U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to ________
SURGICARE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 58-1597246
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6699 CHIMNEY ROCK, SUITE 105
HOUSTON, TEXAS 77081
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (713) 665-1406
Check whether the Registrant: (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 July 10, 2000, 12,596,657 shares of Common Stock, $0.005 par value per
share, were outstanding.
As of July 10, 2000, 1,450,000 shares of Series A Redeemable Preferred
Stock, $0.001 par value per share, were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
The information contained herein contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. Investors are
cautioned that all forward looking statements involve risks and uncertainty,
including, without limitation, the ability of SurgiCare to continue its
expansion strategy, changes in federal or state healthcare laws and regulations
or third party payer practices, SurgiCare's historical and current compliance
with existing or future healthcare laws and regulations and third party payer
requirements, changes in costs of supplies, labor and employee benefits, as well
as general market conditions, competition and pricing. Although SurgiCare
believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward looking statements
included in this Form 10-QSB will prove to be accurate. In view 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 SurgiCare or any other person that the objectives and plans of
SurgiCare will be achieved. SurgiCare undertakes no obligation to update or
revise forward-looking statements to reflect changed assumptions, the occurrence
of unanticipated events or changes to future operating results over time.
ITEM 1.
Financial Statements
The information required hereunder is included in this report as set forth
in the "Index to Financial Statements"
INDEX TO FINANCIAL STATEMENTS
Page
Consolidated Balance Sheet as of December 31 1999, and
June 30, 2000 3
Consolidated Income Statement for the 3 months ending as
of June 30, 1999 and 2000 and the 9 months ending as of
June 30, 1999 and 2000. 5
Consolidated Statement of Cash Flows for the 3 months ending as
of June 30, 1999 and 2000 and the 9 months ending as of
June 30, 1999 and 2000. 6
<PAGE>
SURGICARE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 243,859 $ 76,162
Accounts receivable (less allowance for
contractual adjustments and doubtful accounts 1,832,833 2,495,922
of $1,470,530 and $2,008,981 at December
31, 1999 and June 30, 2000, respectively)
Inventory 89,361 139,863
Prepaid expenses 27,175 23,178
Other current Assets 21,200 8,934
Total Current Assets 2,214,428 2,744,059
Property and Equipment
Office furniture and equipment 40,922 44,228
Medical and surgical equipment 660,225 715,723
Leasehold improvements 28,016 398,019
Computer equipment 58,303 61,103
Construction in progress 117,121
904,587 1,219,073
Less: Accumulated depreciation and (487,998) (567,191)
amortization
Total Property and Equipment 416,589 651,882
Other Assets
Goodwill 166,367 160,631
TOTAL ASSETS $ 2,797,384 $ 3,556,572
<PAGE>
SURGICARE, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES
Current Liabilities
Current portion of capital lease $ 21,464 $ 30,061
Notes Payable 633,764 547,105
Accounts Payable 147,685 312,245
Accrued Expenses 128,280 51,275
Federal income tax payable 95,637 752,931
Deferred federal income tax 546,000 368,121
Total Current Liabilities 1,572,830 2,061,738
Long-Term Capital Lease Obligations 49,544 27,736
Total Liabilities 1,622,374 2,089,474
SHAREHOLDERS' EQUITY
Preferred Stock, Series A, par value
$.001, 1,650,000 authorized, 1,400,000 and 1,400 1,450
1,450,000 issued and outstanding at
December 31, 1999 and June 30, 2000 respectively
Common Stock, par value $.005, 50,000,000 shares
authorized, 12,596,657 issued and outstanding 62,983 62,983
Additional Paid-In Capital 900,245 922,695
Retained Earnings 237,882 744,450
Less: Shareholders receivables (27,500) (264,480)
Total Shareholders' Equity 1,175,010 1,467,098
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,797,384 $ 3,556,572
</TABLE>
<PAGE>
SURGICARE, INC.
