recorded at a fair value of $2.70 per share based on the fair value
assigned to shares issued in a private equity offering during July 1999. As a
result, the consolidated condensed financial statements as of and for the three
and six months ended June 20, 2000 have been restated from amounts previously
reported to expense the excess of the purchase price over the fair value of the
assets acquired as the costs of terminating the Marketing Agreement and to
record the issuance of the common stock based on a fair value of $2.70 per
share.
A summary of the significant effects of the adjustments is as follows:
As Previously As
Reported Restated
As of June 30, 2000:
Other assets $ 1,118,520 $ 232,191
Additional paid-in capital 5,158,530 4,812,030
Accumulated deficit (5,381,215) (5,921,044)
For the three months ended June 30, 2000:
Other operating expenses 564,570 509,175
Total operating expenses (925,323) (869,928)
Loss from operations (840,747) (785,352)
Net loss (843,020) (787,625)
Basic and diluted loss per share (0.13) (0.12)
For the six months ended June 30, 2000:
Other operating expenses 981,988 871,197
Total operating expenses (1,545,152) (1,434,361)
Loss from operations (1,416,310) (1,305,519)
Net loss (1,421,702) (1,310,911)
Basic and diluted loss per share (0.23) (0.21)
******
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
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.
Readers are cautioned to not place undue reliance on any forward-looking
statements contained in this discussion.
In July 1999, the Company terminated the Exclusive Marketing
Representative Agreement ("Marketing Agreement") between Scardello Marketing
Group, LLC ("SMG") and the Company and acquired certain assets of SMG. In
connection with the termination of the Marketing Agreement, the Company issued
restricted common stock to SMG. These shares were originally valued at $3.75 per
share based on the average stock price quoted on the Over-the-Counter Bulletin
Board from the date the agreement with SMG was signed until the closing of the
transaction. The Company originally accounted for the transaction as a business
combination under Accounting Principles Board Opinion 16 and the excess of the
purchase price over the fair value of the assets acquired was allocated to
goodwill.
Subsequent to the issuance of the Company's consolidated condensed
financial statements as of and for the three and six months ended June 30, 2000,
the Company's management determined that the transaction should not have been
recorded as a business combination and that goodwill associated with terminating
the Marketing Agreement should not have been recorded. Additionally, the
Company's management determined that the shares of common stock issued in
connection with the acquisition should have been recorded at a fair value of
$2.70 per share based on the fair value assigned to shares issued in a private
equity offering during July 1999. As a result, the consolidated condensed
financial statements as of and for the three and six months ended June 20, 2000
have been restated from amounts previously reported to expense the excess of the
purchase price over the fair value of the assets acquired as the costs of
terminating the Marketing Agreement and to record the issuance of the common
stock based on a fair value of $2.70 per share.
OVERVIEW
MediQuik Services, Inc. ("MediQuik" or the "Company") is a healthcare service
company specializing in the delivery of chronic disease management programs to
chronically ill patients on behalf of managed care payors. The Company is
deploying electronic, e-healthcare technology solutions in the delivery of
MediQuik's proprietary disease management tools and systems via the Internet.
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
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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 Marketing, Inc.
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.
The Company is currently serving patients with Diabetes and is developing new
disease management programs for other high cost, chronic diseases, such as
asthma 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. The Company is in the process of
conducting research regarding the new disease management programs.
MediQuik offers comprehensive disease monitoring and maintenance solutions by
providing pharmacy and diagnostic products, disease education, adherence review
and reporting, and personal health resources via the U.S. Mail, telephone and
the Internet. 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 existing disease management programs. 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
(HMOs), preferred provider organizations (PPOs), self-insured companies and
other third-party payors (TPAs) in an effort to enhance the quality of life for
chronically ill patients and improve the financial outcomes for managed care
payors. The Company also provides billing and collection activities on behalf of
the patient to the healthcare plan. The Company will utilize advanced healthcare
technology applications in the delivery of MediQuik's proprietary disease
management programs via the Internet.
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.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's principal cash requirements to date have been to fund working
capital in order to support growth of net sales. Because revenue from operations
has been inadequate to completely fund these requirements, the Company has
supplemented its revenue from operations with proceeds from its private
offerings of securities, loans and extensions of credit from vendors in order to
meet its working capital requirements. The Company anticipates that as revenue
from sales to managed care plans increases, the Company will be able to satisfy
all of its funding requirements for operations from such revenue. The Company
had an aggregate of $147,781 in cash as of June 30, 2000.
