FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _______________________
Commission File Number 0-30899
MEDGRUP CORPORATION
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(Exact name of registrant as specified in its charter)
Colorado 84-1504390
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1824 Woodmoor Drive, Suite 102, Monument, CO 80132
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(Address of principal executive office) (Zip Code)
(719) 481-1500
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 ___ No X
The number of shares outstanding of each of Issuer's classes of common equity as
of August 10, 2000.
Common Stock, par value $.001 5,541,538
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Title of Class Number of Shares
Transitional Small Business Disclosure Format yes ___ no X
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MedGrup Corporation
Index
Part I
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Item 1. Financial Statements
Condensed Balance Sheet as of June 30, 2000 (unaudited) 1
Condensed Statements of Operations for the Three and
Six Months Ended June 30, 2000 and 1999 (unaudited) 2
Condensed Statements of Cash Flows for the Three and
Six Months Ended June 30, 2000 and 1999 (unaudited) 3
Notes to Condensed Financial Statements (unaduited) 4
Item 2. Management's Discussion and Analysis or Plan of Operation 5
Part II
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Items 1-6. Other Information 8
Signatures 9
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Part I. Item 1. Financial Information
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MEDGRUP CORPORATION
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CONDENSED BALANCE SHEET
(Unaudited)
June 30, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents ....................................... $ 392,618
Accounts receivable, net of $54,685 allowance ................... 553,182
Prepaid expenses ................................................ 47,948
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TOTAL CURRENT ASSETS 993,748
PROPERTY, net of $138,346 accumulated depreciation ................ 550,125
DEPOSITS .......................................................... 9,356
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$1,553,229
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................................ $ 61,620
Accrued expenses ................................................ 13,564
Current maturities of long-term debt ............................ 72,958
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TOTAL CURRENT LIABILITIES 148,142
LONG-TERM DEBT .................................................... 80,911
DEFERRED INCOME TAXES ............................................. 9,047
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; 50,000,000 shares authorized;
5,535,000 shares issued and outstanding ......................... 5,535
77,000 outstanding common stock warrants ........................ 27,104
20,293 outstanding common stock options ......................... 13,755
Additional paid in capital ...................................... 810,938
Retained earnings ............................................... 457,797
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TOTAL SHAREHOLDERS' EQUITY 1,315,129
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$1,553,229
==========
See accompanying notes to condensed financial statements
1
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<TABLE>
<CAPTION>
MEDGRUP CORPORATION
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CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE ............................................ $ 935,870 $ 447,067 $ 1,835,410 $ 821,702
COSTS AND EXPENSES
Cost of revenue .................................. 362,968 304,007 657,875 382,833
General and administrative ....................... 342,132 122,049 710,358 317,637
Loss on disposal of assets ....................... -- -- 553 --
Depreciation ..................................... 31,920 10,511 58,721 20,237
----------- ----------- ----------- -----------
TOTAL COSTS AND EXPENSES 737,020 436,567 1,427,507 720,707
NON-OPERATING INCOME (EXPENSE)
Interest expense ................................. (3,188) (2,472) (6,855) (4,382)
Interest income .................................. 5,280 -- 6,614 --
----------- ----------- ----------- -----------
NET INCOME BEFORE TAXES 200,942 8,028 407,662 96,613
INCOME TAXES ....................................... (51,107) -- (102,107) --
----------- ----------- ----------- -----------
NET INCOME $ 149,335 $ 8,028 $ 305,555 $ 96,613
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic ............................................ $ 0.03 * $ 0.06 $ 0.02
=========== =========== =========== ===========
Diluted .......................................... $ 0.03 $ 0.00 $ 0.05 $ 0.02
=========== =========== =========== ===========
SHARES USED FOR COMPUTING NET INCOME PER COMMON SHARE:
Basic ............................................ 5,535,000 4,470,000 5,535,000 4,127,500
=========== =========== =========== ===========
Diluted .......................................... 5,903,293 4,470,000 5,903,293 4,127,500
=========== =========== =========== ===========
*Less than $.01 per share
See accompanying notes to condensed financial statements
2
</TABLE>
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<TABLE>
<CAPTION>
MEDGRUP CORPORATION
