<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2000
Commission file number 000-29579
U. S. MEDICAL GROUP, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 88-0320389
(State of Incorporation) (IRS Employer Identification No.)
1405 South Orange Avenue Suite 600 Orlando, FL 32806
(Address of Principal Executive Offices)
(407) 849-2288
Issuer's Telephone Number
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 |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 13,575,380 shares of Common Stock
($.001 par value) as of August 10, 2000.
Transitional small business disclosure format: Yes |_| No |x|
<PAGE>
U.S. MEDICAL GROUP, INC.
Quarterly Report on Form 10-QSB for the
Quarterly Period Ending June 30, 2000
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Consolidated Statements of Operations:
Three Months Ended June 30,2000 and 1999
Six Months Ended June 30, 2000 and 1999
Consolidated Balance Sheets:
June 30, 2000 and December 31, 1999
Consolidated Statements of Cash Flows:
Three Months Ended June 30, 2000 and 1999
Six Months Ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements:
June 30, 2000
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<TABLE>
U.S. MEDICAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<CAPTION>
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Patient fees $ 863,373 $ 527,461 $ 1,712,377 $ 850,339
Operating expenses:
Selling, general and
administrative 435,515 303,793 791,469 470,482
Interest expense 47,183 9,854 87,439 23,203
Depreciation expense 79,437 41,243 156,453 82,486
------------- ------------- ------------- -------------
Operating expense 562,135 354,890 1,035,361 576,171
------------- ------------- ------------- -------------
Net income before taxes 301,238 172,571 677,016 274,168
Provision for income taxes 138,000 291,410 280,900 291,410
------------- ------------- ------------- -------------
Net income $ 163,238 $ (118,839) $ 396,116 $ (17,242)
============= ============= ============= =============
Earnings per common share $ 0.01 $ (0.01) $ 0.03 $ (0.00)
(basic and assuming dilution)
Weighted average shares outstanding
Basic 13,575,000 13,575,000 13,575,000 13,287,500
Diluted
See accompanying footnotes to the unaudited consolidated financial statements
</TABLE>
2
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<TABLE>
U.S. MEDICAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
Unaudited
<S> <C> <C>
Current assets:
Cash and equivalents $ 212,942 $ 22,763
Accounts receivable 314,091 548,669
Prepaid expenses 77,062 13,330
----------- -----------
Total current assets 604,095 584,762
Property and equipment - at cost:
Mobile unit and medical equipment 3,746,495 3,642,467
Furniture and fixtures 89,428 61,075
----------- -----------
3,835,923 3,703,542
Less accumulated depreciation 566,841 410,389
----------- -----------
3,269,082 3,293,153
Other assets:
Financing fees, less amortization of $8,059
And $5,521 on June 30, 2000 and
December 31, 1999, respectively 9,698 12,236
----------- -----------
$3,882,875 $3,890,151
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses 102,885 127,297
Shareholder loans 310,044 72,435
Current maturities of long-term debt 319,621 729,167
Income tax payable 158,800
Deferred tax liability 37,606 81,406
----------- -----------
928,956 1,010,305
Long-term debt less current maturities 1,478,840 1,447,045
Deferred tax liability 389,153 301,253
Stockholders' equity:
Preferred stock, par value, $.001 per share,
20,000,000 authorized at June 30, 2000 and
December 31, 1999; none issued - -
Common stock, par value, $.001 per share;
100,000,000 authorized, 13,575,380 issued at
June 30, 2000 and December 31, 1999 13,575 13,575
Additional paid-in-capital 80,925 80,925
Retained earnings 991,426 1,037,048
----------- -----------
1,085,926 1,131,548
----------- -----------
$3,882,875 $3,890,151
=========== ===========
See accompanying footnotes to the unaudited consolidated financial statements
</TABLE>
3
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<TABLE>
U.S. MEDICAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
Six months ended June 30,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income from operating activities $ 396,116 $ (17,242)
Adjustments to reconcile net income to net cash:
Depreciation and amortization 158,990 82,484
Deferred income taxes 44,100 223,090
Change in: Receivables 234,578 44,092
Prepaid expenses and other assets (63,732) (10,040)
Income tax payable 158,800 68,320
Accounts payable and accrued expenses (24,411) 12,649
Stock issued for merger consulting fees - 57,500
---------- ----------
Net cash from operating activities 904,441 460,853
Cash flows used in investing activities:
Capital expenditures (132,380) (380,842)
Cash flows (used in)/provided by financing activities:
Proceeds from bank loans 250,000 100,000
Proceeds from loans from stockholders 441,739 160,136
Repayments of bank loans (627,751) (302,466)
Stockholder debt retired during merger 5,200
Repayment of loans from stockholders (204,131) (43,847)
Dividend payments (441,739) -
---------- ----------
Net cash used in financing activities (581,882) (80,977)
Net increase in cash and cash equivalents 190,179 (966)
Cash and cash equivalents at January 1 22,763 49,153
---------- ----------
Cash and cash equivalents at June 30 $ 212,942 $ 48,187
========== ==========
Supplemental Information:
Interest paid 78,140 23,203
Income taxes paid 78,000 -
See accompanying footnotes to the unaudited consolidated financial statements
</TABLE>
4
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U. S. MEDICAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
-------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB, and therefore, do not
include all the information necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's SEC Form 10-SB, as amended.
