<PAGE>
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Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-10418
UNITED MEDICORP, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 75-2217002
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
10210 NORTH CENTRAL EXPRESSWAY, SUITE 400
Dallas, Texas 75231
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 691-2140
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
NONE NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class
COMMON STOCK
Indicate by check mark whether the Registrant has (1) 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K._____
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the average of the bid and asked prices of such stock
on April 2, 1996 was $312,520.
As of April 2, 1996 there were 26,310,217 shares of Common Stock, $.01 par
value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on July 15, 1996 are incorporated herein by reference
in Part III.
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<PAGE>
UNITED MEDICORP, INC.
INDEX TO FORM 10-K
ITEM
NUMBER PART I PAGE
- ------ ------ ----
1 Description of Business. . . . . . . . . . . . . . . . . . . . . . . 3
2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . .11
4 Submission of Matters to a Vote of
Securities Holders. . . . . . . . . . . . . . . . . . . . . . .11
PART II
-------
5 Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . .11
6 Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . .13
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . .13
8 Financial Statements and Supplementary Data. . . . . . . . . . . . .25
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . .25
PART III
--------
10 Directors and Executive Officers of the Registrant . . . . . . . . .26
11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . .26
12 Securities Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . . . . .26
13 Certain Relationships and Related Transactions . . . . . . . . . . .26
PART IV
-------
14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . .27
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
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GENERAL
United Medicorp Texas, Inc., was incorporated in the State of Texas on
March 13, 1989 ("UMC-Texas"). On July 10, 1989, in an exchange of stock, UMC-
Texas was acquired by Gamma Resources, Inc., a publicly-owned Delaware shell
corporation, which simultaneously changed its name to United Medicorp, Inc. (the
"Company", "UMC" or the "Registrant"). All references herein to the Company
include UMC-Texas, unless the context requires otherwise.
The Company provides medical insurance claims management services to health
care providers. The Company employs proprietary and purchased software to
provide claims processing, management and collection services to its customers,
which are primarily hospitals and medical clinics. The Company's basic service
is designed to provide an electronic claims processing, management and
collection service that expedites payment of claims from private insurance
carriers or government payors such as Medicare and Medicaid. The Company also
offers to its customers processing and collection services for uncollected
"backlog" (aged) claims that were not originally submitted through the Company's
system. In addition, from time to time the Company also provides advance funding
services where the Company purchases and then funds a portion of an eligible
customers's claims in advance of payment of such claims by a private insurance
carrier. A service called UMClaimPros was introduced by the Company in December
1994. UMClaimPros are experienced claims processors available for customers'
interim staffing needs.
Management believes that it has developed a computer hardware and
proprietary software system and a line of services which, together with its
experienced claims management personnel, are capable of effectively addressing
the claims management needs of health care providers. In order to develop this
system, the Company initially engaged Andersen Consulting, formerly a division
of Arthur Andersen & Co., to provide the initial design, programming and
installation of its electronic claims processing, management and advance funding
system. Andersen Consulting completed its work for the Company in February
1991.
The Company has also worked with several other companies that provide
enhanced software, computer hardware and maintenance, electronic claim
clearinghouse services, financing and other valuable services specifically
designed to meet the needs of health care providers. Management believes these
efforts have produced a system that provides the Company's customers with
enhanced claims editing, error detection and management capabilities.
Management further believes its application and refinement of electronic and
computer technologies in the health care claims management industry will enable
the Company to provide claims processing services that will significantly
improve its customers' cash flow.
3
<PAGE>
INDUSTRY OVERVIEW
The U.S. healthcare industry continues to experience tremendous change as
both federal and state governments as well as private industry work to bring
more efficiency and effectiveness to the healthcare system. UMC's business is
impacted by trends in the U.S. healthcare industry. As healthcare expenditures
have grown as a percentage of U.S. gross national product, public and private
healthcare cost containment measures have applied pressure to the margins of
healthcare providers. Historically, some payers have willingly paid the prices
established by providers while other payers, notably the government and managed
care companies, have paid far less than established prices (in many cases less
than the average cost of providing the services). As a consequence, prices
charged payers willing to pay established prices increased in order to recover
the cost of services purchased by the government and others but not paid by them
(i.e., cost shifting). Increasing complexity in the reimbursement system and
assumption of greater payment responsibility by individuals have caused
healthcare providers to experience increased receivables and bad debt levels and
higher business office costs. Providers overcome these pressures on
profitability by increasing their prices, by relying on demographic changes to
support increases in the volume and intensity of medical procedures, and by cost
shifting. As providers experience limitations in their continued ability to
shift cost in these ways, the amount of reimbursement received by UMC's clients
may be reduced and UMC's rate of growth in revenues, assuming present management
fee levels, may decline. However, management believes UMC may benefit from
providers' attempts to offset declines in profitability through seeking more
effective and efficient business management services such as those provided by
UMC. UMC continues to evaluate governmental and industry reform initiatives in
an effort to position itself to take advantage of the opportunities created
thereby.
CUSTOMER SERVICES AND FEE STRUCTURE
ONGOING ACCOUNTS RECEIVABLE MANAGEMENT SERVICES: Customers using the
Company's "Ongoing" claims processing service typically receive computer
software from the Company that facilitates claims preparation, editing and
transmission. Under the Company's Ongoing service, the Company edits, submits,
manages, coordinates, submits required additional information, and collects
claims on behalf of its customers. In order to implement this package of
services the Company often installs interface and editing software on a computer
located in the customer's offices. This "front end" system assists the
customer's personnel in the preparation and editing of claims, which are then
electronically transmitted to the Company and, in turn, transmitted directly or
through an electronic clearinghouse to the insurance carrier or governmental
payor, as the case may be. In cases where the insurance carrier or governmental
payor cannot receive or efficiently handle the Company's electronically
transmitted claims, the Company will print the claim on a standard industry form
and mail it to the insurance carrier. After the claims are processed, the
Company's claims operations personnel utilize computer-assisted follow-up
methods to ensure timely collection. The payor is directed to send the claim
payment directly to the customer or to UMC. In most cases the Company charges a
percentage of actual claim payment amounts collected as its fee. Complete
claims settlement reports are sent to customers on a semi-weekly or weekly
interval. Management believes that the Company's claims collection experience
to date and increasing awareness throughout the healthcare industry of the need
to cut costs and improve cash flow will increase demand for this type of
service.
4
<PAGE>
BACKLOG ACCOUNTS RECEIVABLE SERVICES: Customers using the "Backlog"
service engage the Company to collect aged claims which usually have been
previously filed with an insurance carrier or governmental payer, but which
remain uncollected. When a customer enters into a backlog collection agreement,
the customer submits completed insurance claim forms to the Company. The claims
are then entered into the Company's claims management and collection system, and
the Company's standard claims processing and collection procedures are applied
to collect these backlog claims. The Company believes that this program is
attractive to potential backlog collection customers because the Company
collects outstanding claims at competitive rates. Backlog collection contracts
generally involve a one-time placement of claims for collection.
ADVANCE FUNDING SERVICES: Customers who use the Company's advance funding
service submit claims to the Company, which in turn transmits them to the
appropriate insurance carrier. To implement this service, the Company purchases
an undivided interest in a claim and advances between 45 and 60 percent of the
insurance claim amount to the customer within seven business days of purchase by
the Company. When the carrier pays the claim, it sends the payment directly to
the Company's post office box for deposit pursuant to a special power-of-
attorney granted by the customer to the Company. The Company then disburses the
balance of that insurance claim payment to the customer, minus the funds
previously advanced and the Company's fee. In the event payment from an
insurance carrier is not received within 120 days after a given claim is funded,
the Company has the right, under the terms of its standard customer contract, to
require that the customer repurchase the claim or offset the amount of the
payment against balances otherwise payable to the customer by the Company. The
Company generally continues its collection efforts for at least 120 days. The
advance funding fee is not payable by the customer for any claim not collected.
To qualify for the Company's advance funding service, a customer is
required to allow the Company to file appropriate Uniform Commercial Code
financing statements to establish the Company's interest in the customer's
insurance claims receivable. In addition, the Company provides advance funding
services only on those claims written on insurance carriers whose financial
standing meets financial criteria established by the Company. Furthermore, the
Company requires that the customer verify the existence and amount of coverage
on each insurance claim with the insurance carrier before transmitting the claim
to the Company. The Company reverifies insurance coverage with the carrier
before advancing any funds to the customer.