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CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
----------------------
2000 1999
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<S> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 296,659 $ (32,575)
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296,659 (32,575)
INVESTING ACTIVITIES
Equipment and leasehold purchases ....................... (237,253) (21,238)
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NET CASH (USED IN)
INVESTING ACTIVITIES (237,253) (21,238)
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FINANCING ACTIVITIES
Proceeds from sale of common stock ...................... 215,000 --
Cash paid for offering costs ............................ (23,650) --
Repayments to shareholder ............................... (5,551) (10,287)
Proceeds from issuance of notes payable ................. -- 87,000
Payments on long-term debt .............................. (35,030) (15,529)
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 150,769 61,184
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NET CHANGE IN CASH AND CASH EQUIVALENTS ................... 210,175 7,371
Cash and cash equivalents, beginning ...................... 182,443 81,256
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Cash and cash equivalents, ending ......................... $ 392,618 $ 88,627
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .................................... $ 6,855 $ 4,382
========= =========
Cash paid for income taxes ................................ $ 51,000 $ --
========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Vehicle purchased with issuance of promissory note ........ $ 35,550 $ --
145,000 common shares issued for conversion of note payable $ -- $ 87,000
Equipment acquired under capital lease .................... $ -- $ 88,919
See accompanying notes to condensed financial statements
3
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MEDGRUP CORPORATION
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NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2000
Note A: Basis of presentation
-----------------------------
The interim financial statements presented herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The interim
financial statements should be read in conjunction with the Company's annual
financial statements, notes and accounting policies thereto included in the
Company's Registration Statement on Form SB-2 as filed with the Securities and
Exchange Commission.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited.
Note B: Shareholders' equity
----------------------------
During the six months ended June 30, 2000 the Company sold for $215,000 cash,
215,000 shares of its common stock. Net proceeds to the Company after deducting
$23,650 in costs of the offering were $191,350.
4
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Item 2. Management's Discussion and Analysis or Plan of Operations.
General
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The following discussion and analysis covers material changes in the
financial condition of MedGrup Corporation ("Company" or "us") since December
31, 1999 and material changes in our results of operations for the three and six
months ended June 30, 2000, as compared to the same periods in 1999. This
discussion and analysis should be read in conjunction with "Management's
Discussion and Analysis and Results of Operations" included in the Company's
Registration Statement on Form SB-2 as filed with the Securities and Exchange
Commission.
This report contains statements that plan for or anticipate the future.
Forward-looking statements include statements about our future operations,
statements about our future business plans and strategies, and most other
statements that are not historical in nature. In this report, forward-looking
statements are generally identified by the words "anticipate," "plan,"
"believe," "expect," "estimate," and the like. Because forward-looking
statements involve future risks and uncertainties, there are factors that could
cause actual results to differ materially from those expressed or implied. For
example, a few of the uncertainties that could affect the accuracy of
forward-looking statements, besides the specific factors identified in this
report, include:
(a) changes in general economic and business conditions affecting the
medical services industry;
(b) financial strength of the Medicare, Medicaid and private healthcare
systems;
(c) new regulations which might be adopted by Federal or state governments;
(d) changes in billing requirements which might be adopted by private
insurance carriers;
(e) our costs and the pricing of our services;
(f) the level of demand for our services; and
(g) changes in our business strategies.
Results of Operations
---------------------
The results of our operations improved substantially during the three and
six month periods ended June 30, 2000 compared to the same periods ended June
30, 1999. During the six month period ended June 30, 2000, we realized a net
profit after taxes of $305,555, or $.06 per basic common share. This represents
an increase of 216% over the net income of $96,613, or $.02 per basic share, for
the six month period ended June 30, 1999. Revenue for the six month period ended
June 30, 2000 also increased substantially, to $1,835,410, an increase of 123%
from the comparable period ended June 30, 1999.