The Company had $130,000 of 15% subordinated debentures outstanding, originally
due in June and December 1999. The Company paid $15,000 of the debentures in
July 1999, $55,000 in December 1999, and $10,000 in April, 2000 and received an
extension on the balance of $50,000, plus accrued interest, until June 2000. The
balance was paid off as of June 30, 2000. The debentures were owed to
significant shareholders of the Company. The Company has accrued wages of
approximately $105,220 primarily to Company officers and insiders who are
significant shareholders in the Company. The Company negotiated a bank line of
credit in the amount of $50,000 during the second quarter of 2000. No draws have
been made on the note as of June 30, 2000.
Accounts receivable are primarily derived from payments due to the Company by
managed care plans, providers, and patients. As revenues increase, the Company
expects working capital requirements to increase. 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.
In December 1999, the Company began raising money from private investors (the
"Private Placement") utilizing a Private Placement Memorandum (the "PPM"). As of
June 30, 2000, MediQuik has raised $532,500 in cash in the Private Placement. A
price of $2.00 per unit was established by the Company for the Private
Placement. Each unit includes one share of MediQuik common stock and two
warrants to purchase a share of common stock exercisable at $2.00 per share. As
of June 30, 2000, the Private Placement has been concluded.
On March 31, 2000, MediQuik signed a Letter of Intent with MiraQuest Capital
Holdings, Inc. / MiraQuest Ventures, LLC (MiraQuest). The terms of the Letter of
Intent provide MediQuik with $2,000,000 in initial funding and an equity
interest in MiraQuest, an Internet/E-Commerce Holding Company comprised
primarily of entities serving the business-to-business market. As of June 30,
2000, MediQuik had received $800,000 in advances pursuant to the terms of the
Letter of Intent and as of August 13, 2000, MediQuik had received $1,100,000
pursuant to the terms of the Letter of Intent. In connection with the MiraQuest
transaction, MediQuik is being valued on a negotiated basis at approximately
$13,000,000 ($2.00 per share) and MiraQuest is being valued at $185,000,000. The
transaction would provide MiraQuest with 70% of the voting stock in
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MediQuik. MediQuik engaged the financial advisory firm of Howard, Frazier,
Barker, Elliott, Inc. (HFBE) to provide a fairness opinion on the transaction.
HFBE has completed the fairness opinion with the conclusion that the transaction
is fair to the existing shareholders of MediQuik. The fairness opinion results
were reported at the Company's annual shareholders' meeting held on May 17,
2000. A revised fairness opinion has been approved by the Board of Directors.
The MiraQuest transaction is currently scheduled for closing on August 28, 2000.
After the closing of the transaction, the Company intends to file a Form 8-K
disclosure report concerning the transaction with the Securities and Exchange
Commission. The Company filed a Preliminary Form 14C and a Definitive Form 14C,
incorporated herein by reference, with the Securities and Exchange Commission in
relation to the transaction.
RESULTS OF OPERATIONS
MediQuik is expanding through internal sales growth and plans to conduct
strategic acquisitions to further fuel growth and accelerate the time to market
of additional planned services. During 1998 and 1999, the Company established:
(i) corporate marketing and fulfillment operations; (ii) contractual
relationships with product manufacturers; (iii) contractual relationships with
specialty service providers; (iv) contractual relationships with insurance
payors and provider networks; (v) contractual relationship with a pharmacy
products distribution company; and (vi) initial patient enrollment and
fulfillment operations. During the six months ended June 30, 2000, the Company
expanded its proprietary clinical and e-care technology initiatives, and
implemented an internal billing/collection department.
REVENUE FROM OPERATIONS
The Company commenced operations in July 1998 and received its initial revenue
in August 1998. For the three month period ended June 30, 1999, the Company
reported revenue of $242,875. Total revenue increased to $385,540 for the three
months ended June 30, 2000. For the six months ended June 30, 1999, the Company
had revenues of $720,854, compared to $707,469 for the six months ended June 30,
2000. The revenue decrease primarily resulted from reduced diagnostic product
sales to managed care providers. The Company is currently deriving the majority
of its revenues through direct sales to managed care plans. The Company expects
to realize improvement in gross margin percentages with increased direct managed
care plan revenues. Cash flow from operations has not been sufficient to fund
all of the Company's initial operating activities to date.
MediQuik provides services to healthcare consumers primarily through agreements
with managed care plans and provider networks. Management believes that
enrollment in managed care plans has increased in recent years and, as a result,
customer referrals generated through the managed care plans should increase.
