<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended
September 30, 1996 Commission File No.1-10418
UNITED MEDICORP, INC.
(Exact name of registrant as specified in charter)
Delaware 75-2217002
- ---------------- ---------------
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
10210 N. Central Expressway, #400
Dallas, Texas 75231
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
214/691-2140
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 X No
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As of October 1, 1996, there were outstanding 26,310,217 shares of Common Stock,
$.01 par value.
<PAGE>
UNITED MEDICORP, INC.
September 30, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Revenues and Expenses
for the Three Months Ended September 30, 1996 and 1995, and
for the Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . 4
Consolidated Statement of Cash Flows for the
Three Months Ended September 30, 1996 and 1995, and
for the Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . 15
Item 3. Default Upon Senior Securities . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 15
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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<PAGE>
UNITED MEDICORP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (AUDITED)
SEPTEMBER 30, DECEMBER 31,
1996 1995
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CURRENT ASSETS:
Cash and cash equivalents $ 124,189 $ 58,078
Restricted cash 31,130 0
Accounts receivable, less allowance for
doubtful accounts of $6,203 and $7,493,
respectively 232,974 138,970
Notes receivable, less allowance for
doubtful accounts of $0 and $0,
respectively 0 214
Prepaid expenses and other 23,610 20,427
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Total current assets 411,903 217,689
PROPERTY AND EQUIPMENT (net) 138,041 200,996
OTHER ASSETS 15,819 17,373
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TOTAL ASSETS $ 565,763 $ 436,058
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------------ ------------
CURRENT LIABILITIES:
Payable to clients $ 31,130 $ 19,902
Trade accounts payable 50,936 48,230
Accrued expenses 174,301 141,501
Deferred revenue 0 15,959
Current portion of capital lease obligations 31,446 32,487
------------ ------------
TOTAL CURRENT LIABILITIES 287,813 258,079
LONG TERM LEASE OBLIGATION 113,025 138,565
DEFERRED CREDITS 27,662 31,434
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 50,000,000
authorized, 26,415,764 shares issued and
outstanding at 9/30/96 and 12/31/95 264,157 264,157
Less: 105,547 shares of treasury stock, at cost (221,881) (221,881)
Additional paid-in capital 18,552,343 18,552,341
Retained deficit (18,457,356) (18,586,637)
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TOTAL STOCKHOLDERS' EQUITY 137,263 7,980
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 565,763 $ 436,058
------------ ------------
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The accompanying notes are an integral part of these financial statements.
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<PAGE>
UNITED MEDICORP, INC.
CONSOLIDATED STATEMENT OF REVENUES AND EXPENSES
(Unaudited)
<TABLE>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1996 SEPT. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Fee income $ 542,838 $ 450,969 $1,471,263 $1,536,455
Installation income 0 403 6,900 3,593
Interest & other income 54,937 0 54,937 0
---------- ---------- ---------- ----------
TOTAL REVENUES 597,775 451,372 1,533,100 1,540,048
EXPENSES:
Salaries and benefits 271,011 380,817 856,292 1,179,160
Selling, general and
administrative 110,700 127,314 323,642 360,532
Professional fees 16,600 15,156 53,104 49,060
Office and equipment rental 22,668 20,594 75,442 56,354
Depreciation and amortization 28,192 39,792 80,828 98,057
Interest 5,590 3,800 14,581 14,457
Other (144) (1,200) (70) (1,298)
---------- ---------- ---------- ----------
TOTAL EXPENSES 454,617 586,273 1,403,819 1,756,322
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 143,158 $ (134,901) $ 129,281 $ (216,274)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET INCOME (LOSS) PER SHARE $ 0.01 $ (0.01) $ 0.00 $ (0.01)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 26,310,217 26,310,217 26,310,217 26,310,217
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
UNITED MEDICORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1996 SEPT. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $143,158 $(134,901) $129,281 $(216,274)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 28,192 39,792 80,828 98,057
(Increase) Decrease in restricted cash 18,951 0 (31,130) 4,851
Decrease in purchased claims 0 0 0 37,721
(Increase) Decrease in accounts receivable (92,198) 10,725 (94,004) 8,432
Decrease in notes receivable 0 10,000 214 10,000
(Increase) Decrease in prepaid expenses
and other (6,059) (5,685) (3,183) 1,890
Increase (Decrease) in payable to clients (18,951) 268 11,228 (26,372)
Increase (Decrease) in accounts payable (63,908) 468 2,706 15,329
Increase (Decrease) in accrued expenses 33,942 (1,554) 32,800 (3,858)
Increase (Decrease) in deferred revenue 0 15,959 (15,959) 15,959