During September 1994 the Company reentered the advance funding services
market by signing a contract to purchase claims with an anticipated realizable
value of $145,643. As of December 31, 1994, $37,720 of these purchased claims
remained to be collected from commercial insurance companies. The Company
collected the remainder of the claims purchased under this contract in May of
1995. The Company's ability to raise capital to fund the purchase of claims
will determine the extent of the Company's ability to offer advance funding
services in the future.
5
<PAGE>
MANAGED CARE CLAIMS REPRICING SERVICES: With the advent of managed care,
many healthcare providers are being asked to accept discounted pricing
arrangements in exchange for the opportunity to provide services to a given
group of patients. These discounted pricing arrangements may be structured as a
fixed percentage discount from standard charges, a defined "fee schedule" which
results in lower charges for selected services, or more complicated structures
involving caps, outliers, and per diems. These discounted fee structures are
collectively referred to as "contracted rates".
Many healthcare providers do not have the systems and personnel needed to
efficiently and accurately reprice large volumes of managed care claims
consistent with contracted rates. UMC has developed the specifications for a
claims repricing module to be developed within UMC's proprietary Claims
Automation Support System ("CLASS"), and has initiated program development work
to enhance CLASS to support repricing functions.
UMCLAIMPROS: The Company began providing interim staff services under the
UMClaimPros label early in 1995. UMClaimPros are experienced billing and
collection personnel who are employed by UMC and placed on temporary assignments
in hospital and physician business offices. During 1995, the UMClaimPros
service was only offered in the Dallas area.
ECSPRESS SERVICES: Customers using the Company's "ECSpress" service
typically receive computer software from the Company that facilitates claims
preparation, editing and transmission. Under the Company's ECSpress service,
the customer edits and transmits claims using the Company's software. This
"front end" system assists the customer's personnel in the preparation and
editing of claims, which are then electronically transmitted to the Company and,
in turn, transmitted directly or through an electronic clearinghouse to the
insurance carrier or governmental payor, as the case may be. In cases where the
insurance carrier or governmental payor cannot receive or efficiently handle the
Company's electronically transmitted claims, the Company will print the claim on
a standard industry form and mail it to the insurance carrier. After the claims
are sent to the insurance carriers, customers are provided with acknowledgement
and error reports for the claims submitted. In most cases the Company charges a
flat fee per claim or per month. Management believes that the Company's front
end software and increasing awareness throughout the healthcare industry of the
need to cut costs and improve cash flow will increase demand for this type of
service.
FEE STRUCTURE: The Company has established both contingency and non-
contingency based fee structures which are intended to allow prospects for the
Company's services a wide range of pricing options. Under the Company's
contingency based fee structure, fees are charged as a percentage of amounts
collected. For the Company's Ongoing service, the Company generally charges
healthcare providers contingency fees ranging from 4.75 to 10 percent of the
amount the Company collects on behalf of these providers, depending upon the
average claim amount collected. Backlog collection services are usually priced
between 8 and 15 percent of the amount collected, depending upon the age of the
claims. Collection ratios generally range from 0 percent to about 40 percent
for Backlog projects and about 25 percent to 80 percent for Ongoing projects.
UMClaimPros services are priced at a per hour rate based on the salary of the
assigned personnel. ECSpress services are priced at a flat fee per claim or per
month. Management believes that the Company's fee structure for its package of
services is competitive.
6
<PAGE>
SOFTWARE AND DATA PROCESSING
The Company's ability to provide its services on a large scale depends on
the successful operation of computer hardware and software capable of handling
the processing and transmission of insurance claims from the customer to the
insurance carrier, and through the intermediate steps that such claims must take
during the process. Andersen Consulting designed and implemented the original
prototype of the Company's medical insurance claims processing and management
system. The system became operational during the second half of 1989. In
February, 1991 the Company sold to Andersen Consulting a license to use an early
prototype version of the medical insurance claims processing and management
software system and simultaneously discontinued the use of Andersen Consulting's
services. Since then, the Company has continued to develop and enhance its
systems using programmers employed by the Company.
The computerized claims filing process involves the use of IBM PC-
compatible claims processing software. Such software is used in hospital
environments and in physician offices where integration with an existing
computer system is desirable. The Company installs its software at the
customer's site and trains the customer's personnel in the use of such software.
The claims processing software packages currently used by the Company are
specifically designed to expedite claims preparation and processing and,
simultaneously, to reduce errors associated with manual claims processing.
Claims are edited for certain mistakes, such as invalid or missing information,
using the claims processing software. Claims are then transmitted directly to
the Company, which performs further editing before they are forwarded to the
insurance carrier directly or through any one of several insurance claim
clearinghouses used by the Company. The clearinghouses format and
electronically transmit the claim data according to the specifications of the
individual insurance carriers, which avoids delays resulting from paper routing
and the errors resulting from insurance carrier data re-entry. If, however, the
insurance carrier cannot receive or efficiently handle the Company's
electronically transmitted claims, the Company will print the claim on a
standard industry form and mail it to the insurance carrier. The Company
intends to continue to enhance and refine its claims processing and repricing,
customer reporting, claims tracking and collection functions during 1996.
SALES AND MARKETING
The Company solicits potential customers through its own resources and
through independent sales representatives.
On June 2, 1994, the Company signed an agreement with Healthcare Advisory
Services of Puerto Rico, Inc. ("HAS"). Under the agreements, the Company
provides claim processing, submission to payors and collection follow up
services to customers of HAS in the Puerto Rican market during a three year
term. HAS is responsible for marketing, sales and payer relations in the Puerto
Rican market. HAS employs two full time sales representatives.
7
<PAGE>
During 1995, the Company signed three contracts with domestic healthcare
providers. A contract was signed to deliver "patient balance" collection
services to a major hospital in the midwest. A contract was signed to provide
third party billing and patient balance collection services to selected clinics
to be opened by a national operator of clinics. A third contract was signed to
deliver claims repricing services to a managed care provider network.
As noted elsewhere in this report, UMC has served as a sub-contractor to
Healthcare Advisory Service of Puerto Rico ("HAS") in processing claims for HAS'
customers in Puerto Rico. In September 1995, UMC signed the first contract in
the UMC name in Puerto Rico with an emergency room physician group. UMC will
continue its attempts to close additional contracts under the UMC name in the
Puerto Rican market.
COMPETITION
The Company has competition for each segment of its package of services.
There are electronic claims processing companies, claims collection companies,
claims management companies, factoring and financing firms, software vendors and
temporary employment contractors. In addition, the Company faces stiff
competition from the traditional in-house claims processing and collection
departments of hospitals and other healthcare providers. Management believes
that the Company's principal competitive strengths are the quality and
reliability of its computer hardware and software systems, compatibility of its
systems with those of prospective customers, technical support, service quality,
industry experience, the number of insurance carriers to whom claims can be
submitted, the breadth of services offered and the price of such services. The
Company offers a broad range of services and believes that its fee structure
compares favorably with that of its competitors. Nevertheless, many of the
Company's competitors currently have competitive advantages over the Company.
In particular, some competitors, particularly those in the financial services
business, are many times larger than the Company and could, if they chose to
enter the market for the Company's line of services, devote resources and
capital to the market that are much greater than those which the Company
currently has available or may have available in the future.
SIGNIFICANT CUSTOMERS
During 1995, 91% of fee revenue was earned from three customers, the
Washington Hospital Center (WHC), Mimbres Memorial Hospital (MMH), and
Healthcare Advisory Service of Puerto Rico, Inc. (HAS). The Washington Hospital
Center provided revenue totaling $1,262,899, or 64% of total fee revenue. Of
the revenue generated by WHC during 1995, 99% was generated as a result of the
ongoing contract described below and 1% was generated as a result of backlog
contracts. Mimbres Memorial Hospital generated revenue of $364,365, or 18% of
total fees. Of this revenue, 82% were ongoing fees, 16% were backlog fees, and
1% were funded claims fees. On March 14, 1996, MMH advised the Company that its
contract for ongoing accounts receivable management services would not be
renewed upon its expiration on April 1, 1996. HAS generated revenues totaling
$176,635, or 9% of total fees.
During 1994, 85% of fee revenue was earned from WHC. Of the revenue
generated by WHC during 1994, 99% was generated as a result of the ongoing
contract described below and 1% was generated as a result of backlog contracts.
8
<PAGE>
During 1993, 86% of fee revenue was earned from WHC. Of the revenue
generated by WHC during 1993, 79% was generated as a result of the ongoing
contract described below and 21% was generated as a result of backlog contracts.
On December 15, 1992, the Company entered into a contract with WHC to
provide ongoing processing of all of WHC's outpatient claims due from Medicare,
Medicaid, Blue Cross, and commercial insurance carriers. Consistent with
industry practice, this ongoing claims processing contract with WHC may be
terminated by WHC or the Company upon 30 days prior written notice.