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the Company, and
its wholly-owned subsidiary, U. S. Medical Group (Florida), Inc., formerly
American Mobile Surgical Services, Inc. Significant intercompany transactions
have been eliminated in consolidation.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere within
this Report.
Description of Company
----------------------
The Company, through its wholly owned subsidiary, U.S. Medical Group (Florida),
Inc. provides surgical operating rooms and required support staff (such as
nurses and technicians) by means of a mobile unit on site at correctional
facilities. The Company currently owns, manages and operates freestanding,
totally self-contained, mobile surgical facilities that serve the prison systems
in Florida and in North Carolina. The Company uses mobile ambulatory surgical
centers, built into tractor-trailer vehicles with expandable side panels, to
deliver cost-effective surgical services to correctional facilities. While the
military has used similar services to perform surgical procedures during periods
of war and other conflicts, the Company believes that it is the first to provide
a mobile surgery unit on site at a correctional facility for ambulatory surgical
procedures. The service is designed to reduce the costs of the correctional
authority (by reducing or eliminating the need for hospitals) and to enhance
security as well as cost by reducing or eliminating the need to transport
inmates to off-site hospitals and guard them during hospital stays.
5
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Forward Looking Statements
--------------------------
This Form 10-QSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. All statements included
herein that address activities, events or developments that the Corporation
expects, believes, estimates, plans, intends, projects or anticipates will or
may occur in the future, are forward-looking statements. Actual events may
differ materially from those anticipated in the forward-looking statements.
Important risks that may cause such a difference include: general domestic and
international economic business conditions and increased competition in the
Corporation's markets and products. Other factors may include; availability and
terms of capital, and/or increases in operating and supply costs, market
acceptance of existing and new products, rapid technological changes and
availability of qualified personnel, termination of or failure to renew the
Company's contracts with the State of Florida and State of North Carolina and
other matters discussed in the Company's SEC filings also could be factors.
Changes in the Corporation's business strategies and development plans and
changes in government regulation could adversely affect the Company. Although
the Corporation believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate. There can be no assurance that the forward-looking statements
included in this filing will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Corporation that the objectives and expectations of the Corporation would be
achieved.