5
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During the three month period ended June 30, 2000, we realized net income
of $149,335, or $.03 per basic common share, on revenue of $935,870. This
compares to net income of $8,028 and revenue of $447,067 for the three months
ended June 30, 1999.
The substantial improvement in our operations for the first six months of
2000 is attributable in an increase in revenue and an improved profit margin.
Our gross profit margin for the six months ended June 30, 2000 was 64%, compared
to 53% for the first six months of 1999. We attribute this improvement to the
increased efficiency of our staff of coding personnel as they gain additional
experience. The profit margin for the first six months of 2000 was generally
consistent with our experience for all of 1999, as well as the first three
months of 2000.
Commensurate with an increase in our revenue during 2000 was a substantial
increase in general and administrative expenses. These expenses more than
doubled during the first six months of 2000 compared to the same period of 1999,
primarily related to costs of additional management and administrative personnel
necessary to support our increased operations, as well as additional
depreciation associated with equipment necessary to run our business. We believe
costs associated with management and administrative personnel will remain
generally constant for the foreseeable future, but that depreciation associated
with equipment will increase slightly as our operations increase.
The substantial increase in our revenue during 2000 is attributable to an
increase in the number of clients which we serve, as well as an increase in the
amount of service provided those clients. We continually market our service to
both existing and potential customers in an effort to increase revenue. We
believe that the potential exists to expand our service to additional clients
within the geographic areas which we currently serve, as well as other parts of
the United States.
We believe the improvement in our operating results from 1999 to 2000 was
abnormally affected by costs associated with the merger which we completed
during the second quarter of 1999. In conjunction with our merger with MedGrup
Development Services, Inc., we incurred an abnormal amount of legal, accounting
and other general and administrative expenses. Those expenses, in turn, reduced
profitability during the second quarter of 1999. Accordingly, we believe the
results for the first six months of 2000 increased disproportionately from the
comparable period in 1999.
Liquidity and Capital Resources
-------------------------------
Our liquidity and capital position improved from year-end December 31, 1999
and remained basically unchanged from the end of the previous quarter at March
31, 2000. Working capital at June 30, 2000 was $845,606, an increase of $284,405
from December 31, 1999. Our current assets increased approximately $133,000 at
June 30, 2000 compared to December 31, 1999, while current liabilities decreased
approximately $151,000. This improvement in working capital is primarily
attributable to a private placement of common stock which we completed in the
first quarter of 2000, the proceeds of which were used to compliment our
existing cash and reduce current liabilities. On the basis of our capital at
June 30, 2000, we believe we have sufficient resources for the balance of this
fiscal year, as well as our foreseeable needs during 2001.
6
<PAGE>
Our existing needs for capital primarily include cash to support
operations, as well as acquisition of equipment. During the first six months of
2000, our operations provided almost $300,000 of cash flow, more than enough to
support our equipment needs during that time. Coupled with the proceeds from the
private placement of common stock, our cash increased $210,000 for the first six
months of this year.
We must continually invest in our equipment to remain competitive.
Investing activities include replacing worn out or obsolete equipment, as well
as adding additional equipment to support increased operations. We finance our
equipment acquisition through a combination of direct purchase and leasing. Our
long term debt at June 30, 2000 was insubstantial, representing approximately
$80,000.
7
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Part II: Other Information
Item 1: Legal Proceedings
No report required.
Item 2: Changes in Securities
No report required.
Item 3: Defaults Upon Senior Securities
No report required.
Item 4: Submission of Matters to a Vote of Security Holders
No report required.
Item 5: Other information
No report required.
Item 6: Exhibits and Reports on Form 8-K
(a). No exhibits are required to be filed with this report.
(b). We did not file any reports on Form 8-K during the period covered by
this report.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDGRUP CORPORATION
Date: August 14, 2000 By: /s/ James S. Wantman
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James S. Wantman, Vice-President
of Finance
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