PATENTS AND TRADE SECRETS
As has been typical in software-intensive industries, the Company does not
hold any patents. The Company believes that patent protection is of less
importance in an industry characterized by extremely rapid technological change
than the expertise, experience and creativity of the Company's product
development personnel. Employees of the Company are required to sign non-
disclosure agreements. The Company relies on these agreements, its service
contracts with customers, and trade secrets to protect its proprietary software,
and to date, has had no indication of any material breach of these agreements.
EMPLOYEES
At March 15, 1996, the Company employed 41 permanent full time employees, 2
permanent part time employees and 1 temporary employee. Of the 41 permanent
full time, 9 employees were employed in Puerto Rico. From time to time the
Company supplements its employee work force with temporary personnel to assist
in claims processing. The Company believes that its relations with its
employees are good. Its employees are not currently, nor have they ever been,
represented by a union and there have not been any stoppages, strikes or
organizational attempts. The Company believes that its continued ability to
recruit and maintain highly skilled management, marketing, sales, technical,
collections and customer service personnel is essential to its future success.
9
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
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The Company's executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- ---------
<S> <C> <C>
Peter W. Seaman 46 President and Chief Executive Officer,
and Director
(Principal Accounting Officer)
Donald E. Collins 41 Vice President, Operations
Mary E. Rogers 33 Vice President, Information Systems
</TABLE>
MR. SEAMAN was promoted to President and Chief Executive Officer on
January 28, 1994. Mr. Seaman joined the Company on July 17, 1991 as Vice
President and Chief Financial Officer and subsequently assumed additional
responsibilities managing the Company's Systems department. Mr. Seaman's
prior employment includes two years as Director of Business Development for
TRW Receivables Management Services and three years as Vice President,
Planning and Systems Development, for the Accounts Receivable Management
Division of the Chilton Corporation. Prior to joining the Chilton Corporation,
Mr. Seaman was Vice President and Chief Financial Officer for Corliss, Inc.,
a collection systems and services company. Before that, Mr. Seaman held a
number of finance, marketing and auditing positions with the Datapoint
Corporation, Rockwell International, and Coopers and Lybrand. Mr. Seaman holds
a B.A. in Accounting from Duke University and is a Certified Public Accountant.
MR. COLLINS was promoted to Vice President, Operations on August 29, 1994.
Mr. Collins joined the Company on June 15, 1994 as Director, Claims Operations
and was instrumental in rapidly improving collection performance for the
Company's clients. Before joining UMC, Mr. Collins served one year as Director
of the Central Business Office at OrNda Healthcorp. Before that, two years as
Director of the Central Business Office at Samaritan Health Services, a non-
profit hospital system located in Phoenix, Arizona. Mr. Collins also spent two
and a half years as Corporate Director of Business Office Operations for EPIC
Healthcare Management Group, a Dallas based proprietary system of 36 hospitals.
During that time, Mr. Collins participated in EPIC's start-up, and directed the
establishment of the corporate accounts receivable operation. Before that, Mr.
Collins was a Supervising Consultant for Coopers & Lybrand. Mr. Collins spent
three years with Coopers and worked on a number of healthcare accounts
receivable and information systems consulting projects. He has also held
several management positions with hospitals in accounts receivable and materials
management. Mr. Collins holds a B.S. in Education from Columbia Union College.
MS. ROGERS was promoted to Vice President, Information Systems on December
16, 1994. Ms. Rogers joined the Company on September 22, 1993 and was promoted
to Director of Information Systems in January, 1994. Ms. Rogers' prior business
experience includes two years as a Senior Systems Design Analyst for CTI
Limited, Inc., a property management software development firm, and three years
as a Senior Systems Design Analyst for Andersen Consulting. Ms. Rogers holds a
B.B.A. in Finance from Southern Methodist University.
10
<PAGE>
ITEM 2. PROPERTIES
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The Company's corporate offices and operations are located in an 8,230
square feet leased office space in Dallas, Texas. On August 1, 1995, the lease
on this space was renegotiated with a five and one-half year term extending
until January 31, 2001. The first six months through January 31, 1996 are rent
free. Effective February 1, 1996 through January 31, 1999, the Company's
monthly rent is $7,544. From February 1, 1999 through January 31, 2000, and
February 1, 2000 through January 31, 2001, the monthly rent will be $7,887 and
$8,230 respectively. The Company has the option to terminate this lease after
three years of occupancy, providing it gives a ninety day notice to the Lessor.
Management believes that its facilities are well-located and are in good
condition. The Company's future facilities requirements will depend upon the
success of its business. Management believes that there is adequate office
space available should its space requirements increase.
ITEM 3. LEGAL PROCEEDINGS
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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 Plaintiff seeks reimbursement for unspecified past and future
economic loss, damages, exemplary damages, reinstatement, attorney's fees and
interest. Management believes this lawsuit to be without merit and intends to
vigorously defend against the claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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NONE
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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(a) Market Information
The Company's Common Stock began trading on a limited basis in the
over-the-counter market on August 3, 1989, and was approved for quotation on
the NASDAQ Inter-Dealer Quotation System ("NASDAQ") effective December 27,
1989, under the trading symbol UMCI. The Common Stock began trading under
the symbol UMI on the Boston Stock Exchange ("BSE") on December 22, 1989. On
August 18, 1992 the Company's Common Stock was deleted from NASDAQ due to
failure to maintain bid price, capital and surplus, and total assets at the
levels required for continued inclusion in NASDAQ. Trading of the Company's
Common Stock was suspended by the BSE, on June 2, 1995, pending SEC approval
to delist the stock. The Company no longer meets the minimum asset and
stockholder equity requirements necessary to continue trading on the BSE.
11
<PAGE>
The following table sets forth, with respect to the NASDAQ (the Company's
primary market until August 18, 1992), the BSE, and quotes on the over the
counter market, Common Stock bid prices for the periods indicated.
<TABLE>
<CAPTION>
OVER THE COUNTER(1)
------------------
PERIOD HIGH ($) LOW
------ ---- ----
<S> <C> <C>
January 1 to March 31, 1993 9/16 3/16
April 1 to June 30, 1993 3/8 5/32
July 1 to September 30, 1993 3/4 1/4
October 1 to December 31, 1993 1/2 3/16
January 1 to March 31, 1994 3/8 7/32
April 1 to June 30, 1994 5/16 1/8
July 1 to September 30, 1994 3/8 5/32
October 1 to December 31, 1994 7/32 1/16
January 1 to March 31, 1995 1/8 1/32
April 1 to June 30, 1995 3/32 1/32
July 1 to September 30, 1995 1/16 1/32
October 1 to December 31, 1995 1/16 .01
</TABLE>
(1) All bid prices between January 1, 1993 and June 2, 1995 were quoted on the
Boston Stock Exchange. All bid prices reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions. All prices shown subsequent to June 2, 1995 reflect trade prices
on the over the counter exchange ("pink sheets").
(b) Shareholders
At March 15, 1996 there were 26,415,764 shares of Common Stock outstanding,
held by 1,073 shareholders of record, not including 105,547 shares held in
treasury by the Company.
(c) Dividends
The Company has never paid cash dividends. Management presently intends to
retain any earnings for the operation and expansion of the Company's business
and does not anticipate paying cash dividends in the foreseeable future. Any
future determination as to the payment of dividends will depend upon results of
operations, capital requirements, the financial condition of the Company and
such other factors as the Board of Directors of the Company may consider.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
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The following table presents selected consolidated financial data at
December 31, 1995, 1994, 1993, 1992, and 1991, and for the years ended December
31, 1995, 1994, 1993, 1992, and 1991. The information presented for 1995, 1994,
and 1993 was derived from the consolidated financial statements of the Company
included elsewhere in this report. Information presented for 1992 and 1991 was
derived from consolidated financial statements previously filed by the Company.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues $1,989,865 $1,342,848 $ 1,402,614 $ 872,501 $ 3,452,716
Operating expenses 2,275,610 2,243,906 2,548,196 2,947,457 7,291,679
---------- ---------- ------------ ----------- -----------
Net loss $ (285,745) $ (901,058) $(1,145,582) $(2,074,956) $(3,838,963)
---------- ---------- ------------ ----------- -----------
---------- ---------- ------------ ----------- -----------
Net loss per common share $(.01) $(.04) $(.05) $(.14) $(.30)
At December 31: 1995 1994 1993 1992 1991
---------- ---------- ------------ ----------- -----------
Cash and cash equivalents $58,078 $351,233 $847,318 $113,145 $389,128
Restricted cash $0 $4,851 $4,851 $4,851 $134,708
Accounts receivable $138,970 $154,592 $169,982 $30,313 $89,502
Working capital $(40,390) $139,306 $706,338 $(675,677) $(438,868)
Net property and equipment $200,996 $322,300 $194,102 $329,595 $814,534
Net capitalized software $0 $0 $0 $0 $200,000
Total assets $436,058 $935,166 $1,250,899 $582,394 $1,703,048
Long-term portion of capital
lease obligations $138,565 $164,187 $0 $0 $319,977
Deferred Credits $31,434 $31,319 $89,125 $125,274 $171,530
Stockholders' equity (deficit) $7,980 $293,725 $841,102 $(434,518) $112,501
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ----------------------------------------------------------------------------
The Company emerged from the development stage during the fourth quarter of
1991. During the period from its inception on March 13, 1989 until the fourth
quarter of 1995, the Company raised capital and incurred significant
expenditures primarily for systems development, for developing and implementing
a marketing program and generally to build and maintain an organization to
facilitate the management of the Company. Accordingly, the Company has reported
a loss since its inception, and any comparison between periods does not
necessarily present a meaningful analysis because of the Company's level of
operations in each period.