Three Months Ended June 30, 2000 and 1999
-----------------------------------------
REVENUES
The Company's total revenues were $863,373 for the three month period ended June
30, 2000 compared to $ 527,461 for the same period ended June 30, 1999, an
increase of $335,912, or 63.7%. The increase is attributable to patient fees
derived from the addition of the North Carolina State Department of Corrections
contract, an increased caseload and subsequent increase in patient fees from the
Florida contract and unit, and proceeds from a lease agreement for hyperbaric
oxygen therapy equipment with American Hyperbarics. The lease agreement became
effective March 15th, 2000. The Company reported net income from continuing
operations for the three month period ended June 30, 2000 of $163,238 compared
to a loss of $118,839 for the three month period ended June 30, 1999, an
increase in earnings of $282,077. The net loss for the three month period ended
June 30, 1999 was attributed to the costs associated with the merger of American
Mobile Surgical Services Incorporated with U.S. Medical Group of Florida, as
well as incremental and deferred income taxes payable totaling $291,410. The
deferred taxes fell due upon the completion of the Company achieving C
Corporation status that occurred during the three month period ended June 30,
1999. As an S Corporation, the Company's earnings were taxed, with certain
exceptions, for federal income tax purposes directly to the Company's
shareholders. The Company terminated its S Corporation tax status in April of
1999. Until April 1999, the business was conducted by and under the name of
American Mobile Surgical
6
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Services, Inc., a Florida company ("AMSSI"). In April 1999, pursuant to the
terms of an Agreement and Plan of Merger entered into as of March 31, 1999 by
and among AMSSI, USMGF and the Company (the "Merger Agreement), AMSSI became a
subsidiary of U.S. Medical Group, Inc. when USMGF merged (the "Merger") with
AMSSI with AMSSI being the surviving Company. Following the merger AMSSI changed
its name to USMGF. Net income for the three month period ended June 30, 2000 is
attributed to the addition of the North Carolina State Department of Corrections
contract as well as an increased caseload and subsequent increase in patient
fees associated with the Florida mobile surgery unit.
The Company has contracts with the Florida and North Carolina State Department
of Corrections. Both state contracts are a series of four one-year options. Both
Florida and North Carolina State Department of Corrections have exercised the
second year option in the series of one-year options. Both one-year option
contract renewals expire September 30, 2001.
COSTS AND EXPENSES
The Company's 63.7% increase in revenues for the second quarter of 2000 compared
to the same period ended June 30, 1999 resulted in higher total costs, as
expenses from operations increased $207,245 from $354,890 to $562,135, or 58.4%.
Selling, general and administrative expenses for the three month period ended
June 30, 2000 increased $131,722 from $303,973 to $435,515, or 43.3%. Operations
expenditures increased due to the costs associated with the operations
activities of the North Carolina mobile surgical unit, which commenced
operations in October of 1999. The North Carolina unit incurs similar operating
costs as the Florida surgical unit, such as medical equipment, supplies, and
staff wages. Operations expenditures associated with the mobile hyperbaric
oxygen therapy unit also contributed to the expense increase. Selling, general
and administrative expenses increased from the additional allocation of
financial resources necessary to support the North Carolina mobile surgery unit
contract and the mobile hyperbaric oxygen therapy unit lease agreement. The
selling, general and administrative expenses increase is also attributed to the
support of the Company's active pursuit of new business development. With the
necessary addition of both salary and hourly employees to facilitate day to day
operations as well as new business development, wages and salary expenses
increased 188% from $39,947 to $115,149 for the period.
As the Company continues to expand, the Company will incur additional costs for
personnel. In order for the Company to attract and retain quality personnel, the
Company anticipates it will continue to offer competitive salaries and grant
Company stock options to current and future employees.
General Liability Insurance expenses increased 458% from $2,255 for the three
month period ended March 31, 1999 to $12,594 for the three month period ended
June 30, 2000. The general liability insurance expense increase reflects the
initiation of coverage for the Company's mobile hyperbaric oxygen therapy unit,
as well as significant coverage increases for unit and equipment replacement
costs for the Company's two mobile surgical facilities. Professional Liability
Insurance increased 17.8% from $16,848 for the three month period ended June 30,
1999 to $19,843 for the three month period ended June 30, 2000. The increase in
professional liability insurance includes the initiation of directors and
officer's liability coverage, as well as an increase in coverage in medical
malpractice insurance for the two mobile surgical facilities. As a consequence
of wage and salaried employee additions to the Company, group health insurance
expenditures increased 133.7% to $8,384 for the three month period ended June
30, 2000.
7
<PAGE>
Medical Supplies expenditures increased 85% from $50,351 for the three month
period ended June 30, 1999 to $93,235 for the three month period ended June 30,
2000. The increase in medical supplies purchases is solely attributable to the
increased caseload performed during the period. Both the Florida and North
Carolina mobile surgical facilities experienced caseload increases during the
period.