Increase (Decrease) in deposits and other 518 (726) 1,554 7,454
Increase (Decrease) in deferred credits (3,772) 4,744 (3,772) (18,745)
-------- --------- -------- ---------
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES 39,873 (60,910) 110,563 (65,556)
-------- --------- -------- ---------
INVESTING ACTIVITIES:
Property and equipment, net (6,779) (1,446) (17,870) (1,011)
-------- --------- -------- ---------
NET CASH (USED) PROVIDED BY INVESTING
ACTIVITIES (6,779) (1,446) (17,870) (1,011)
-------- --------- -------- ---------
FINANCING ACTIVITIES:
Repayment of notes payable 0 0 0 (200,000)
Payments of capital lease obligations (3,468) (9,689) (26,582) (9,689)
-------- --------- -------- ---------
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES (3,468) (9,689) (26,582) (209,689)
-------- --------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29,626 (72,045) 66,111 (276,256)
CASH AND CASH EQUIVALENTS, beginning of period 94,563 147,022 58,078 351,233
-------- --------- -------- ---------
CASH AND CASH EQUIVALENTS, end of period $124,189 $ 74,977 $124,189 $ 74,977
-------- --------- -------- ---------
-------- --------- -------- ---------
Additional Cash Flow Information
Cash paid for interest $ 4,322 $ 3,440 $ 10,742 $ 15,051
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
United Medicorp, Inc. (the "Company" or "UMC") is a publicly held company traded
on the over the counter market under the symbol "UMCI". UMC was founded in
March, 1989 to provide medical insurance claims management and advance funding
services to healthcare providers throughout the United States.
The accompanying consolidated financial statements as of September 30, 1996 and
for the three and nine month periods ended September 30, 1996 and 1995 are
unaudited. However, in the opinion of management, all adjustments consisting of
normal recurring adjustments necessary for the fair presentation of financial
position, results of operations, and cash flows for the periods shown have been
made, except the consolidated financial statements do not include any
adjustments that might result from the uncertainty described in Note 2 below.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, although management believes that the disclosures contained
herein are adequate to make the information presented not misleading. These
financial statements should be read in conjunction with the financial statements
and the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
2. CAPITAL INFUSION AND GOING CONCERN
At September 30, 1996, the Company had $124,189 in unrestricted cash and cash
equivalents These funds along with forecasted revenues are projected by
management to be adequate to fund ongoing operations through 1997. The Company
continues to pursue new business primarily through direct contacts with
prospective customers in an effort to generate additional revenues. There is no
assurance that revenues generated from existing customers will continue as
forecasted or that the Company will be successful in securing new customers or
sources of revenue before the Company's remaining capital is depleted. In the
event such new customers or sources of revenue are not secured, management
projects that cash flow from operations may not be sufficient to provide for the
Company's working capital needs beyond 1997, in which case the Company will be
required to raise additional capital in order to continue operating in its
present form. Due to the Company's history of operating losses there can be no
assurance that additional investment capital can be raised in the event the
Company is not successful in securing new customers or new sources of revenue.
3. RESTRICTED CASH
Restricted cash represents payments collected from insurance carriers and
patients on behalf of UMC customers. These funds are remitted to customers by
UMC on a weekly, semi-monthly, or monthly interval.
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<PAGE>
4. ACCOUNTS RECEIVABLE
Accounts receivable represents fees which have been billed to and are due from
customers. Included in the $232,974 of accounts receivable at September 30,
1996 are $36,771 related to services rendered to Healthcare Advisory Service of
Puerto Rico, Inc. ("HAS"). As of the date of this report, HAS cash reserves are
unknown. The ability of HAS to pay UMC for services rendered is contingent upon
receipt by HAS of payment from its customers for services rendered. There can
be no assurance that such payment will be received, or if it will be received
within the timeframe anticipated by HAS and UMC management. The Company has not
established any reserve for bad debts related to receivables due from HAS.
5. PAYABLE TO CLIENTS
Payable to clients includes payments collected from insurance carriers and
patients on behalf of UMC customers. These funds are remitted to customers by
UMC on a weekly, semi-monthly, or monthly interval.
6. FEE INCOME
Fee income includes $118,000 of non-recurring income paid to UMC by HAS on
August 2, 1996 to purchase certain inventories of claims in process pursuant to
a "Settlement and Termination Agreement".