13
<PAGE>
RESULTS OF OPERATIONS
GENERAL:
1993: On January 12, 1993, J. Otis Winters was elected Chairman of the Board of
Directors replacing Barry McCurdy, who resigned as Chairman but continued to
serve as a director. Mr. Winters is Chairman of Pate, Winters and Stone, Inc.,
a management consulting firm located in Dallas.
On February 19, 1993 the Company executed a Settlement And Termination
Agreement with its principal equipment lessor, Summit Capital Corporation
("Summit") and its assignee, American Pacific Acceptance Corporation ("APAC").
Under the terms of the agreement, UMC agreed to pay $316,440 (including sales
tax) and issue 388,750 shares of its Common Stock in exchange for clear title to
all of the computer hardware, software, and telephone equipment leased from
Summit. In addition, UMC, Summit, and APAC released each other from all
obligations and claims arising under the lease agreements. The settlement
agreement also provides registration rights to APAC relative to the shares
issued under the settlement agreement. The required payment of $316,440 was
paid by the Company on February 23, 1993 with funds derived from the proceeds of
a private sale of the Company's Common Stock which is described below. The
financial impact of this settlement was to eliminate an arrearage of $72,000 in
lease payments which were past due as of February 2, 1993; eliminate remaining
lease payments totaling $456,000 which were due to be paid in monthly
installments of $24,000 from March 1, 1993 through September 1, 1994; and avoid
additional expenditures estimated to be in the range of $50,000 to $75,000 to
exercise purchase options at the end of the lease period for the fair market
value of equipment essential to ongoing operations.
On February 22, 1993, the Company completed a private sale of its Common
Stock. A total of 3,283,000 shares were sold at a price of $.35 per share. The
Company received net proceeds of $1,138,199 after deducting legal fees and other
expenses of the offering.
On March 3, 1993, the Company executed a Settlement And Termination
Agreement with Danka Leasing (Danka), an office equipment lessor, relative to
two lease agreements covering the Company's copier equipment. Under the terms
of this agreement, the Company paid $16,238 for clear title to the equipment and
a full release from all claims arising under the copier lease contracts. The
financial impact of this settlement was to eliminate an arrearage of $13,096 in
lease payments which were past due as of March 3, 1993; eliminate remaining
lease payments totaling $7,778 which were due to be paid in monthly installments
of $1,142 from April 1, 1993 through July 1, 1993, and $535 from August 1, 1993
through January 1, 1994; and avoid additional expenditures estimated to be in
the range of $7,000 to $12,000 to exercise purchase options at the end of the
lease periods for the fair market value of the copier equipment.
14
<PAGE>
On August 6, 1993, the Company executed Sales Agent Agreements (the
"Agreements") with Consolidated Associates, Inc. (CAI) and Tomar Investments
(TI), (the "Sales Agents"). The Agreements evolved from negotiations to renew
an existing agreement with CAI, with which UMC has maintained a Sales Agent
Agreement since August 1991. The Sales Agents have in the past provided
services which are considered by UMC management to have been instrumental in
signing several significant customer contracts, including the current ongoing
contract with The Washington Hospital Center. The Agreements provide for a
three year term during which the Sales Agents shall assist UMC in closing
contracts with hospitals and clinics, and support UMC in maintaining its
relationships with such hospitals and clinics.
The Sales Agents are to be compensated for their services via payment of a
cash commission, which is determined based on the fees collected by UMC from
customers referred to UMC by the Sales Agents. In addition, TI was provided a
"warrant incentive plan" under which TI was granted warrants to purchase up to
750,000 shares of UMC Common Stock at a price of $.25 per share, subject to
certain conditions. Of these, 150,000 warrants are exercisable immediately.
Warrants to purchase 250,000 additional shares become exercisable upon the
attainment by UMC of $550,000 in net fees, as defined in the Agreements, during
any consecutive three month period from customers referred by the Sales Agents.
Thereafter, additional warrants to purchase up to 350,000 shares become
exercisable based on the ratio of one share for each $10.00 of incremental net
fees above the highest amount of net fees reported in any previous three month
period from customers referred by the Sales Agents.
During the fourth quarter of 1993, the Company received contract
cancellation notices from the following customers: South Miami Hospital,
effective October 20, 1993; Hamilton Hospital, effective November 1, 1993;
and Highland Lakes Hospital, effective December 31, 1993. These contracts
combined generated average monthly fee revenue of $13,803 and $9,824 during
the third and fourth quarters of 1993, respectively.
1994: On September 1, 1994, the Company completed a private offering to
offshore investors of 2,369,999 shares of UMC Common Stock at a price of $.15
per share. The offering generated net proceeds of $348,011 after deducting
legal fees and other expenses of the offering.
On September 30, 1994, the Company signed a promissory note to borrow
$200,000 from an offshore bank. The funds borrowed were used to purchase claims
under an Advance Funding Service contract provided to a new hospital customer.
At December 31, 1994, the Company had outstanding advances to a customer,
against the purchase price of claims, of $17,163.
On September 13 and October 1, 1994, the Company executed contracts with
the Mimbres Memorial Hospital to perform the initial processing, submission to
payers, and collection follow up of claims due from several payer classes. In
addition, the Company agreed to purchase certain medical accounts receivable
under a separate medical claims purchase contract. Revenues of $42,347 were
generated from this customer during 1994.
15
<PAGE>
On December 30, 1994, the Company leased a new IBM A/S 400 Advanced System
9406 Model 300 computer, for a term of 66 months including 6 months of deferred
payments. The total amount financed, including the rollover of the remaining
lease payments under the previous A/S 400 lease and financing of the maintenance
contract on the new computer, was $182,752. Monthly lease payments will be
$4,196 from June 1995 until May 2000. The Company's capital lease payment
obligations totaled $247,844 as of December 31, 1994, of which $25,456 is
payable in 1995, $50,352 is payable in each year through 1999 and $20,980 is
payable in 2000. Of the total future payments of $259,620 under this lease,
$39,801 represents interest, $13,735 represents maintenance and $11,754
represents sales tax. The A/S 400 equipment financed under this lease may be
purchased at the end of the lease for $1.
1995: On January 30 and February 24, 1995, the Company made two installments
to complete repayment of all principal and interest due on a $200,000 note due
to an offshore bank. The Company borrowed this money on September 30, 1994, to
provide advance funding services to the Mimbres Memorial Hospital in Deming, New
Mexico. The Company completed collection of all claims purchased from MMH under
this advance funding contract in May 1995.
During 1995, the Company signed three contracts with domestic healthcare
providers. A contract was signed to deliver "patient balance" collection
services to a major hospital in the midwest. A contract was signed to provide
third party billing and patient balance collection services to selected clinics
to be opened by a national operator of clinics. A third contract was signed to
deliver claims repricing services to a managed care provider network.
The Company's UMClaimPros interim staffing service, which was introduced to
the marketplace in late December, 1994, generated $116,489 in fees during 1995.
The gross margin on UMClaimPros services is considerably lower than the gross
margin on UMC's other services.
The number of full time permanent employees increased from 45 at
December 31, 1994 to 49 at December 31, 1995.