Legal and Accounting fees charged to the Company increased 719% from $5,671 for
the three month period ended June 30, 1999 to $46,486 for the three month period
ended June 30, 2000. The increase in fees for the period is attributed to the
Company's requirement to obtain legal and accounting services and resources
associated with the filing of the Company's Securities and Exchange Commission
Form 10-SB registration statement. The incremental expense increase for legal
and accounting services associated with the 10-SB registration statement were
charged entirely to the period. Public Filing charges of $13,803 were expensed
during the three month period ended June 30, 2000. Such charges are also
associated with the filing of the Company's Securities and Exchange Commission
Form 10-SB registration statement. No such charges were experienced during the
period ended June 30, 1999.
Advertising expenses increased 61% to $13,034 for the three month period ended
June 30, 2000. The Company advertises mainly in corrections industry trade
publications, and feels that advertising is a necessary component of its goal to
maximize revenue and shareholder value. The Company expects to continue to
advertise in corrections industry trade publications in the future.
Depreciation and amortization expense for the three month period ended June 30,
2000 was $79,437, an increase of $38,194, or 92.6%, from the same period in
1999. The increase is attributable to the addition of a new mobile surgical unit
in North Carolina. Both of the Company's mobile surgical units were depreciated
over the entire period of three months ended June 30, 2000.
Interest expense for the three month period ended June 30, 2000 was $47,183, an
increase of $37,329, or 378.8%, from $9,854 for the same period ended June 30,
1999. The increase in interest expense is due to the repayment of bank loans
needed to finance the construction and purchase of the North Carolina mobile
surgical unit.
For the three month period ended June 30, 2000, an income tax provision of
$138,000 was charged to recognize federal, Florida state and North Carolina
state income tax liabilities. For the three month period ended June 30, 1999, an
income tax provision of $291,410 was charged. As an S Corporation, the Company's
earnings were taxed, with certain exceptions, for federal income tax purposes
directly to the Company's shareholders. The Company terminated its S Corporation
tax status in April of 1999. Upon the termination of the company's S Corporation
tax status, the Company recognized a deferred tax liability. Such an obligation
of deferred income taxes contributed significantly to the Company's overall
liability for the three month period ended June 30, 1999.
8
<PAGE>
Six Months Ended June 30, 2000 and 1999
---------------------------------------
REVENUES
The Company's total revenues were $1,712,377 for the six month period
ended June 30, 2000 compared to $ 850,339 for the same period ended June 30,
1999, an increase of $862,038, or 101.4%. The increase is attributable to
patient fees derived from the addition of the North Carolina State Department of
Corrections contract, an increased caseload and subsequent increase in patient
fees from the Florida contract and unit, and proceeds from a lease agreement for
hyperbaric oxygen therapy equipment with American Hyperbarics. The lease
agreement became effective March 15th, 2000. The Company reported net income
from continuing operations for the six month period ended June 30, 2000 of
$396,116 compared to a loss of $17,242 for the six month period ended June 30,
1999, an increase in earnings of $413,358. The net loss for the six month period
ended June 30, 1999 was attributed to the costs associated with the merger of
American Mobile Surgical Services Incorporated with U.S. Medical Group of
Florida, as well as incremental and deferred income taxes payable totaling
$291,410. The deferred taxes fell due upon the completion of the Company
achieving C Corporation status that occurred during the six month period ended
June 30, 1999. As an S Corporation, the Company's earnings were taxed, with
certain exceptions, for federal income tax purposes directly to the Company's
shareholders. The Company terminated its S Corporation tax status in April of
1999. Until April 1999, the business was conducted by and under the name of
American Mobile Surgical Services, Inc., a Florida Company ("AMSSI"). In April
1999, pursuant to the terms of an Agreement and Plan of Merger entered into as
of March 31, 1999 by and among AMSSI, USMGF and the Company (the "Merger
Agreement), AMSSI became a subsidiary of U.S. Medical Group, Inc. when USMGF
merged (the "Merger") with AMSSI with AMSSI being the surviving Company.
Following the merger AMSSI changed its name to USMGF. Net income for the six
month period ended June 30, 2000 is attributed to the addition of the North
Carolina State Department of Corrections contract as well as an increased
caseload and subsequent increase in patient fees associated with the Florida
mobile surgery unit.