GROSS PROFIT
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<PAGE>
The Company commenced operations in July 1998 and received its initial gross
profit in August 1998. For the period from January 1, 1999 to June 30, 1999, the
Company reported gross profit of $115,495 or 16.0% of revenue for the period.
Gross profit increased to $128,842 or 18.2% of revenue, for the 6 months ended
June 30, 2000.
Gross profit was primarily derived from diagnostic and pharmaceutical product
sales to managed care payors and patients. The gross profit percentage is the
result of volume purchase discounts. The Company expects continued increases in
gross profit percentage with increased direct sales to managed care plans.
OPERATING EXPENSES
For the period from January 1, 1999 to June 30, 1999, operating expenses were
$1,890,329. Operating expenses decreased to $1,434,361 for the six months ended
June 30, 2000, a decrease of 24.1%. The decrease in operating expenses is
primarily associated with reduced consulting expense from non-cash equity
transactions during the six months ended June 30, 2000. Operating expenses also
include marketing and selling expenses, general and administrative costs,
consultants compensation and the hiring and training of staff. During the six
months ended June 30, 2000, operating expenses include the effect of $228,249 in
non-cash equity transactions.
NET LOSS
The Company experienced a net loss of $1,756,343 for the period January 1, 1999
to June 30, 1999, primarily attributed to the development of the Company's
business operations. Net loss decreased to $1,310,911 for the six months ended
June 30, 2000. Net loss includes the effect of several non-cash equity
transactions.
The Company expects the net loss to decrease with increased revenues and gross
profits from business operations.
PART II. - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
In December 1999, the Company began raising money from private investors who are
accredited investors as defined in Regulation D of the Securities Act of 1933 in
the Private Placement described in Part I, Item 2 above under the caption
"Liquidity and Capital Resources." As of June 30, 2000, the Private Placement
has been concluded. The offering, as described in the PPM, consisted of
3,000,000 units issuable directly by the Company at a purchase price of $2.00
per share. One unit comprises one share of MediQuik common stock and two
warrants. The warrant provides the right to purchase one share of common stock
at an exercise price of $2.00 per share. The warrants are exercisable for a
period beginning six months after the issue date until 48 months after the issue
date and are subject to redemption by the Company at any time, in whole or in
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part, for a redemption price of $4.00 per warrant. The Company issued 158,750
shares of common stock and warrants for $317,500 for the six month period ended
June 30, 2000. During the six months ended June 30, 2000 the Company issued
135,879 shares of common stock to various consultants and employees of the
Company at a face value of approximately $228,249.
Item 5. Other Information.
In connection with the transaction with MiraQuest discussed in Part I, Item 1,
Section 6 and Part I, Item 2, "Liquidity and Capital Resources", on July 10,
2000, the Company's Board of Directors approved (A) an amendment to the
Company's Certificate of Incorporation to (1) to amend Article V to increase the
number of authorized shares of stock of the Company from 26,000,000 to
51,000,000 (of which 50,000,000 will be shares of Common Stock and 1,000,000
will be shares of blank check Preferred Stock) and (2) delete the provisions of
Article XII of the Certificate of Incorporation of the Company and (B) a
designation of the relative rights, preferences and limitations of the Company's
Series A Preferred Stock. On the same date, the amendment was approved in a
written consent executed by the holders of more than a majority of the
outstanding shares of Common Stock. Approval by the Board of Directors and by
the holders of a majority of the outstanding shares of Common Stock is adequate
under Delaware law to effect the amendment. Approval of the majority of the
Board of Directors is adequate under Delaware law to effect the designation. The
amendment and the designation are expected to become effective on August 28,
2000 following a waiting period of 20 calendar days from August 8, 2000, the
date the information statement was mailed to stockholders. The Company filed
with the Securities and Exchange Commission a Preliminary Form 14C on July 27,
2000 and a Definitive Form 14C on August 8, 2000, previously incorporated herein
by reference, detailing the amendment and designation.
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Index to Exhibits
Exhibit No. Description of Exhibit
*(b)(3)(i) Certificate of Incorporation of MediQuik
*(b)(3)(ii) Bylaws of MediQuik
*(b)(10) Material Contracts
*(b)(22) Pre 14C filed by MediQuik on July 27, 2000
Def 14C filed by MediQuik on August 8, 2000
(b)(27) Financial Data Schedule
* Previously filed with the Commission
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MediQuik Services, Inc.
Date: November , 2000 /s/ Grant Gables
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Grant Gables, President
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