16
<PAGE>
PUERTO RICAN OPERATIONS:
1995: The Company's principal source of revenue in Puerto Rico results from
a contract between Healthcare Advisory Service of Puerto Rico, Inc. ("HAS"),
and a government agency known as "AFASS." Under this contract, the Company
serves as a subcontractor to HAS in processing claims with dates of service
from October 1, 1994 to June 30, 1995 for a government funded hospital ("GH")
and four government funded clinics. UMC's fees for services rendered to the
clinics are computed at 10% of collections. During 1995, the Company
recognized fees totaling $108,008 for services rendered to the GH. These
revenues were based on a fee structure which required that the Company meet a
collections baseline requirement of $1,875,000, above which the Company
received fees based on a percentage of collections. In June 1995, the HAS
contract with AFASS was amended to allow the continuation of services for an
undefined period beginning July 1, 1995. The baseline for the GH portion of
the contract was reset at $2,500,000 for collections from claims with dates
of service during the period from July 1, 1995 to June 30, 1996. In
addition, HAS and UMC received the right to process claims from four
additional clinics, thus increasing the number of AFASS clinics served to
eight.
Due to differing interpretations surrounding the contract between HAS
and UMC, it is uncertain whether fees recognized by the Company during 1995
will be subject to a final reconciliation (and potential adjustment) between
HAS and AFASS. In management's judgement, any potential adjustment would not
be significant. Additionally, based on the July 1995 to June 1996 baseline
requirement in force and on the Company's collections projections, it is
uncertain whether the Company will recognize any revenue from the principal
Puerto Rican source during 1996. However, the $2,500,000 baseline
requirement related to claims incurred during the period from July 1995 to
June 1996 is currently under negotiation. In management's judgement, the
direct incremental costs of administering the GH portion of the contract are
not significant.
During 1995, the Company received cash payments from HAS totalling
$39,000 in repayment of a number of short term loans the Company made to HAS
to sustain HAS' operations during late 1994 and early 1995. As of December
31, 1995, HAS was current with respect to all invoices payable to UMC.
During 1995, the Company's Puerto Rican operation generated total
revenues of $176,635, with an operating loss of $58,837. The primary reasons
for the loss were the start up costs incurred primarily during the first half
of 1995 to train employees and develop UMC's claims entry, editing,
submission, and follow up processes consistent with the dynamics of the
Puerto Rican market; the costs incurred to set up UMC's office in Ponce; the
costs and expected delay in collections associated with the start up of
services for the four additional AFASS clinics for claims with dates of
service beginning July 1, 1995; and the costs associated with the start of a
new baseline measurement period for GH for claims with dates of service
beginning July 1, 1995.
On September 1, 1995, the Company signed a contract with a group of 15
emergency room physicians. This contract is significant in that it
established the first direct relationship between a customer and the Company
in Puerto Rico. The Company estimates that this contract will produce between
$800 and $1,000 in monthly revenue.
17
<PAGE>
The Company's headcount in Puerto Rico at December 31, 1995 consisted of
one manager, one supervisor, five full time employees, and two part time
employees.
1994: On June 2, 1994, the Company signed agreements with Healthcare
Advisory Services of Puerto Rico, Inc., and its related company, Hospital
Advisory Service ("HAS"). Under the agreements, the Company provided claims
processing, submission to payers and collection follow up services to the
customers of HAS in the Puerto Rican market during a three year term. HAS is
responsible for marketing, sales and payer relations in the Puerto Rican
market. The Company agreed to pay HAS a monthly retainer of $12,000 for six
months, totalling $72,000.
On May 23, 1994, HAS signed a contract with the Municipio De Humacao
("Humacao") to provide the Company's services to a municipally funded clinic
in Humacao. Revenue of $2,003 was generated from the Humacao clinic during
1994.
On September 19, 1994, HAS signed a contract with the Administracion De
Facilidades Y Servicios De Salud ("AFASS"), the health department for the
Commonwealth of Puerto Rico, to provide claims processing services for four
clinics and one hospital which are funded by AFASS. No revenues were
generated from the AFASS contract during 1994. During 1994, the Company
incurred start up costs for operations in Puerto Rico of $155,978. These
expenses consisted of the HAS retainer of $72,000, travel of $22,613, payroll
costs of $37,285, and general office expenses of $24,080, all of which were
expensed as incurred in 1994. In addition, the Company purchased fixed
assets with an original cost of $25,828 for Puerto Rican operations.
MANAGEMENT: There was only one significant change in management during 1995.
Ross Spinazzola, who had been with the Company since 1989, resigned from his
position as Treasurer and Corporate Secretary effective November 15, 1995.
The Company has not yet hired a replacement for Mr. Spinazzola.
18
<PAGE>
SALES AND PROCESSING VOLUME
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 25 to 80
percent of the gross claim amount. Backlog collection ratios range from 0 to
about 40 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.
PROCESSING VOLUME AND FEES
<TABLE>
<CAPTION>
1993 1994 1995
---------------------------------- ---------------------------------- ----------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number of Claims
Accepted for
Processing
Ongoing 26,085 32,658 29,310 30,829 24,690 32,552 32,280 38,779 46,972 46,021 43,161 47,249
Backlog 21,262 1,718 3,700 569 553 48 0 5,753 0 0 0 3,455
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 47,347 34,376 33,010 31,398 25,243 32,600 32,280 44,532 46,972 46,021 43,161 50,704
Gross Amount of
Claims Accepted
for Processing
($000)
Ongoing 12,663 17,282 15,288 15,721 12,502 14,935 14,280 18,571 19,182 19,999 18,791 21,660
Backlog 13,232 2,248 2,448 678 1,067 207 0 3,362 0 0 0 1,269
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 25,895 19,530 17,736 16,399 13,569 15,142 14,280 21,933 19,182 19,999 18,791 22,929
Collections
($000)
Ongoing 3,606 7,425 6,869 6,939 6,277 6,516 7,336 7,851 9,270 9,883 9,613 8,694
Backlog 1,375 1,709 1,413 756 375 136 194 130 272 159 28 60
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 4,981 9,134 8,282 7,695 6,652 6,652 7,530 7,981 9,542 10,042 9,641 8,754
Fees Earned
($000)
Ongoing 150 333 313 308 278 290 332 371 549 482 449 447
Backlog 76 94 77 37 22 8 14 15 39 15 2 3
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 226 427 390 345 300 298 346 386 588 497 451 450
</TABLE>
FOR ONGOING CLAIMS, THERE IS TYPICALLY A TIME LAG OF APPROXIMATELY 5 TO 30
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.
19
<PAGE>
1994 COMPARED TO 1993
Fee income from UMC's advance funding service increased from $0 in 1993
to $14,058 in 1994, due to a medical claims purchase contract signed during
September, 1994 with Mimbres Memorial Hospital ("MMH"). Fee income from
"Ongoing" claims processing, management and collection services increased by
14%, from $1,093,721 in 1993 to $1,247,730 in 1994, due to increased revenue
from WHC and MMH. Backlog collection fees decreased by 79%, from $284,495 in
1993 to $58,584 in 1994, due to decreased revenue from WHC and other clients.
Patient billing fees decreased from $8,333 in 1993 to $2,921 in 1994.
Installation fees increased from $1,458 in 1993 to $4,737 in 1994.
Interest and other income increased by 1%, from $14,607 in 1993 to
$14,819 in 1994.
Salaries and benefits expense decreased by 5%, from $1,218,826 in 1993
to $1,157,518 in 1994, due to the severance costs of $41,145 associated with
a staff reduction plan during 1993. At June 30, 1994, this reserve had been
fully utilized. Total headcount increased from 36 at December 31, 1993, to
45 at December 31, 1994.
Selling, general and administrative expenses decreased by 11%, from
$821,789 in 1993 to $731,273 in 1994, due to decreased expenses for contract
professional fees, contract clerical, sales taxes, dealer commissions, travel
and marketing expenses partially offset by increased expenses for employee
recruitment, system usage fees, Puerto Rican operations, claims purchase and
repair and maintenance. In addition a smaller credit was realized in bad
debt expense due to lower recovery of bad debt.
Professional fees decreased by 57%, from $254,353 in 1993 to $110,580 in
1994, due to the elimination of board of directors fees and lower legal fees
and other professional fees.
Office and equipment rental decreased by 7%, from $69,799 in 1993 to
$64,753 in 1994, due to the equipment lease settlements in February and March
of 1993 as described above.
Depreciation and amortization decreased by 16%, from $142,215 in 1993 to
$118,814 in 1994, due to the equipment lease settlements in February and
March of 1993 as described above.
Interest expense declined by 55%, from $41,821 in 1993 to $18,744 in
1994, due to equipment lease settlements in February and March of 1993 as
described above, offset by increased expense for interest on a short term
loan.
Other expenses increased from $(607) in 1993 to $42,223 in 1994, due to
the loss on retirement and the write off of fixed assets, primarily computer
equipment.
