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 9/30/99
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|_| 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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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 September 30,
1999, as set forth in the pages attached hereto (See Note 8 to the Financial
Statements):
Page
PART I. FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS 3
Consolidated Condensed Balance Sheets
September 30, 1999 (Unaudited) and December 31, 1998 3
Consolidated Condensed 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 4
Consolidated Condensed 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 Consolidated Condensed Financial Statements 6
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K 14
2
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MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
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<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
ASSETS (As restated,
see Note 8)
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
----------- -----------
Total current assets 211,608 153,456
PROPERTY AND EQUIPMENT:
Office equipment 49,270 249
Less accumulated depreciation (5,040) (29)
----------- -----------
Total property and equipment 44,230 220
INVESTMENT - MP Total Care 250,001
OTHER ASSETS 125,220 61,651
----------- -----------
TOTAL $ 631,059 $ 215,327
=========== ===========
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
----------- -----------
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 3,795,244 505,768
Accumulated deficit (3,851,793) (829,854)
----------- -----------
Total stockholders' deficit (50,652) (319,237)
----------- -----------
TOTAL $ 631,059 $ 215,327
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Period from
September 30, Ended April 7, 1998 to
---------------------------- September 30, September 30,
1999 1998 1999 1998
(As restated, (As restated,
see Note 8) see Note 8)
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 111,144 $ 18,122 $ 827,496 $ 18,122
Other revenues 14,534 19,036
----------- ----------- ----------- -----------
Total revenues 125,678 18,122 846,532 18,122
----------- ----------- ----------- -----------
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 - officers 199,397 82,952 277,320 82,952
Consulting fees 65,498 73,201 1,570,920 107,201
Other 1,054,343 68,694 1,361,327 103,488
----------- ----------- ----------- -----------
Total operating expenses (1,319,238) (224,847) (3,209,567) (293,641)
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (1,265,997) (222,940) (3,040,831) (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
----------- ----------- ----------- -----------
NET LOSS $(1,265,596) $ (222,940) $(3,021,939) $ (291,734)
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER SHARE $ (0.22) $ (0.05) $ (0.56) $ (0.07)
=========== =========== =========== ===========
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 5,412,089 4,115,787
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Period from
Ended April 7, 1998 to
September 30, September 30,
1999 1998
(As restated,
see Note 8)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,021,939) $ (291,734)
Adjustment for noncash transactions:
Common stock and warrants issued for services 1,492,048
Termination of marketing agreement 761,411
Depreciation and amortization 5,011 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 45,576 (3,000)
----------- -----------
Net cash used in operating activities (466,727) (384,826)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (49,021) (249)
Investment in MP Total Care (250,001)
----------- -----------
Net cash used in investing activities (299,022) (249)
----------- -----------
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
----------- -----------
Net cash provided by financing activities 787,600 430,954
----------- -----------
NET INCREASE IN CASH 21,851 45,879
CASH, Beginning of period 7,578
----------- -----------
CASH, End of period $ 29,429 $ 45,879
=========== ===========
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
Stock issued in connection with terminated
marketing agreement 891,000
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MEDIQUIK SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED 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 assets have 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 consolidated condensed 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 accounting
principles generally accepted in the United States of America 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 consolidated condensed 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 year 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 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 income
statement. Basic EPS amounts are calculated using the weighted average
number of common shares outstanding during each period. 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
securities would have been excluded from the calculation of EPS, as they
would be anti-dilutive to basic EPS.
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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 reduce the deferred tax assets
to the amount that is more likely than not to be realized. 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
-------- --------
$139,680 $280,000
======== ========
</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.
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 amounts are derived from sales in the
ordinary course of business and the payable amounts relate to certain
consulting services.
