UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 9/30/00
|_| 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.
--------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Delaware 74-2876711
------------------------------ ------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4299 San Felipe, Suite 300, Houston, Texas 77027
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(832) 200-7000
--------------------------------------------------------------------------------
(Issuer's telephone number)
--------------------------------------------------------------------------------
(Former address : 4295 San Felipe, Suite 200, Houston, Texas 77027)
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 |_|
--------------------------------------------------------------------------------
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:
13,441,529 shares of the Company's Common Stock issued and outstanding at
September 30, 2000.
--------------------------------------------------------------------------------
Transitional Small Business Disclosure Format (Check one):Yes |_|; No |X|
<PAGE>
Page
PART I. FINANCIAL INFORMATION 3
ITEM 1
FINANCIAL STATEMENTS 3
Consolidated Condensed Balanced Sheets (Unaudited)
September 30, 2000 and December 31, 1999 3
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended September 30, 2000 and 1999,
Nine Months Ended September 30, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended September 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
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,216 $ 47,424
Accounts receivable, net of allowance of $284,975
and $88,702, respectively 336,979 141,695
Inventory 89,545 21,737
------------ ------------
Total current assets 439,740 210,856
PROPERTY AND EQUIPMENT:
Office equipment and other 227,778 74,850
Less accumulated depreciation (15,324) (7,215)
------------ ------------
Total property and equipment 212,454 67,635
OTHER ASSETS
Investment in MiraQuest Ventures, LLC 5,980,001
Other 134,919 143,407
------------ ------------
Total other assets 6,114,920 143,407
------------ ------------
TOTAL $ 6,767,114 $ 421,898
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 959,077 $ 199,479
Accrued expenses 177,204 598,208
Notes payable and subordinated debentures 101,195 85,000
------------ ------------
Total current liabilities 1,237,476 882,687
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - 1,000,000 shares authorized, 513,266 issued,
333,623 outstanding as of September 30, 2000 334
Common stock - $.001 par value, 25,000,000 shares authorized;
13,441,529 issued with 10,974,380 shares outstanding, and
6,032,007 shares issued and outstanding at September 30,
2000 and December 31, 1999, respectively 10,974 6,033
Additional paid-in capital 11,971,786 4,143,311
Accumulated deficit (6,453,456) (4,610,133)
------------ ------------
Total stockholders' equity (deficit) 5,529,638 (460,789)
------------ ------------
TOTAL $ 6,767,114 $ 421,898
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
--------------------------------------------------------------------------------
<PAGE>
MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
SALES $ 520,028 $ 125,678 $ 1,227,497 $ 846,532
COST OF SALES 326,879 72,437 905,506 677,796
----------- ----------- ----------- -----------
Gross profit 193,149 53,241 321,991 168,736
OPERATING EXPENSES:
Salaries - officers 100,106 199,397 352,581 277,320
Consulting fees 81,597 65,498 392,286 1,570,920
Other 543,452 1,054,343 1,414,649 1,361,327
----------- ----------- ----------- -----------
Total operating expenses 725,155 1,319,238 2,159,516 3,209,567
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (532,006) (1,265,997) (1,837,525) (3,040,831)
OTHER INCOME (EXPENSE):
Interest income 2,795
Other income 5,276 46,480
Interest expense (406) (4,875) (5,798) (30,383)
----------- ----------- ----------- -----------
Total other (expense) income (406) 401 (5,798) 18,892
----------- ----------- ----------- -----------
NET LOSS $ (532,412) $(1,265,596) $(1,843,323) $(3,021,939)
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER
SHARE $ (0.08) $ (0.22) $ (0.29) $ (0.56)
=========== =========== =========== ===========
BASIC WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 6,471,414 5,782,307 6,345,522 5,412,089
=========== =========== =========== ===========
DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 6,471,414 5,782,307 6,345,522 5,412,089
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
--------------------------------------------------------------------------------
<PAGE>
MEDIQUIK SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
----------------------------
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,843,323) $(3,021,939)
Adjustment for noncash transactions:
Common stock and warrants issued for services 228,249 1,492,048
Termination of marketing agreement 761,411
Depreciation and amortization 32,852 5,011
Minority Interest 4,264
Provision for losses on accounts receivable 196,273
Net changes in assets and liabilities:
Accounts receivable and other assets (391,557) (111,700)
Advances 16,000
Inventory (67,808) 59,399
Accounts payable 759,598 69,900
Accrued expenses (421,004) 213,303
Other Assets (16,254) 45,576
----------- -----------
Net cash (used) provided by operating activities (1,522,974) (466,727)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (152,929) (49,021)
Investment in MP total care (250,001)
Investment in MiraQuest Ventures, LLC (5,980,001)
----------- -----------
Net cash (used) provided by investing activities (6,132,930) (299,022)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of indebtedness (85,000) (165,000)
Proceeds from borrowing 101,195
Proceeds from sale of common stock 317,500 952,600
Proceeds from sales of interests in subsidiary 8,000
Proceeds from MiraQuest, LLC transaction 7,280,001
----------- -----------
Net cash (used) provided by financing activities 7,621,696 787,600
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (34,208) 21,851
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 47,424 7,578
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,216 $ 29,429
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES -
Interest paid $ 5,797 $ 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
Stock issued in connection with terminated marketing agreement $ 891,000
Stock issued to minority shareholders of ChronicRX for their 20%
interest 115,330
</TABLE>
See accompanying notes to consolidated condensed financial statements.