20
<PAGE>
1995 COMPARED TO 1994
Fee income from UMC's advance funding service decreased 67%, from
$14,058 in 1994 to $4,574 in 1995, due to the completion of the advance
funding services for MMH. Fee income from "Ongoing" claims processing,
management and collection services increased by 30%, from $1,247,730 in 1994
to $1,620,868 in 1995, due to increased revenue from WHC and MMH. Backlog
collection fees decreased by 3%, from $58,584 in 1994 to $56,754 in 1995 due
to reduced backlog fees from WHC, offset by increased fees from MMH. Fees
from UMC's new UMClaimPros interim staffing service totalled $116,489 in
1995. No fees were earned from UMClaimPros in 1994. Patient billing fees
decreased from $2,921 in 1994 to $90 in 1995, and installation fees decreased
from $4,737 in 1994 to $0 in 1995.
Interest and other income decreased by 75%, from $14,819 in 1994 to
$3,632 in 1995. This was due to a lower level of investable cash upon which
to earn interest during 1995.
Salaries and benefits expense increased by 29%, from $1,157,518 in 1994
to $1,499,038 in 1995, which can be attributed to several factors. The
UMClaimPros service produced incremental salaries of $76,782 in 1995. Puerto
Rico salaries and benefits increased by $95,756 in 1995 over 1994, due to the
fact that the Company completed its first full year of operations in Puerto
Rico in 1995. Total headcount increased from 45 at December 31, 1994 to 49
at December 31, 1995.
Selling, general and administrative expenses decreased by 36%, from
$731,274 in 1994 to $467,397 in 1995 due to decreased expenses for claims
purchase, contract professional fees, contract clerical, employee
recruitment, property taxes, repair and maintenance, sales taxes, dealer
commissions, system usage fees and software maintenance, telephone service,
Puerto Rican operations, travel and marketing expenses offset by increased
expenses for bad debt, insurance, and office supplies.
Professional fees decreased by 25%, from $110,580 in 1994 to $82,794 in
1995 due to lower audit fees and professional fees to enhance software. This
decrease was partially offset by an increase in legal fees.
Office and equipment rental increased 26%, from $64,753 in 1994 to
$81,648, due to the office that the Company established in Puerto Rico in May
1995.
Depreciation and amortization increased by 7%, from $118,814 in 1994 to
$126,807 in 1995, due to depreciation on office equipment purchased for the
Company's Puerto Rico office.
Interest expense increased by 2% from $18,744 in 1994 to $19,169 in 1995.
Other expenses decreased by 103%, from $42,223 in 1994 to ($1,246) in
1995, due primarily to the loss on retirement and write off of fixed assets,
primarily computer equipment, in 1994.
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND FINANCIAL CONDITION
Cash and cash equivalents were $58,078 at December 31, 1995, a decrease
of $293,155 from December 31, 1994. Net cash used in operating activities was
$79,311 in 1995, contrasted with a net use of $855,424 in 1994 and a net use
of $1,140,962 in 1993. The most significant areas of change in 1995 were a
reduction in net loss from $901,058 in 1994 to $285,745 in 1995. Financing
activities resulted in a net use of $211,711 in 1995 primarily related to the
repayment of a $200,000 note due to an offshore bank.
Net cash used in 1994 was $496,085 versus a net provision of cash
totalling $734,173 in 1993. As stated above, operating activities produced
negative cash flow of $855,424 and $1,140,962 in 1994 and 1993, respectively.
Investing activities required additional cash of $165,110 in 1994 and $40,609
in 1993. Financing activities, primarily the sale of common stock and the
issuance of a $200,000 note in 1994, provided cash of $524,448 and $1,915,744
in 1994 and 1993, respectively.
The Company's current ratio at December 31, 1995, was .84 to 1, compared
to 1.31 to 1 at December 31, 1994. The decrease in current ratio occurred
primarily as a result of the repayment of a $200,000 note to an offshore bank
during 1995 and negative cash flow from operations of $79,311, as mentioned
above. The Company has never been able to produce sustainable positive cash
flow from operations, and management may be forced to sell additional shares
of stock during 1996 in order to sustain the Company's operating activities.
There can be no assurance that management will be successful in finding
buyers for the Company's shares, or of the terms under which shares might be
sold.
CAPITAL SOURCES
On January 30, 1995, the Company repaid $100,000 in principal plus
interest on a promissory note due to an offshore bank. The remaining
$100,000 plus interest due on this promissory note was repaid on February 24,
1995.
On September 30, 1994, the Company signed a promissory note to borrow
$200,000 from an offshore bank. The funds borrowed were used to provide the
Company's advance funding service to MMH.
On September 1, 1994, the Company completed a private offering to
offshore investors of 2,369,999 shares of UMC Common Stock at a price of $.15
per share. The offering generated net proceeds after expenses of $348,011,
which were used to provide working capital for operations.
On July 22, 1993, the Company completed a private offering to offshore
investors of 4,000,000 shares of UMC Common Stock at the price of $.28 per
share. The Company received net proceeds of $1,115,347 after deducting legal
fees and other expenses of the offering.
22
<PAGE>
On February 22, 1993 the Company completed a private sale to U.S. and
offshore investors of 3,283,000 shares of Common Stock at a price of $.35 per
share. The Company received net proceeds of $1,138,199 after deducting legal
fees and other expenses of the offering.
In August 1992, the Company completed a private offering to U.S. and
offshore investors, selling 1,935,000 shares of Common Stock at a price of
$.65 per share. Net proceeds to the Company totaled $1,178,541 after
deducting placement agent fees, legal fees and other expenses.
On June 2, 1992, the Company received $150,000 in interim financing from
a stockholder. The terms of this loan required the Company to pay simple
interest at an annualized rate of six percent for the period of time the loan
remained outstanding. In addition, the Company agreed to issue to the
stockholder a common stock purchase warrant for 50,000 shares at an exercise
price of $.50 per share, exercisable for two years from the date issued. The
loan was subsequently repaid on July 10, 1992 along with $937 in interest.
The warrant was issued on August 21, 1992.
On February 28, 1992, the Company completed a private sale of 1,395,000
shares of Common Stock at a price of $.25 per share. The net proceeds to the
Company were $340,000 after deducting legal fees and other expenses.
During August 1990, the Company completed a public offering of its
Common Stock. A total of 2,017,820 shares were sold at $5.00 per share. The
net proceeds to the Company were $8,221,789, after deducting underwriter and
other expenses, and the repurchase of a portion of the shares owned by
Andersen Consulting.
ADVANCE FUNDING SERVICES
On May 3, 1995, the last of the claims that were advance funded in late
1994 were collected. The Company's ability to raise capital to fund the
purchase of claims will determine the extent of the Company's future
commitment to advance funding services.
On September 23, 1994, the Company reentered the advance funding
services market by signing a contract to purchase claims with an anticipated
realizable value of $145,643. As of December 31, 1994, $37,720 of these
purchased claims remained to be collected from commercial insurance
companies. The Company secured a short term bank loan to provide funds to
advance against the purchased claims.
During the second half of 1990 and the first three quarters of 1991, the
Company used some of the proceeds from the August 1990 public offering to
fund its advance funding services. The Company was forced to discontinue its
advance funding service from October 1991 until September 1994 due to capital
constraints brought on by operating losses.
23
<PAGE>
CAPITAL EQUIPMENT LEASES
The Company leases a portion of the computer hardware used on its
premises under a 66 month lease agreement which expires in June 2000. The
total amount financed, including the rollover of the remaining lease payments
under a previous A/S 400 lease and financing of the maintenance contract on
the new computer, was $182,752. Monthly lease payments will be $4,196 from
June 1995 until May 2000. The Company's capitalized lease obligations
totalled $222,388 as of December 31, 1995, of which $50,352 is payable in
each year through 1999 and $20,980 is payable in 2000. The A/S 400 equipment
financed under this lease may be purchased at the end of the lease for $1.
ADEQUACY OF CAPITAL RESOURCES
At December 31, 1995, the Company had $58,094 in cash and cash
equivalents on hand. These funds along with forecasted revenues are
projected by management to be marginally adequate to fund current levels of
operations through 1996. The Company continues to pursue new business through
direct contacts with prospective customers and through independent sales
agents 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 will not be sufficient to provide for the
Company's working capital needs beyond 1996, 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.
OTHER ITEMS
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation" was issued. This statement
requires the fair value of stock options and other stock-based compensation
issued to employees to either be included as compensation expense in the
income statement or the pro-forma effect on net income and earnings per share
of such compensation expense to be disclosed in the footnotes to the
Company's financial statements commencing with the Company's 1996 fiscal
year. The Company has not yet determined whether it will adopt SFAS No. 123
on an accounting basis, or on a disclosure basis. As such, the impact of
implementation of SFAS No. 123 on the Company's consolidated balance sheet
and income statement cannot yet be determined.