COSTS AND EXPENSES
The Company's 101.4% increase in revenues for the first six months of 2000
compared to the same period ended June 30, 1999 resulted in higher total costs,
as expenses from operations increased $459,190 from $576,171 to $1,035,361, or
79.7%. Selling, general and administrative expenses for the six month period
ended June 30, 2000 increased $311,987 from $479,482 to $791,469, or 65%.
Operations expenditures increased due to the costs associated with the
operations activities of the North Carolina mobile surgical unit, which
commenced operations in October of 1999. The North Carolina unit incurs similar
operating costs as the Florida surgical unit, such as medical equipment,
supplies, and staff wages. Operations expenditures associated with the mobile
hyperbaric oxygen therapy unit also contributed to the expense increase.
Selling, general and administrative expenses increased from the additional
allocation of financial resources necessary to support the North Carolina mobile
surgery unit contract and the mobile hyperbaric oxygen therapy unit lease
agreement. The selling, general and administrative expenses increase is also
attributed to the support of the Company's active pursuit of new business
development. With the necessary addition of both salary and hourly employees to
facilitate day to day operations as well as new business development, wages and
salary expenses increased 175% from $76,566 to $210,808 for the period.
As the Company continues to expand, the Company will incur additional costs for
personnel. In order for the Company to attract and retain quality personnel, the
Company anticipates it will continue to offer competitive salaries and grant
Company stock options to current and future employees.
9
<PAGE>
General Liability Insurance expenses increased 234% from $4,580 for the six
month period ended June 30, 1999 to $15,284 for the six month period ended June
30, 2000. The general liability insurance expense increase reflects the
initiation of coverage for the Company's mobile hyperbaric oxygen therapy unit,
as well as significant coverage increases for unit and equipment replacement
costs for the Company's two mobile surgical facilities. Professional Liability
Insurance increased 51% from $16,848 for the six month period ended June 30,
1999 to $25,373 for the same period ended June 30, 2000. The increase in
professional liability insurance includes the initiation of directors' and
officers' liability coverage, as well as an increase in coverage in medical
malpractice insurance for the two mobile surgical facilities. As a consequence
of wage and salaried employee additions to the Company, group health insurance
expenditures increased 97% to $15,415 for the period six months ended June 30,
2000.
Medical supplies expenditures increased 76.4% from $95,698 for the six month
period ended June 30, 1999 to $168,832 for the six month period ended June 30,
2000. The increase in medical supplies purchases is solely attributable to the
increased caseload performed during the period. Both the Florida and North
Carolina mobile surgical facilities experienced caseload increases during the
period.
Legal and Accounting fees charged to the Company increased from $6,296 for the
six month period ended June 30, 1999 to $80,203 for the same period ended June
30, 2000. The increase in fees for the period is attributed to the Company's
requirement to obtain legal and accounting services and resources associated
with the filing of the Company's Securities and Exchange Commission Form 10-SB
registration statement. The incremental expense increase for legal and
accounting services associated with the 10-SB registration statement were
charged entirely to the three month period ended June 30, 2000. Public Filing
charges of $13,803 were expensed during the three month period ended June 30,
2000. Such charges are also associated with the filing of the Company's
Securities and Exchange Commission Form 10-SB registration statement. No such
charges were experienced during the period ended June 30, 1999.
Advertising expenses increased 62.6% to $19,246 for the six month period ended
June 30, 2000. The Company advertises mainly in corrections industry trade
publications, and feels that advertising is a necessary component of its goal to
maximize revenue and shareholder value. The Company expects to continue to
advertise in corrections industry trade publications in the future.
Depreciation and amortization expense for the six month period ended June 30,
2000 was $156,543, an increase of $73,967, or 89.7%, from the same period in
1999. The increase is attributable to the addition of a new mobile surgical unit
in North Carolina. Both of the Company's mobile surgical units were depreciated
over the entire six month period ended June 30, 2000.
Interest expense for the six month period ended June 30, 2000 was $87,439, an
increase of $64,236, or 276.8%, from $9,854 for the same period ended June 30,
1999. The increase in interest expense is due to the repayment of bank loans
needed to finance the construction and purchase of the North Carolina mobile
surgical unit.