CONSOLIDATED INCOME STATEMENT
(unaudited)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDING SIX MONTHS ENDING
June 30, June 30
1999 2000 1999 2000
<S> <C> <C> <C> <C>
Revenues, net $ 1,081,707 $ 1,370,750 $ 1,973,770 $ 2,599,453
Expenses
Direct Surgical Expenses
Surgical Costs 137,285 197,123 250,531 390,331
Salaries, wages and Benefits 155,172 105,918 232,201 214,532
Contract services 18,978 65,693 52,900 96,722
Total Direct Surgical Expenses 311,435 368,733 535,632 701,585
Gen. and Admin. Expenses
Salaries, Wages and Benefits 63,122 71,493 82,112 118,196
Management company termination fee 0 0 0
Professional fees 1,251 56,967 1,941 63,758
Rent 43,020 44,682 86,571 85,365
Management Fee 75,453 16,794 153,969 38,011
Insurance 7,761 8,823 13,836 17,761
Depreciation 26,951 42,713 56,609 84,930
Repairs and maintenance 3,444 18,147 9,429 30,445
Other operating expenses (17,156) 47,793 30,957 99,928
Taxes 15,730 4,476 17,526 10,052
Total Direct Gen. and Admin. Expenses 219,576 311,888 452,950 548,444
Total Expenses 531,011 680,622 988,582 1,250,029
Other Income
Gain on sale of property and equipment 8,775 0 12,025 0
Miscellaneous income 4,624 0 7,439 0
Total Other Income 13,399 0 19,464 0
Earnings Before Income Tax Expense 564,095 690,128 1,004,652 1,349,423
Federal Income Tax Expense (Benefit)
Deferred 428,651 176,841 428,651 206,931
Current 0 52,016 0 232,295
State 0 29,425 0 59,629
Net Earnings $ 135,444 $ 431,847 $ 576,001 $ 850,567
Pro forma income data (unaudited):
Earnings before federal income tax expense $ 564,095 $ 431,847 $ 1,004,652 $ 850,567
Proforma federal and state income tax (219,997) (391,814)
Dividends Paid (161,875) (174,000) (299,375) (344,000)
Pro forma Net Earnings $ 182,223 $ 257,847 $ 313,463 $ 506,567
Pro forma earnings per share - basic and $ 0.02 $ 0.02 $ 0.03 $ 0.04
diluted
</TABLE>
<PAGE>
<TABLE>
SURGICARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDING SIX MONTHS ENDING
June 30, June 30
1999 2000 1999 2000
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings $ 135,444 $ 431,847 $ 576,001 $ 850,567
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation and amortization 30,458 42,713 56,612 84,930
Gain on sale of property and 24,450 24,450
Deferred federal income tax 428,651 176,841 428,651 206,931
Management company termination fee
(Increase) Decrease in:
Accounts receivable (279,486) (517,149) (449,004) (663,819)
Inventory (4,026) (50,326) (2,013) (50,502)
Prepaid expenses (3,308) 1,176 (260) 3,997
Other current assets (4,326) 6,977 (2,437) 12,266
State income tax payable 29,425 59,629
Federal income tax receivable 0 52,016 232,295
Increase (Decrease) in:
Accounts payable 38,420 58,510 83,094 164,560
Accrued expenses (57,240) (46,652) (14,611) (99,505)
Net Cash Provided by Operating 309,037 185,376 700,483 801,349
Activities
Cash Flows From Investing Activities
Capital expenditures (12,989) (35,406) (93,487) (314,486)
Collections on shareholder receivable 41,001 6,000 72,501 31,750
Proceeds from sale of property and 52,565 52,565
equipment
Acquisition of SurgiCare, Inc. (267,000)
Net Cash Used in Investing Activities 80,577 (29,406) 31,579 (549,736)
Cash Flows From Financing Activities
Borrowings on debt 50,000 50,612 50,000
Payments on debt (52,500) (72,112) (107,079) (136,659)
Principal payments on capital lease (26,761) (5,115) (55,720) (11,151)
Contributions by shareholders 22,500
Dividends paid to preferred shareholders (174,000) (344,000)
Distributions to shareholders (324,000) (599,000)
Net Cash Used in Financing Activities (403,261) (201,227) (711,187) (419,310)
Net Decrease in Cash and Cash Equivalents (13,648) (45,257) 20,874 (167,697)
Cash and Cash Equivalents - Beginning of 91,571 121,419 57,049 243,859
Period
Cash and Cash Equivalents - End of Period $ 77,923 $ 76,162 77,923 76,162
</TABLE>
<PAGE>
SURGICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying financial statements are unaudited, but in the opinion of
management, include all adjustments necessary for a fair presentation of
financial position and results of operations for the periods presented.