CAPITAL STOCK
At the Annual Meeting of Stockholders on July 23, 1993, the Company's
stockholders approved an amendment to the Company's Certificate of
Incorporation whereby the total number of authorized shares of Common Stock
was increased from 25,000,000 to 50,000,000. The Company's Certificate of
Incorporation also provides for 5,000,000 authorized shares of Preferred
Stock, of which none were outstanding at December 31, 1995. The voting
rights, designation, liquidation preference, redemption rights, dividends and
other rights of the Preferred Stock may be designated from time to time by
resolution of the Board of Directors.
24
<PAGE>
At the Annual Meeting of Stockholders on August 14, 1995, the
stockholders of UMC approved a 1 for 5 reverse split of the Company's Common
Stock, to be implemented at the discretion of UMC's Board of Directors. As
of the date of this report, the 1 for 5 reverse split had not been
implemented.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
Refer to the Index to Consolidated Financial Statements and Financial
Statement Schedules on page 32 for the required information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------------------------
None
25
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------------------------------------------------
The section entitled "Election of Directors" appearing in the
Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on July 15, 1996, sets forth certain information with
respect to the Directors and nominees for election as Directors of the
Registrant and is incorporated herein by reference. Certain information with
respect to executive officers of the Registrant is set forth under the
caption "Executive Officers of the Registrant" in Item 1 of Part I of this
Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
The section entitled "Compensation of Executive Officers" appearing in
the Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on July 15, 1996, sets forth certain information with
respect to the compensation of management of the Registrant, and is
incorporated herein by reference.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------------------------------------------------------------------------------
The section entitled "Stock Ownership of Principal Stockholders and
Management" appearing in the Registrant's definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on July 15, 1996, sets forth
certain information with respect to the ownership of the Registrant's voting
securities, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------------------------------
The section entitled "Certain Transactions" appearing in the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
on July 15, 1996, sets forth certain information with respect to relations of
and transactions by management of the Registrant, and is incorporated herein by
reference.
26
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
- --------------------------------------------------------------------------------
(a)(1)(2) See accompanying index to financial statements on page 32.
(a)(3) Exhibits
3.1 Certificate of Incorporation of the Company, filed with Secretary
of State of Delaware on February 26, 1988, is incorporated herein by
reference to Exhibit 3(a) of the Company's Registration Statement on
Form S-1, Commission File No. 33-20989, filed with the Commission on
March 30, 1988 and declared effective June 7, 1988.
3.2 By-Laws of the Company are incorporated herein by reference to Exhibit
3(b) of the Company's Registration Statement on Form S-1, Commission
File No. 33-20989, filed with the Commission on March 30, 1988 and
declared effective June 7, 1988.
3.3 Certificate of Amendment to Certificate of Incorporation of the
Company, filed with Secretary of State of Delaware on July 12, 1989,
is incorporated herein by reference to Exhibit 3 of the Company's
Current Report on Form 8-K, filed with the Commission on July 25,
1989.
3.4 Certificate of Amendment to Certificate of Incorporation of the
Company, filed with Secretary of State of Delaware on August 9, 1989,
is incorporated herein by reference to Exhibit 3.2 of the Company's
Form 10-Q filed for the fiscal quarter ended September 30, 1989.
4.1 Certificate of Designations, Preferences and Rights of 10% Cumulative
Convertible Preferred Stock of the Company, filed with the Secretary
of State of Delaware on August 9, 1989, is incorporated herein by
reference to Exhibit 4 of the Company's Form 10-Q filed for the fiscal
quarter ended September 30, 1989.
4.2 First Amended Certificate of Designations, Preferences and Rights of
10% Cumulative Convertible Preferred Stock of the Company, filed with
the Secretary of State of Delaware on December 7, 1989 is incorporated
herein by reference to Exhibit 4.2 of the Company's Form 10-K filed
for the fiscal year ended December 31, 1989.
4.3 Specimen Form of Certificate of Common Stock of the Company is
incorporated herein by reference to Exhibit 4.3 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35177,
originally filed with the Commission on June 1, 1990 and declared
effective July 27, 1990.
27
<PAGE>
4.4 Article Fourth of the Company's Certificate of Incorporation is
incorporated herein by reference to Exhibit 3 of the Company's Current
Report on Form 8-K, filed with the Commission on July 25, 1989.
4.5 Certificate of Amendment to Certificate of Incorporation, filed
with the Secretary of State of Delaware on June 21, 1990 is
incorporated herein by reference to Exhibit 4.5 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35177,
originally filed with the Commission on June 1, 1990 and declared
effective on July 27, 1990.
9. Not Applicable.
10.1 1989 Stock Option Plan of the Company is incorporated herein by
reference to Exhibit 10.1 of the Company's Form 10-Q filed for the
fiscal quarter ended September 30, 1989.
10.2 Form of Warrant to purchase shares of the Company's Common Stock
granted to certain persons during 1990 in connection with the
provision of interim financing is incorporated herein by reference to
Exhibit 10.14 of the Company's Registration Statement on Form S-1,
Commission File No. 33-35177, originally filed with the Commission on
June 1, 1990 and declared effective July 27, 1990.
10.3 Medical Claims Management/Collection Agreement, dated May 25, 1990, by
and between the Company and University Hospital is incorporated herein
by reference to Exhibit 10.20 of the Company's Registration Statement
on Form S-1, Commission File No. 33-35177, originally filed with the
Commission on June 1, 1990 and declared effective July 27, 1990.
10.4 Master Equipment Lease Agreement, dated February 2, 1990, by and
between the Company and Com Resources, Inc., together with certain
Schedules attached thereto is incorporated herein by reference to
Exhibit 10.22 of the Company's Registration Statement on Form S-1,
Commission File No. 33-35177, originally filed with the Commission on
June 1, 1990 and declared effective July 27, 1990.
10.5 First Amended and Restated 1989 Stock Option Plan of the Company is
incorporated herein by reference to Exhibit 10.23 of the Company's
Form 10-K filed for the fiscal year ended December 31, 1990.
10.6 Third Amended and Restated 1989 Stock Option Plan of the Company.
(Previously filed.)
10.7 1992 Stock Option Plan of the Company is incorporated herein by
reference to Exhibit 10.24 of the Company's Registration Statement on
Form S-1, Commission File No. 33-35178.
28
<PAGE>
10.8 Warrant dated August 21, 1992, issued to Gary R. Beauchamp is
incorporated herein by reference to Exhibit 10.25 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35178.
10.9 Warrant dated August 21, 1992 issued to Walid E. Moukarzel is
incorporated herein by reference to Exhibit 10.26 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35178.
10.10 Warrant dated August 14, 1992, issued to Mary G. Merritt is
incorporated herein by reference to Exhibit 10.27 of the
Company's Registration Statement on Form S-1, Commission File No.
33-35178.
10.11 Customer Service Agreement dated December 15, 1992 by and between
the Company and the Washington Hospital Center is incorporated
herein by reference to Exhibit 10.27 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35178.
10.12 Settlement and Termination Agreement dated as of February 19,
1993 by and between the Registrant, American Pacific Acceptance
Corporation and Summit Capital Corporation, is incorporated
herein by reference to Exhibit 10.1 of the Company's Current
Report on Form 8-K, filed with the Commission on March 3, 1993.
10.13 Warrant dated March 2, 1993, issued to Walid E. Moukarzel.
(Previously filed.)
10.14 Standard Office Building Lease Agreement dated June 1, 1989,
between the Registrant and Aetna Life Insurance Company.
(Previously filed.)
10.15 Third Amendment to Lease, dated May 1, 1992, between the
Registrant and Aetna Life Insurance Company. (Previously filed.)
10.16 Sales Agent Agreement dated August 6, 1993, between UMC and
Consolidated Associates, Inc., is incorporated herein by
reference to Exhibit 10.1 of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
10.17 Sales Agent Agreement dated August 6, 1993, between UMC and Tomar
Investments, is incorporated herein by reference to Exhibit 10.2
of the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993.
10.18 Warrant dated August 9, 1993 issued to Tomar Investments.
(Previously filed.)
10.19 Certificate of Amendment to Certificate of Incorporation of the
Company, filed with Secretary of State of Delaware on August 3,
1993. (Previously filed.)
10.20 Promissory Note dated September 30, 1994 made by the Registrant
to BFI Banque de Financement et D'Investissement. (Previously filed.)