7. INTEREST & OTHER INCOME
Interest & other income includes $54,000 of non-recurring income paid to UMC by
HAS on August 2, 1996 for the release of certain contract rights pursuant to a
"Settlement and Termination Agreement".
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
U.S. OPERATIONS: Late in the first quarter, the Company was notified by its
second largest customer, Mimbres Memorial Hospital ("MMH"), that it had
accepted an offer to be acquired by a hospital chain. The chain has available
the resources necessary to perform all of the billing and collection
functions which had been outsourced to UMC. Effective April 12, 1996, MMH
discontinued transmitting new claims to UMC for processing. UMC earned about
$360K in fees from MMH during 1995, $115,934 in fees during the six months
ended June 30, 1996, and $1,790 in fees during the three months ended
September 30, 1996.
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<PAGE>
Effective September 1, 1996, the Washington Hospital Center ("WHC") executed an
amendment to its existing agreement with UMC whereby WHC authorized UMC to begin
providing patient billing and collection services. UMC's responsibilities under
this amendment include billing and collecting the balances due from the
guarantors of certain classes of patient accounts following collection of
medical insurance payments. UMC management has not yet developed an estimate of
the incremental revenues and expenses that will result from this contract
amendment.
A contract to provide interim staffing services to a major hospital in Texas was
signed on September 18. Under this contract, UMC is currently providing
UMClaimPros personnel to assist the hospital with various tasks associated with
a major system conversion. This engagement is expected to continue for several
weeks.
PUERTO RICAN OPERATIONS: Most of the Company's revenue in Puerto Rico is
derived from HAS, which the Company serves as a subcontractor in regard to HAS'
contract for claims processing services to the Administracion de Facilidades y
Servicios de Salud ("AFASS"). Under this contract, the Company has provided
claims processing and follow up services to nine AFASS funded clinics and one
hospital in Yauco, Puerto Rico.
Effective June 30, 1996, the Company completed a Settlement And Termination
Agreement (the "Agreement") with HAS. Under the Agreement, on August 2, 1996 HAS
paid to UMC a total of $172,000 representing the sum of $46,000 to purchase
UMC's interest in the claims inventory in process for the AFASS clinics located
at Coamo, Juana Diaz, Adjuntas, Jayuga, Villalba, and Santa Isabel; $72,000 to
purchase UMC's interest in the claims inventory in process for the AFASS
hospital located in Yauco; and $54,000 as additional consideration for the
Agreement. Income related to these cash payments was recognized in the month of
August, 1996, when the cash was received. In addition, HAS agreed to pay UMC
$26,101 representing UMC's share of invoices currently in process for payment by
AFASS if and when payment for such invoices is received from AFASS. Also, HAS
agreed to pay UMC 50 percent of the proceeds from the final settlement of HAS'
contract with Humacao, if and when such settlement is completed and payment is
received from Humacao. The estimated amount of the settlement with Humacao is
$14,000, which would yield $7,000 in cash to UMC. The Agreement included a
mutual release by UMC and HAS of any claims either party may have against the
other, and an indemnification of UMC by HAS against any claim by AFASS for a
refund of fees paid.
The Agreement also provided for the continuation of UMC's services to three
AFASS clinics and the AFASS hospital in Yauco (the "HAS Customers") if, in UMC's
sole discretion, the continuation of such services is in UMC's best interest.
Fees earned from the HAS Customers subsequent to June 30, 1996 shall be
allocated 90 percent to UMC and 10 percent to HAS, instead of the 50/50 split in
force prior to the effective date of the Agreement. During October, 1996, UMC
and HAS received verbal notification that HAS' contract with AFASS was
terminated effective September 30, 1996.
At September 30, 1996, UMC's records reflect invoices totalling $36,771 due from
HAS. There can be no assurance that the Company's invoices to HAS will be paid
as expected. The Company has not established any reserve for bad debts related
to receivables due from HAS.
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<PAGE>
On August 2, 1996, UMC retained the services of a healthcare industry consultant
with extensive contacts in the healthcare industry in Puerto Rico. With
introductions provided by this consultant, several sales calls have been made on
major private sector hospitals in Puerto Rico. There can be no assurance that
UMC will be successful in obtaining new business or producing profitable new
revenues from these sales efforts.