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7. CONTRACT TERMINATION
In July 1999, the Company terminated the Exclusive Marketing
Representative Agreement ("Marketing Agreement") between Scardello
Marketing Group, LLC ("SMG") and acquired certain assets of SMG. The
Marketing Agreement had a term of five years ending in 2004. In connection
with the termination of the Marketing Agreement, the Company issued to SMG
330,000 shares of restricted common stock valued at $2.70 per share,
assumed a note payable of $25,000 due to a bank and received the proceeds
of such note, and forgave $15,396 in debt due from SMG. The Company
acquired the assets of SMG and terminated the Marketing Agreement
primarily to internally operate the Company's marketing activities.
8. RESTATEMENT
In July 1999, the Company terminated the Exclusive Marketing
Representative Agreement ("Marketing Agreement") between 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 nine months ended
September 30, 1999, 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 nine months ended September 30, 1999 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 restatement is as follows:
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<TABLE>
<CAPTION>
As Previously As
Reported Restated
<S> <C> <C>
As of September 30, 1999:
Other assets $ 1,177,736 $ 125,220
Additional paid-in capital 4,141,744 3,795,244
Accumulated deficit (3,145,777) (3,851,793)
For the three months ended September 30, 1999:
Other operating expenses 348,327 1,054,343
Total operating expenses (613,222) (1,319,238)
Loss from operations (559,981) (1,265,997)
Net loss (559,580) (1,265,596)
Basic and diluted loss per share (0.10) (0.22)
For the nine months ended September 30, 1999:
Other operating expenses 655,311 1,361,327
Total operating expenses (2,503,551) (3,209,567)
Loss from operations (2,334,815) (3,040,831)
Net loss (2,315,923) (3,021,939)
Basic and diluted loss per share (0.43) (0.56)
</TABLE>
******
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,
which are as of the date hereof. Readers are cautioned to not place undue
reliance on any forward-looking statements contained in this discussion.
RESTATEMENT
In July 1999, the Company terminated the Exclusive Marketing
Representative Agreement ("Marketing Agreement") between 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 nine months ended September 30,
1999, 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
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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 nine months ended September 30, 1999 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 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; and (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.
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 would care products for diabetes patients,
and the Company is adding new
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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.
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.
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 20.0% of revenue, for the nine
months ended September 30, 1999. For the three month period ended 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 immediate payment upon delivery terms.
The Company expected and experienced significant increases in gross profit
percentage with increases in 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.
Operating expenses increased to $3,209,567 for the nine months ended September
30, 1999, reflecting initiation of the Company's operating activities. For the
three month period ended September 30, 1998, the Company reported operating
expense of $224,847. Operating expenses increased to $1,319,238 for three month
period ended September 30, 1999.
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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
and the costs of terminating the marketing agreement with the Scardello
Marketing Group, LLC.
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 net loss for 1998 and 1999
reflect increased consulting fees related to the issuance common stock for
services. Net loss increased to $3,021,939 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 an increased net loss of $1,265,596 for the
three months ended September 30, 1999. The increased net loss is related to the
costs of terminating the marketing agreement with the Scardello Marketing Group,
LLC. 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. 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.
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.
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 has developed an internal team that is assessing Year 2000
readiness. Internal computer systems have been reviewed and cleared by outside
system consultants for Year 2000 compliance. The Company is heavily reliant on
outsource vendors in the delivery of products and continues to assess their
level of readiness. A description of Year 2000 readiness is as follows:
1. The Company completed a detailed inventory and risk assessment of
all systems and business operations.
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2. The Company converted all internal information technologies to Year
2000 compliant systems.
3. The Company will continue communication with customers and vendors
on Year 2000 readiness.
The Company believes that the Year 2000 project compliance will cost
approximately $5,000. The Company is committed to providing the necessary
resources for Year 2000 compliance.
The Company believes that its greatest Year 2000 risk is related to
reimbursement from third-party payors. Risk also exists relative to the flow of
inventory from vendors. Minimal risks are associated with the Company's
information technologies, financial systems and internal communications. 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 systems, would not have a material
adverse effect on the Company's operations or financial condition.
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<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
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<PAGE>
Pursuant to the requirements of Sections 13 of 15(d) 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 November ___, 2000 /S/ Grant M. Gables
------------------------ -----------------------------------------
Grant M. Gables
President and principal financial officer
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