Note 1 - Accounting Policies
SurgiCare, Inc. (the Company) maintains its accounts on the accrual method of
accounting in accordance with generally accepted accounting principles.
Accounting principles followed by the Company and the methods of applying those
principles which materially affect the determination of financial position,
results of operations and cash flows are summarized below:
Description of Business
Bellaire SurgiCare, Inc. (Bellaire) was formed in January, 1995 as a Texas
corporation to operate a day surgery center in Houston, Texas, and
therefore operates as a single segment. Effective July 1, 1999, Bellaire
acquired SurgiCare, Inc. (formerly Technical Coatings, Inc.) in a reverse
acquisition. Bellaire SurgiCare, Inc. is now a wholly owned subsidiary of
SurgiCare, Inc.
Principles of Consolidation
These consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Bellaire SurgiCare, Inc. All material
inter company balances and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents. During the year, the
Company maintained cash balances in excess of federally insured limits.
Revenue Recognition
Revenue is recognized on the date the procedures are performed, and
accounts receivable are recorded at that time. Revenues are reported at the
estimated realizable amounts from patients and third-party payers. If such
third-party payers were to change their reimbursement policies, the effect
on revenue could be significant. Earnings are charged with a provision for
contractual adjustments and doubtful accounts based on fee schedules,
contracts and collection experience. Contractual adjustments and accounts
deemed uncollectible are applied against the allowance account.
Inventory
Inventory consists of medical and pharmaceutical supplies which are stated
at the lower of cost or market. Cost is determined under the first in,
first-out method.
Property and Equipment
Property and equipment are presented at cost. Medical and surgical
equipment, of approximately $144,000, under capital lease is recorded at
the present value of future minimum lease payments. Depreciation and
amortization are computed at rates considered sufficient to amortize the
cost of the assets, using the straight-line method over their estimated
useful lives as follows:
Office furniture and equipment 7 years
Medical and surgical equipment 5 years
Leasehold improvements 5 years
Computer equipment 5 years
Goodwill
Goodwill arises from the acquisition of assets at an amount in excess of
their fair market value. Amortization is computed by the straight-line method
over 15 years.
SURGICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1999 and 2000
Federal Income Taxes
Prior to July 1, 1999, the Company had elected to be taxed as an S
corporation under provisions of the Internal Revenue Code. As such, current
taxable income had been included on the income tax returns of the
shareholders for federal income tax purposes and no provision had been made
for federal income taxes.
Effective July 1, 1999, the Company changed its election to be taxed as a C
corporation under the Internal Revenue Code. Taxes on income are provided
based upon Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable
or deductible amounts in the future. Such deferred income tax asset and
liability computations are based on enacted tax laws and rates applicable to
periods in which the differences are expected to affect taxable income.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Unaudited Pro Forma Net Earnings and Pro Forma Earnings Per Share
Pro forma earnings per share represent pro forma net earnings (after a
pro forma provision for income taxes as if the Company had been subject to
federal and state income taxation as a C corporation since inception) available
to common shareholders divided by the pro forma weighted average number of
common shares outstanding during the period. Pro forma weighted average shares
were calculated giving effect to the 7,304 to 1 exchange of SurgiCare common
stock for Bellaire common stock, as if the reverse acquisition had occurred at
the beginning of each period presented. The conversion of preferred stock to
common stock is anti-dilutive
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
-------------- ------------
1999 2000 1999 2000
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Pro forma net earnings $ 344,098 $ 431,847 $ 612,838 $ 850,567
Less: Preferred dividends 161,875 174,000 299,375 344,000
----------- -------- --------- ---------
Pro forma net earnings available for common
Shareholders. $ 182,223 $ 257,847 $ 313,463 $ 506,567
============= =========== =========== ==========
Weighted average shares outstanding 10,914,188 12,596,657 10,914,188 12,596,657
============= =========== =========== ==========
Pro forma net earnings per share - basic $.02 $.02 $.03 $.04
============= ============ ========== ==========
Proforma earnings per share for 1999 have been reduced to assume the
preferred stock had been issued at the beginning of the period.