On October 7, 1996, UMC completed an alliance with an established physician
billing firm in Puerto Rico. Under this alliance, UMC will provide systems and
marketing expertise relative to managing hospital accounts receivable, and the
Puerto Rican firm will provide on-island management and staff resources and
sales contacts. There can be no assurance that UMC will be successful in
obtaining new business or producing profitable revenues as a result of this
alliance.
During the third quarter, the Company's Puerto Rican operations generated
revenues of $185,148, direct expenses of $56,033 and positive gross margin of
$129,115.
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<PAGE>
The following table sets forth for each period indicated the volume and gross
dollar amount of insurance claims received and fees recognized for each of the
Company's two principal services. In general, collections on most healthcare
providers' new claims ("Ongoing") tend to average about 20 to 80 percent of the
gross claim amount. Backlog collection ratios range from 0 to about 34 percent
of the aggregate gross claim amount because many backlog claims have already
been paid or denied by the insurance carriers prior to submission of the claims
to UMC. For these previously paid claims, UMC often charges an administrative
fee which is less than a collection fee.
CLAIMS PROCESSING VOLUME AND FEES
<TABLE>
1994 1995 1996
------- ------------------------------------- ---------------------------
FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NUMBER OF CLAIMS
ACCEPTED FOR PROCESSING
ONGOING 38,779 46,972 46,021 43,161 47,249 48,280 46,861 40,179
BACKLOG 5,753 0 0 0 3,455 41 0 1
------ ------ ------ ------ ------ ------ ------ ------
TOTAL 44,532 46,972 46,021 43,161 50,704 48,321 46,861 40,180
GROSS AMOUNT OF CLAIMS ACCEPTED
FOR PROCESSING ($000)
ONGOING 18,571 19,182 19,999 18,791 21,660 19,923 21,055 18,068
BACKLOG 3,362 0 0 0 1,269 17 0 0
------ ------ ------ ------ ------ ------ ------ ------
TOTAL 21,933 19,182 19,999 18,791 22,929 19,940 21,055 18,068
COLLECTIONS ($000)
ONGOING 7,851 9,270 9,883 9,613 8,694 9,020 8,257 7,533
BACKLOG 130 272 159 28 60 70 6 0
------ ------ ------ ------ ------ ------ ------ ------
TOTAL 7,981 9,542 10,042 9,641 8,754 9,090 8,263 7,533
FEES EARNED ($000)
ONGOING 371 549 482 449 447 467 465 543
BACKLOG 15 39 15 2 3 3 0 0
------ ------ ------ ------ ------ ------ ------ ------
TOTAL 386 588 497 451 450 470 465 543
</TABLE>
For Ongoing claims, there is typically a time lag of approximately 30 to 45
days from contract execution to computer hardware installation and training
of customer personnel. During this period, Company personnel survey the
customer's existing operations and prepare for installation. Following
installation and training of the customer's personnel, the customer begins
entering claims and transmitting them to the Company. There is usually a
time lag of 30 to 90 days between transmission of a claim to a third party
payor and collection of a claim from that payor.
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<PAGE>
Ongoing fees earned during the third quarter include $118,000 paid on
August 2 to UMC by HAS under the Settlement And Termination Agreement dated
effective June 30, 1996 as discussed above.
QUARTERLY INFORMATION: Fee income increased $91,870, or 20 percent, from
$450,968 for the three months ended September 30, 1995 to $542,838 for the
three months ended September 30, 1996. The increase was due to increased
revenue of $121,753 from Puerto Rican operations and a decrease of $29,883
from domestic operations.
For domestic operations, fee income from "Ongoing" claims processing,
management and collection services decreased by 14 percent from $418,146
for the three months ended September 30, 1995 to $359,633 for the three
months ended September 30, 1996 due primarily to reduced revenue from MMH.
Backlog collection fees decreased by 99 percent, from $2,451 for the three
months ended September 30, 1995 to $23 for the three months ended September
30, 1996 due primarily to reduced backlog fees from MMH. Fees from UMC's
UMClaimPros interim staffing service increased by 62 percent from $20,181
for the three months ended September 30, 1995 to $32,659 for the three
months ended September 30, 1996. Patient billing fees increased from $0
for the three months ended September 30, 1995 to $15,191 for the three
months ended September 30, 1996. Repricing fees increased from $0 for the
three months ended September 30, 1995 to $3,494 for the three months ended
September 30, 1996.