10
<PAGE>
For the six month period ended June 30, 2000, an income tax provision of
$280,900 was charged to recognize federal, Florida state and North Carolina
state income tax liabilities. For the six month period ended June 30, 1999, an
income tax provision of $291,410 was charged. As an S Corporation, the Company's
earnings were taxed, with certain exceptions, for federal income tax purposes
directly to the Company's shareholders. The Company terminated its S Corporation
tax status in April of 1999. Upon the termination of the Company's S Corporation
tax status, the Company recognized a deferred tax liability. Such an obligation
of deferred income taxes contributed significantly to the Company's overall
liability for the six month period ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of June 30, 2000, the Company had a working capital deficit of $324,861
compared to a deficit of $425,543 at December 31, 1999, a deficit decrease of
$100,682, or 24%. The decrease in working capital deficit is attributed to a
$19,333 increase in current assets and a current liability decrease of $81,349.
The Company's accounts payable balance as of June 30, 2000 was $102,885, a
$24,412, or 19.2% decrease from the balance as of December 31, 1999. Shareholder
loans outstanding increased to $310,044 from $72,435 as of December 31, 1999.
Proceeds from shareholder loans were used for working capital purposes. The
Company plans to repay shareholder loans in the three month period ended
September 30, 2000, subject to the Company's liquidity. Current maturities of
long-term debt decreased $481,981 from $ 729,187 as of December 31, 1999 to
$319,621 as of June 30, 2000.
The Company generated cash flows from operations of $904,441 for the six month
period ended June 30, 2000 and $460,853 for the six month period ended June 30,
1999, an increase of 96%. Increased cash flow from operating activities for the
six month period ended June 30, 2000 is primarily attributable to the Company's
net income from operations of $396,116 adjusted for depreciation of $158,990 and
income taxes of $202,900.
Cash flows used in investing activities for the six month period ended June 30,
2000 consisted primarily of the acquisition of $ 132,380 of surgical and medical
equipment. The equipment was placed in the Company's North Carolina and Florida
facilities.
Cash flows used in financing activities was $581,882 during the six month period
ended June 30, 2000. The Company repaid $204,131 in shareholder loans and $
627,751 of bank loans during this period. The Company received loan proceeds of
$ 441,739 from Company shareholders and $ 250,000 from bank loans. The loan
proceeds were used to make dividend payments in the amount of $441,739 to AMSSI
shareholders and fund the acquisition of medical and surgical equipment.
The Company has contracts with the Florida and North Carolina State Department
of Corrections. Both state contracts are a series of four one-year options. Both
Florida and North Carolina State Department of Corrections have exercised the
second year option in the series of one-year options. Both one-year option
contract renewals expire September 30, 2001.
11
<PAGE>
As the Company continues to expand, the Company will incur additional costs for
personnel. In order for the Company to attract and retain quality personnel, the
Company anticipates it will continue to offer competitive salaries and grant
Company stock options to current and future employees.
While the Company has raised capital to meet its current working capital and
facility and equipment financing needs, additional financing will be required in
order to acquire additional surgical facilities. The Company is seeking
financing in the form of equity and debt in order to provide for these
expansions and for working capital. There are no assurances the Company will be
successful in raising the funds required.
The Company has borrowed funds from significant shareholders of the Company in
the past to satisfy certain obligations. In addition, Company officers and
significant shareholders guarantee all of the Company's bank debt.
The Company plans to develop new sites for its mobile surgical units and to
introduce mobile dental and hyperbaric units in the near future, placing one or
more units in service by year-end. The Company plans to obtain financing for
these units through bank loans, private placements of its securities, and equity
financing through offerings in the secondary markets. There can be no assurance
that management will be successful in its efforts to obtain the financing
necessary to fund the Company's growth or that contracts for future sites will
be obtained.
The effect of inflation on the Company's revenue and operating results was not
significant. The Company's operations are in the southeastern United States and
there are no seasonal aspects that would have a material adverse effect on the
Company's financial condition or results of operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2 - Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Contract with Florida Department of
Corrections
10.2 Contract with North Carolina Department of
Corrections
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
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<PAGE>
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.
U. S. MEDICAL GROUP, INC.
Registrant
August 10, 2000 By: /s/ Thomas Winters
---------------- -------------------------
Date Thomas Winters
Chairman of the Board and
Chief Executive Officer
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