</TABLE>
Note 3 - Preferred Stock
The Series A preferred stock is convertible at a rate of one share of preferred
stock into one share of $.005 par value common stock. The Company can redeem the
stock at $5 per share. The Series A preferred stock accrues dividends at a rate
of $.48 per share per annum which are payable, in arrears, on the first day of
the month. Holders of Series A preferred stock are entitled to one vote for each
share of Series A preferred stock held.
ITEM 2.
Management's Discussion and Analysis of Financial Condition and results of
Operation.
SurgiCare principal business strategies are to (i) increase physician
utilization of existing facilities, (ii) increase both the revenue and profits,
from current cases and procedures being performed in existing facilities and,
(iii) achieve growth and expand revenues by pursuing strategic acquisitions of
existing, and the development of new, physician owned ambulatory surgical
centers.
(i) SurgiCare has completed its addition of one new operating room to its
Bellaire facility. This additional operating room has increased the capacity at
Bellaire by 50%.
(ii) SurgiCare is constantly striving to achieve increased profits from
existing revenues. Surgical supply costs are the single largest cost component
of any ambulatory surgical center. Therefore SurgiCare is always looking for
ways to decrease the cost of surgical supplies. Through participation in
national buying groups SurgiCare has been able to negotiate discounts on most of
the commonly used surgical supplies. SurgiCare has also implemented a "Just in
Time" approach to inventory. This allows the center to minimize the amount of
supplies that it is required to keep in inventory. SurgiCare is also always
looking for new distributors of its surgical supplies that have the capability
to deliver the majority of its surgical supplies "Just in Time", and provide
quality service, at reduced prices. SurgiCare has found that the purchasing
policies that govern the acquisition of surgical equipment is an important key
to maximize a centers profit. Therefore all equipment is purchased at the
corporate level, in order to insure that the equipment is purchased at the
lowest possible price.
(iii) SurgiCare is in the process of identifying ambulatory surgical
centers as potential acquisition targets, and has, in some cases, conducted
preliminary discussions with representatives of centers. Except as stated below,
such discussions have been tentative in nature and there can be no assurance
that SurgiCare will acquire any center with whom discussions have been
conducted. SurgiCare expects that generally the acquisition of another surgery
center would take the form of a merger, stock-for-stock exchange or
stock-for-assets exchange, and that in most instances the target company will
wish to structure the business combination to be within the definition of a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended. SurgiCare may, however, use other acquisition structuring
techniques, including purchases of assets or stock for cash or cash and stock,
or through formation of one or more limited partnerships or limited liability
companies.
SurgiCare has entered into a letter of intent with Memorial Villages
Surgery Center, Ltd. ("Memorial Villages") pursuant to which SurgiCare will
acquire a majority interest in the surgery center currently owned by Memorial
Villages, located in Houston. The consideration for such acquisition would be a
combination of cash and SurgiCare common stock. Consummation of the transaction
is subject, among other things, to negotiation and execution of definitive
agreements, receipt of necessary regulatory approvals, approval by the board of
directors of SurgiCare and the general and limited partners of Memorial
Villages, and certain other conditions. There can be no assurance that the
acquisition contemplated by the letter of intent will be consummated.
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following table sets forth for the periods indicated the percentages of
revenues represented by income statement items.
<TABLE>
<CAPTION>
For the Six
Month Ended
June 30
1998 1999
<S> <C> <C>
------------------------------------------------------------------------
Revenues, net 100.00% 100.00%
------------------------------------------------------------------------
Expenses
Direct Costs of Sales
------------------------------------------------------------------------
Surgical Costs 12.69% 15.02%
------------------------------------------------------------------------
Clinical Salaries, Wages and benefits 11.76% 8.25%
------------------------------------------------------------------------
Other Surgical Cost 2.68% 3.72%
------------------------------------------------------------------------
Total Direct Cost of Services 27.14% 26.99%
------------------------------------------------------------------------
General & Administrative Expenses
------------------------------------------------------------------------
Salaries, Wages and benefits 4.16% 4.55%
------------------------------------------------------------------------
Management Co. Termination Fee 0.00% 0.00%
-----------------------------------------------------------------------
Professional Fees 0.10% 2.45%
------------------------------------------------------------------------
Rent 4.39% 3.28%
------------------------------------------------------------------------
Management Fee 7.80% 1.46%
------------------------------------------------------------------------
Insurance 0.70% 0.68%
------------------------------------------------------------------------
Depreciation 2.87% 3.27%
------------------------------------------------------------------------
Repairs & Maintenance 0.48% 1.17%
------------------------------------------------------------------------
Other operating expenses 1.57% 3.84%
------------------------------------------------------------------------
Taxes 0.89% 0.39%
------------------------------------------------------------------------
Total G & A 22.95% 21.10%
------------------------------------------------------------------------
Total Expenses 50.09% 48.09%
------------------------------------------------------------------------
Operating Income 49.91% 51.91%
------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------
Gain on sale of property and equipment 0.61% 0.00%
------------------------------------------------------------------------
Miscellaneous income 0.38% 0.00%
------------------------------------------------------------------------
Total Other Income 1.99% 0.00%
------------------------------------------------------------------------
Earnings Before Federal Income Tax Expense 50.90% 51.91%
------------------------------------------------------------------------
Federal Income Tax Expense (Benefit)
------------------------------------------------------------------------
Current 0.00% 8.94%
------------------------------------------------------------------------
Deferred 21.72% 7.96%
------------------------------------------------------------------------
Net Earnings 29.18% 32.72%
------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATION
The following table sets forth for the period indicated the number of surgical
cases.