For Puerto Rican operations, fees from clinics increased by 503 percent
from $9,395 for the three months ended September 30, 1995 to $56,605 for
the three months ended September 30, 1996. Physician fees increased from
$0 for the three months ended September 30, 1995 to $2,543 for the three
months ended September 30, 1996. Hospital fees increased from $0 during
the three months ended September 30, 1995 to $72,000 during the three
months ended September 30, 1996. The increased revenues from Puerto Rican
operations represent primarily $172,000 of non-recurring revenues from the
Settlement and Termination Agreement with HAS executed August 2, 1996. Of
these non-recurring revenues, $118,000 was reported in "Fee income" and
$54,000 was reported in "Interest & other income" during the three month
period ended September 30, 1996.
Salaries and benefits for the third quarter of 1996 decreased $109,805 or
29 percent, from $380,817 for the three months ended September 30, 1995 to
$271,011 for the three months ended September 30, 1996. Total headcount
decreased from 52 at September 30, 1995 to 39 at September 30, 1996,
excluding temporary and part-time employees.
Selling, general and administrative expenses decreased $16,613, or 13
percent, from $127,314 for the three months ended September 30, 1995 to
$110,700 for the three months ended September 30, 1996, due primarily to
reduced expenses for the Company's Puerto Rico operations, and reduced
dealer commissions and telephone expenses.
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<PAGE>
Professional fees increased by $1,444, or 10 percent, from $15,156 in the
third quarter of 1995 to $16,599 in the third quarter of 1996, due to
accrual of anticipated increased audit fees for 1996 for both Domestic and
Puerto Rican operations.
Rental expense increased $2,074, or 10 percent, from $20,594 in the third
quarter of 1995 to $22,667 in the third quarter of 1996, due to an
accounting entry in August, 1995 to adjust for one month of deferred rent
credit which remained on the Dallas office lease which expired July 31,
1995 and was renewed in August, 1995. The deferred credit caused August,
1995 rent expense to be lower than normal.
Depreciation and amortization decreased $11,600 or 29 percent, from $39,792
in the third quarter of 1995 to $28,192 in the third quarter of 1996, due
to leasehold improvements becoming fully depreciated in 1996 and $6,500 of
adjustments to IBM depreciation expense in 1995.
Interest expense increased by $1,790 or 47 percent, from $3,800 in the
third quarter of 1995 to $5,590 in the second quarter of 1996, due to
interest paid on a payable to an officer of the Company.
Credits reported in Other expenses decreased $1,056 in the third quarter of
1996 as compared to the third quarter of 1995, due to gains recognized on
the sales of fully depreciated computer equipment in August and September
of 1995.
NINE MONTH INFORMATION: Fee income decreased $58,292, or 4 percent, from
$1,536,455 for the nine months ended September 30, 1995 to $1,478,164 for
the nine months ended September 30, 1996. The decrease was due to
decreased revenue of $152,039 from domestic operations and an increase of
$93,747 from Puerto Rican operations.
For domestic operations, fee income from "Ongoing" claims processing,
management and collection services decreased by 11 percent from $1,243,482
for the nine months ended September 30, 1995 to $1,109,710 due primarily to
reduced revenue from MMH. Backlog collection fees decreased by 93 percent
from $56,637 for the nine months ended September 30, 1995 to $4,131 for the
nine months ended September 30, 1996 due primarily to reduced backlog fees
from MMH. Fees from UMC's UMClaimPros interim staffing service decreased
by 23 percent from $94,725 for the nine months ended September 30, 1995 to
$72,742 for the nine months ended September 30, 1996. Patient billing fees
increased from $0 for the nine months ended September 30, 1996 to $34,984
for the nine months ended September 30, 1996. Repricing fees increased
from $0 for the nine months ended September 30, 1995 to $11,480 for the
nine months ended September 30, 1996. The increased revenue from Puerto
Rican operations consists primarily of $172,000 of non-recurring revenues
from the Settlement and Termination Agreement with HAS which was completed
on August 2, 1996.
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<PAGE>
For Puerto Rican operations, fees from clinics increased by 271 percent
from $28,234 for the nine months ended September 30, 1995 to $104,697 for
the nine months ended September 30, 1996. Physician fees increased from $0
for the nine months ended September 30, 1995 to $10,017 for the nine months
ended September 30, 1996. Hospital fees increased 7 percent from $108,008
during the nine months ended September 30, 1995 to $115,274 for the nine
months ended September 30, 1996. Other Income increased from $0 for the
nine months ended September 30, 1995 to $54,000 for the nine months ended
September 30, 1996.