--------------------------------------------------------------------------------
<PAGE>
MEDIQUIK SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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-KSB40/A for the year ended
December 31, 1999 and the Company's Quarterly Reports on Forms 10QSB/A for the
quarters ended March 31 and June 30, 2000.
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 September 30,
2000, there were outstanding warrants to purchase 532,500 and 650,000 shares of
common stock at exercise prices of prices of $2.00 and $0.60 per share,
respectively. In addition, as of September 30, 2000, the Company had granted
options to purchase 848,863 shares of common stock at exercise prices ranging
from $0.60 - $2.00 with terms of two to four years. As of September 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.
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 of ChronicRX.com from
its shareholders through an exchange of shares of the Company at $1.75 per share
through which ChronicRX.com became a wholly owned subsidiary of the Company.
ChronicRX.com will focus on the chronic care niche market and will specialize in
the internet ordering and delivery of medicines and management products
(including compliance surveys and educational materials used in the management
and treatment of chronic diseases of all kinds).
4. EQUITY TRANSACTIONS
Warrants - During the nine months ended September 30, 2000, in connection
with the sale of common stock, the Company issued warrants to purchase 317,500
shares
<PAGE>
of common stock at an exercise price of $2.00 per share. The warrants became
exercisable in September 2000 and expire in December 2001.
Private Stock Offerings - The Company issued 158,750 shares of common
stock and warrants to purchase 317,500 shares of common stock at $2.00 per share
for $317,500 during the nine months ended September 30, 2000.
Options - In connection with the MiraQuest Transaction and the signing of
employment and engagement agreements by two employees, the Company issued
options to the two employees in the amounts of 150,000 and 50,000 shares
respectively. Of these shares, 50,000 of the shares vested immediately, 75,000
vest after one year, and the rest vest quarterly during the second year. An
additional 150,000 options were issued to the same employees and vest upon
achievement of certain profitability goals.
Other Equity Transactions - During the nine months ended September 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 65,901 shares with a value of $115,330 to the minority
shareholders of ChronicRX.com in order to acquire the remaining 20% interest of
that entity. See Note 6 regarding the MiraQuest equity transactions.
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 September 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 cancelled such
certificate as of September 30, 2000.
6. MIRAQUEST TRANSACTION
On March 31, 2000, the Company signed a letter of intent with MiraQuest
Capital Holdings, Inc./MiraQuest Ventures, LLC ("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 "MiraQuest Transaction"). The intent was to convey to MiraQuest a 50%
ownership of the common stock of the Company on a fully diluted basis. At
closing, MiraQuest would 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 allowed for convertible debt as an alternative
to or supplement to preferred stock.
The transaction was closed effective September 29, 2000. In return for
7,048,996 shares of the Company's common stock, 513,266 shares of the Company's
Series A preferred stock convertible into 10,265,328 shares of its common stock,
and 650,000 warrants to purchase 650,000 shares of the Company's common stock,
exercisable at $0.60 cents per share, MiraQuest provided $1.4 million cash and
committed to provide up to $600,000 of additional cash and MiraQuest units for
the remaining sum required to equal the valuation of the Company. The Company
converted $1.3 million of the advances to equity as a completed part of the
transaction as of September 30, 2000, and has been recording the rest as
advances until increments of $150,000 have been received, at which time another
pro-rata part of the transaction is recorded and the $150,000 advance converted
to equity. The entire transaction will be recorded as of November 30, 2000, as
the Company has received the entire $600,000 in advances from MiraQuest on
November 17, 2000.
<PAGE>
The Company has received a valuation opinion from Howard, Frazier, Barker
and Elliot and is recording its investment in the units of MiraQuest at that
value as the advances are received and recorded.
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 both existing and new managed care plan customers, and
from marketing its services direct to consumers and doctors increases, the
Company will be able to satisfy all of its funding requirements for operations
from such revenue.
******
Item 2. Management's Discussion and Analysis or Plan of Operation
FORWARD LOOKING STATEMENTS
This management discussion and analysis 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.
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 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 conditions of such patients and reduce
the financial burden for managed care payors. The Company is in the process of
<PAGE>
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.