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1999 2000 1999 2000
----------------- ----------------
<S> <C> <C> <C> <C>
Total Number of Cases 681 874 1200 1531
Total Revenue Generated $ 1,081,707 $ 1,370,750 $1,973,770 $ 2,599,453
Revenue Generated per Case $ 1,588 $ 1,568 $ 1,645 $ 1,698
Earnings Before Income Tax per Case $ 828 $ 789 $ 837 $ 881
</TABLE>
THREE MONTHS ENDING June 30, 2000 vs. THREE MONTHS ENDING June 30, 1999
In the three months ending June 30, 2000 Bellaire again recorded record revenue
of $1,370,750 compared to $1,081,707 for the same period in 1999, this
represents a 27% increase in total revenue.
SurgiCare performed 874 cases by June 30, 2000 compared to 681 procedures
done for the same period in 1999, this represents 28% increase in average
monthly utilization. However the revenue generated per case decreased 1.3% from
$1,588 for the six-month period ending June 30, 1999, to $1,568 for the same-
six-month period in 2000. This slight decrease is because the 28% increase in
cases was not proportionate through out each surgical specialty. High volume
quick turn around procedures that are extremely cost efficient to perform made
up a large portion of the increase. These quick turn around cases are very short
procedures, subsequently reimbursement for these types of procedures is usually
lower than procedures that take more time to perform, however what is lost in
reimbursement is offset by increased volume.
The pre-tax earnings generated per case also decreased from $828 per case
for the three-month period ending June 30, 1999, to $789 for the same
three-month period in 2000, this represents a 5% decrease. In 2000 the company
has incurred the cost of being a public company, that it did not experience
during the first half of 1999. These costs such as audit, legal, investor
relations, and shareholder awareness have increased the company's General and
Administrative expenses, thus decreasing the pre-tax earnings per-case.
Direct surgical cost dropped slightly as a percentage of total revenue from
28.79% for the period ending June 30, 1999 to 26.9% for the same period in 2000.
Management expects that direct surgical cost as a percentage of total revenue,
has stabilized at the Bellaire facility, and should continue to remain stable in
26% to 28% range.
General and administrative expenses increased slightly as a percentage of total
revenue from 20.30% for the period ending June 30, 1999, to 20.55% for the same
period in 2000. Management does not consider this increase to be material.
As a percentage of revenue, total expenses also rose ever so slightly from
49.09% for the period ending June 30, 1999, to 49.65% for the same period in
2000. Management anticipates this slow increase to continue for the short term,
as the company absorbs the cost of being public. These cost such as audit,
legal, investor relations, and shareholder awareness increase the company's
overall General and Administrative expenses.
This slight increase in expenses coupled with the 26% growth in revenues
translated to an increase in pre-tax earning of 22.34% to $690,128 for the
three-period ending June 30, 2000, from $564,095 for the same period in 1999.
SIX MONTHS ENDING June 30, 2000 vs. SIX MONTHS ENDING June 30, 1999
In the six-months ending June 30, 2000 Bellaire once again posted record revenue
of $2,599,453 compared to $1,973,770 for the same period in 1999, this
represents a 32% increase in total revenue.