Salaries and benefits for the first nine months of 1995 decreased $322,867,
or 27 percent, from $1,179,160 for the nine months ended September 30, 1995
to $856,292 for the nine months ended September 30, 1996. Total headcount
decreased from 52 at September 30, 1995 to 39 at September 30, 1996,
excluding temporary and part-time employees.
Selling, general and administrative expenses decreased $36,889, or 10
percent, from $360,532 for the nine months ended September 30, 1995 to
$323,642 for the nine months ended September 30, 1996, due primarily to
reduced expenses for the Company's Puerto Rico operations and reduced
dealer commissions, marketing and advertising costs, telephone expenses,
and contract clerical expenses.
Professional fees increased by $4,044, or 8 percent, from $49,060 in the
first nine months of 1995 to $53,104 in the first nine months of 1996,
primarily due to expenses incurred to comply with new SEC requirements for
electronic filing of forms 10-K and 10-Q.
Rental expense increased $19,088, or 34 percent, from $56,354 in the first
nine months of 1995 to $75,442 for the first nine months of 1996. The
office in Ponce, Puerto Rico was not established until May, 1995. In
addition, the monthly rent expense on the current Dallas office lease
averages $1,059 more per month than the lease that expired July 31, 1995.
Also, in August, 1995 the company recognized $3,915 in deferred rent credit
on the expired lease, causing August, 1995 rent expense to be lower than
normal.
Depreciation and amortization decreased $17,229, or 18 percent, from
$98,057 in the first nine months of 1995 to $80,828 in the first nine
months of 1996, due to various assets becoming fully depreciated in 1995
and 1996.
Credits reported in Other expenses decreased $1,228 in the first nine
months of 1996 as compared to the first nine months of 1995, due to gains
on sales of fully depreciated assets during the first nine months of 1995.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF CAPITAL: Operating capital through September 30, 1996 has been
derived primarily from the issuance of Common Stock ($18.8 million).
CAPITAL EXPENDITURES: During the third quarter of 1996 the Company made
capital expenditures totalling $8,267 for computer hardware and software.
As of September 30, 1996, the Company had no significant outstanding
commitments for capital expenditures.
LIQUIDITY OUTLOOK: At September 30, 1996, the Company had $124,189 in
unrestricted cash and cash equivalents and $232,974 in net accounts
receivable. The Company generated positive cash flow of $29,626 during the
third quarter of 1996 compared to negative cash flow of $72,045 during the
third quarter of 1995.
There can be no assurance that the Company's invoices to HAS for claims
processing services rendered in Puerto Rico will be paid as expected. The
Company has not established any reserve for bad debts related to
receivables due from HAS.
Although the Company generated positive cash flow during both the three
month period and the nine month period ending September 30, 1996, there are
considerable risks, including primarily the need for additional sustainable
revenues, that additional capital will be needed. There can be no
assurance that such capital will be available, or of the terms upon which
such capital might be made available. Additionally, UMC has incurred
cumulative losses of $18,457,356 since inception. These factors raise
substantial doubt as to the Company's ability to continue as a going
concern.
-14-
<PAGE>
UNITED MEDICORP, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is the defendant in a lawsuit filed on March 2, 1995 by a
former employee of the Company. The lawsuit charges the Company with
wrongful discharge. The former employee seeks unspecified past and future
economic loss, damages, exemplary damages, reinstatement, attorney's fees
and interest. The plaintiff has requested a trial by jury. Management
believes this lawsuit to be without merit and intends to vigorously defend
against the claim.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
UNITED MEDICORP, INC.
(REGISTRANT)
By: /s/ Peter W. Seaman Date: November 11, 1996
------------------------------ -----------------
Peter W. Seaman, President and
Chief Executive Officer
(Chief Financial Officer)
-16-
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 155,319
<SECURITIES> 0
<RECEIVABLES> 232,974
<ALLOWANCES> 6,203
<INVENTORY> 0
<CURRENT-ASSETS> 411,903
<PP&E> 138,041
<DEPRECIATION> 28,192
<TOTAL-ASSETS> 565,763
<CURRENT-LIABILITIES> 287,813
<BONDS> 0
0
0
<COMMON> 264,157
<OTHER-SE> (84,618)
<TOTAL-LIABILITY-AND-EQUITY> 565,763
<SALES> 0
<TOTAL-REVENUES> 597,775
<CGS> 0
<TOTAL-COSTS> 454,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,590
<INCOME-PRETAX> 143,158
<INCOME-TAX> 0
<INCOME-CONTINUING> 143,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 143,158
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