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 both existing and new managed care plans and from marketing its
services direct to consumers and healthcare providers increases, the Company
will be able to satisfy all of its funding requirements for operations from such
revenue. The Company had an aggregate of $13,216 in cash as of September 30,
2000. The Company had $130,000 of 15% subordinated debentures outstanding,
originally due in September 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 30, 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 $54,830 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 September 30, 2000.
Subsequently, the Company has drawn and repaid up to the entire amount of the
line.
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.
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 September
30, 2000, MediQuik had received $1,400,000 in advances pursuant to the terms of
the Letter of Intent and as of November 17, 2000, MediQuik had received the
entire $2,000,000 pursuant to the terms of the Letter of Intent. The transaction
provides MiraQuest with 70% of the voting stock in 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'
<PAGE>
meeting held on May 17, 2000. A revised fairness opinion has been approved by
the Board of Directors. A separate valuation opinion on the value of the
MiraQuest securities received in the transaction has been issued to the Company
by Howard, Frazier, Barker and Elliott and the MiraQuest transaction was closed
as of September 29, 2000. The transaction is being recorded on a pro-rata basis
as the advances are received.
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 nine months ended September 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 September 30, 1999, the Company
reported revenue of $125,678. Total revenue increased to $520,028 for the three
months ended September 30, 2000. For the nine months ended September 30, 2000,
the Company had revenues of $1,227,497, compared to $846,532 for the nine months
ended September 30, 1999. The revenue increase primarily resulted from
additional pharmacy product sales to managed care patients. The Company is
currently deriving the majority of its revenues through direct sales to managed
care plan patients. The Company expects to realize improvement in gross margin
percentages with increased direct managed care plan revenues and from improved
purchasing of the pharmacy supplies. Cash flow from operations has not been
sufficient to fund all of the Company's 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
The Company commenced operations in July 1998 and received its initial gross
profit in August 1998. For the period from January 1, 1999 to September 30,
1999, the Company reported gross profit of $168,736 or 19.9% of revenue for the
period. Gross profit increased to $321,991 or 26.2% of revenue, for the 9 months
ended September 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 and
improved purchasing efficiencies.
OPERATING EXPENSES
For the period from January 1, 1999 to September 30, 1999, operating expenses
were $3,209,567, Operating expenses decreased to $2,159,916 for the nine months
ended September 30, 2000, a decrease of 32.7%. The decrease in operating
expenses is primarily associated with reduced consulting expense from non-cash
equity transactions during the nine months ended September 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
nine months ended September 30, 2000, operating expenses include the effect of
$228,249 in non-cash equity transactions.
<PAGE>
NET LOSS
The Company experienced a net loss of $3,021,939 for the period January 1, 1999
to September 30, 1999, primarily attributed to the development of the Company's
business operations and termination of a marketing agreement with Scardello
Marketing Group, LLC. Net loss decreased to $1,843,323 for the nine months ended
September 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.
The Company issued common stock, preferred stock, and warrants in connection
with the MiraQuest Transaction as detailed in Footnote 6 to the financial
statements included herein. The $1,400,000 cash received from MiraQuest as of
September 30 was used to fund current operations, to repay outstanding payables
and accrued liabilities, and to repay debt.
Item 4. Submission of Matters to a Vote of Security Holders
In connection with the MiraQuest Transaction discussed in Part I, Item 1,
Section 6 and Part I, Item 2, "Changes in Securities and Use of Proceeds", 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
Company filed with the Securities and Exchange Commission a Preliminary Form 14C
Information Statement on July 27, 2000, and a Definitive Form 14C Information
Statement on August 8, 2000, detailing the amendment and designation. The
amendment and the designation 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. As part of the MiraQuest Transaction, the
Company also entered into an employment, confidentiality, and non-competition
agreement with Grant M. Gables, and an engagement, confidentiality, and
non-competition agreement with Robert B. Teague. M.D., P.A., and issued stock
options in connection therewith.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits on Form 8-K
Index to Exhibits
Exhibit No. Description of Exhibit
*(b)(2) Stock Purchase Agreement by and between MediQuik
Services, Inc. and MiraQuest Ventures, LLC dated June
30, 2000
*(b)(3)(i) Certificate of Incorporation of MediQuik
*(b)(3)(ii) Bylaws of MediQuik
(b)(10) Gables employment agreement; Teague employment agreement
*(b)(22) Pre 14C filed by MediQuik on July 27, 2000; Def 14C
filed by MediQuik on August 8, 2000
<PAGE>
(b)(27) Financial Data Schedule
* Previously filed with the Commission
B. Reports on Form 8-K
A current report on Form 8-K was filed with the Securities and
Exchange Commission on September 18, 2000, reporting the change in control
of the registrant and the acquisition and disposition of assets as a
result of the MiraQuest Transaction as described in Item 4 above.
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: December , 2000 /s/ Grant Gables
----------------- ----------------------------------------
Grant Gables, President