SurgiCare performed 1531 cases by June 30, 2000 compared to 1200 procedures
done for the same period in 1999, this represents 28% increase in average
monthly utilization. Revenues generated per case increased a 3.2% from $1,645
for the six-month period ending June 30, 1999, to $1,698 for the same six-month
period in 2000.
The pre-tax earnings generated per case increased slightly from $837
per case for the six-month period ending June 30, 1999, to $881 for the same
six-month period in 2000, this represents a 5% increase.
As percentage of revenue, total expenses rose from 50.9% for the period
ending June 30, 1999, to 51.9% for the same period in 2000. This increase again
can be attributed to the company incurring the cost of being public, that it did
not experience during the first half of 1999. These costs such as audit, legal,
investor relations, and shareholder awareness have increased the company's
overall General and Administrative expenses.
This 1% increase in expenses as a percentage of revenue, in combination with the
32% growth in revenues translated to an increase in pre-tax earning of 34% to
1,349,423 for the period ending June 30, 2000, from $1,004,652 for the same
period in 1999.
LIQUIDITY and CAPITAL RESOURCES
Since its formation, the Company has financed its operating
activities primarily through cash generated from operations. Net cash provided
by operating activities increased from $.7 million for the six-month period end
June 30, 1999 to $.8 million for the same period in 2000, due primarily to the
level of net income and changes in operating assets and liabilities.
Capital expenditures increased from $30 thousand for the six-month
period ending June 30, 1999 to $314 thousand for the same period in 2000. The
increase was due in part to the additional equipment required to increase case
capacity within specific surgical services, as well as the expenses associated
with the addition of the new operative suite. All anticipated capital
expenditures, can and will be funded from operating revenues.
SurgiCare does not foresee any trend or uncertainties that would
impact the long or short-term liquidity of the company.
The company is in active negotiations with outside funding sources in order to
secure the funding required in order to begin its expansions through its merger
and acquition model.
PART II
OTHER INFORMATION
ITEM 1.
Legal Proceedings
SurgiCare is not currently involved in any legal proceedings.
ITEM 2.
Change in Securities and Use of Proceeds
During the first quarter of 2000, SurgiCare sold 50,000 shares of its
Series A Redeemable Preferred Stock, par value $.005 per share, to Dr. Meynard
Nussbaum, for a total consideration of $22,500, of which $7,500 was paid in cash
and the balance is payable pursuant to a promissory note made by Dr. Nussbaum in
favor of SurgiCare. Each share of the Series A Redeemable Preferred Stock is
convertible into one share of the Company's common stock, subject to certain
adjustments. The securities were sold without registration under the Securities
Act of 1933 (the 1933 "Act")in reliance upon the exemption afforded by Section
4(2) of the 1933 Act, as the Company has determined that the purchaser is a
sophisticated investor with such knowledge of the Company and its affairs as not
to require the protections of the registration provisions of the 1933 Act.
ITEM 3.
Default Upon Senior Securities
SurgiCare has not defaulted on any payments of principal or interest on
any securities.
ITEM 4.
Submission of Matters to a Vote of Security Holder
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.
Date: August 14, 2000 REGISTRANT:
SurgiCare, Inc
By: /s/ David Blumfield
Dr. David Blumfield
President and CEO
By: /s/ CHARLES S. COHEN
Charles S. Cohen
Chief Operating Officer
ITEM 6.
INDEX TO EXHIBITS
DESCRIPTION
EXHIBIT
NUMBER
3.1 * Amended and Restated Certificate of Incorporation of
SurgiCare, Inc.
3.2 * Articles of Incorporation of Bellaire SurgiCare, Inc.
3.3 * By-Laws of Technical Coatings Incorporated
(now SurgiCare, Inc.)
3.4 * By-Laws of Bellaire SurgiCare, Inc.
4 * Certificate of Designation, Powers, Preferences and Rights
of Series A Redeemable Preferred Stock, par value $.001
per share, of SurgiCare, Inc.
10.1 * Agreement, dated July 29,1999, between
SurgiCare, Inc. and Surgery Centers of
America II, Inc.
10.2 * Letter agreement with SCOA
27 * Financial Data Schedule
* Incorporated herein by reference to the Company's Current Report on form 10-SB
filed on August 20, 1999.
(b) reports on Form 8-K. None