29
<PAGE>
10.21 Term Lease Supplement dated December 30, 1994 between the
Registrant and IBM Credit Corporation. (Previously filed.)
10.22 1995 Stock Option Plan
10.23 Modification and Ratification of Lease, dated July 19, 1995.
22.1 Subsidiaries of the Company. (Previously filed.)
23.1 Consent of Price Waterhouse LLP, Independent Accountants
27 Financial Data Schedule.
(b) Reports on Form 8-K
None
30
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
United Medicorp, Inc.
Date: April 12, 1996 By: /s/ Peter W. Seaman
---------------------------------
Peter W. Seaman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ J. Otis Winters Chairman of the Board April 12, 1996
- -------------------------
J. Otis Winters
/s/ Eugene W. Aune Vice Chairman of the Board April 12, 1996
- -------------------------
Eugene W. Aune
/s/ Peter W. Seaman President and Chief April 12, 1996
- ------------------------- Executive Officer, Director
Peter W. Seaman (Principal Accounting
Officer)
/s/ Michael P. O'Boyle Director April 12, 1996
- -------------------------
Michael P. O'Boyle
/s/ Joseph A. Spiak Director April 12, 1996
- -------------------------
Joseph A. Spiak
31
<PAGE>
ITEM 8 AND 14(a). UNITED MEDICORP, INC.
- --------------------------------------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
----
Consolidated Balance Sheets as of December 31, 1995 and 1994 . . . . . . . . .33
Consolidated Statements of Revenues and Expenses for the Years
Ended December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . .34
Consolidated Statements of Cash Flows For the Years Ended
December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . .35
Consolidated Statement of Changes in Stockholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993 .. . . . . . . . . . . . . .36
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . .37
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . .50
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:
The following consolidated financial statement schedules are submitted
on the pages indicated:
PAGE
----
Report of Independent Accountants on Consolidated
Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . .51
VIII- Valuation and Qualifying Accounts. . . . . . . . . . . . . . . . . .52
Other financial statement schedules have been omitted because they are not
applicable or the required information is shown in the Consolidated Financial
Statements or the Notes thereto.
32
<PAGE>
UNITED MEDICORP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 58,078 $ 351,233
Restricted cash (Note A) -- 4,851
Purchased claims (Note A) -- 37,721
Accounts receivable, less allowance for
doubtful accounts of $7,493 and $8,627,
respectively 138,970 154,592
Notes receivable, less allowance for
doubtful accounts of $0 and $99,139,
respectively 214 12,214
------------ ------------
Prepaid expenses and other 20,427 24,630
Total current assets 217,689 585,241
PROPERTY AND EQUIPMENT (net) 200,996 322,300
OTHER ASSETS 17,373 27,625
------------ ------------
TOTAL ASSETS $ 436,058 $ 935,166
------------ ------------
------------ ------------
CURRENT LIABILITIES:
Payable to clients (Note A) $ 19,902 $ 26,640
Trade accounts payable 48,230 63,257
Accrued expenses (Note E) 141,501 137,462
Notes payable (Note F) -- 200,000
Deferred revenue 15,959 --
Current portion of capital lease
obligations (Note H) 32,487 18,576
------------ ------------
Total current liabilities 258,079 445,935
LONG TERM LEASE OBLIGATION (Note H) 138,565 164,187
DEFERRED CREDITS (Note I) 31,434 31,319
COMMITMENTS AND CONTINGENCIES (Note N)
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 50,000,000
authorized, 26,415,764 shares issued and
outstanding at 12/31/95 and 12/31/94. 264,157 264,157
Less: 105,547 shares of treasury stock, at cost (221,881) (221,881)
Additional paid-in capital 18,552,341 18,552,341
Retained deficit (18,586,637) (18,300,892)
------------ ------------
Total stockholders' equity 7,980 293,725
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 436,058 $ 935,166
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
UNITED MEDICORP, INC.
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Fee income $1,986,233 $1,328,029 $ 1,386,549
Interest income 3,632 13,063 12,957
Other Income -- 1,756 3,108
---------- ---------- -----------
Total revenues 1,989,865 1,342,848 1,402,614
EXPENSES:
Salaries and benefits 1,499,038 1,157,518 1,218,826
Selling, general and administrative 467,397 731,274 821,789
Professional fees 82,794 110,580 254,353
Office and equipment rental 81,648 64,753 69,799
Depreciation and amortization 126,807 118,814 142,215
Interest 19,169 18,744 41,821
Other (1,243) 42,223 (607)
---------- ---------- -----------
Total expenses 2,275,610 2,243,906 2,548,196
---------- ---------- -----------
NET LOSS $ (285,745) $ (901,058) $(1,145,582)
---------- ---------- -----------
---------- ---------- -----------
NET LOSS PER SHARE $ (0.01) $ (0.04) $ (0.05)
---------- ---------- -----------
---------- ---------- -----------
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 26,310,217 24,730,218 21,078,278
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
UNITED MEDICORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(285,745) $(901,058) $(1,145,582)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 126,807 118,814 142,215
Issuance of warrants and options -- 5,760 21,617
(Gain) Loss on disposal of assets (1,298) 40,671 (14,665)
CHANGES IN ASSETS & LIABILITIES NET OF EFFECTS
FROM PURCHASE OF SUBSIDARY:
Decrease in restricted cash 4,851 -- --
(Increase) Decrease in purchased claims 37,721 (37,721) --
(Increase) Decrease in accounts receivable 15,622 15,390 (147,169)
(Increase) Decrease in notes receivable 12,000 (12,000) --
(Increase) Decrease in prepaid expenses and other 4,203 (19,895) 62,703
Decrease in deposits and other 8,180 -- 5,069
(Increase) Decrease in payable to clients (6,738) 21,789 --
Increase (Decrease) in trade accounts payable (15,027) 5,189 (57,664)
Increase (Decrease) in accrued expenses 4,039 (45,385) 50,320
Increase in deferred revenue 15,959 -- --
Increase (Decrease) in deferred credits 115 (46,978) (57,806)
--------- --------- -----------
Net cash used in operating activities (79,311) (855,424) (1,140,962)
INVESTING ACTIVITIES:
Additions of property and equipment, net (2,133) (165,110) (40,609)
--------- --------- -----------
Net cash used in investing activities (2,133) (165,110) (40,609)
FINANCING ACTIVITIES:
Sale of common stock -- 348,011 2,324,385
Proceeds of notes payable -- 200,000 --
Repayment of notes payable (200,000) (882) (48,730)
Decrease in capital lease obligation (11,711) (22,681) (359,911)
--------- --------- -----------
Net cash (used in) provided by financing activities (211,711) 524,448 1,915,744
--------- --------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (293,155) (496,085) 734,173
CASH AND CASH EQUIVALENTS, beginning of period 351,233 847,318 113,145
--------- --------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 58,078 $ 351,233 $ 847,318
--------- --------- -----------
--------- --------- -----------
Additional Cash Flow Information
Cash paid for interest $ 20,122 $ 11,784 $ 28,921
Leases Capitalized -- $ 131,330 --
Capital lease obligations credited for
returned hardware -- -- $ 71,176
Accrued expenses credited for common stock -- -- $ 83,715
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
UNITED MEDICORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK TOTAL
---------------------- PAID-IN --------------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT EQUITY
---------- -------- ----------- ------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 16,178,015 $161,780 $15,879,835 105,545 $(221,881) $(16,254,252) $ (434,518)
Shares issued at $.35
per share 3,409,000 34,090 1,144,150 -- -- -- 1,178,240
Shares issued at $.3125
per share 77,750 777 23,519 -- -- -- 24,296
Shares issued at $.28
per share 4,110,000 41,100 1,105,046 -- -- -- 1,146,146
Shares issued at $.1875
per share 311,000 3,110 55,202 -- -- -- 58,312
Cancellation of
Common Stock at $.1875 (40,000) (400) (7,100) -- -- -- (7,500)
Warrants and options issued -- -- 21,618 -- -- -- 21,618
Net loss -- -- -- -- -- (1,145,582) (1,145,582)
---------- -------- ----------- ------- --------- ------------ -----------
Balance at
December 31, 1993 24,045,765 $240,457 $18,222,270 105,545 $(221,881) $(17,399,834) $ 841,012
Shares issued at $.15
per share 2,369,999 23,700 324,311 -- -- -- 348,011
Warrants and options issued -- -- 5,760 -- -- -- 5,760
Adjust fractional shares -- -- -- 2 -- -- --
Net loss -- -- -- -- -- (901,058) (901,058)
---------- -------- ----------- ------- --------- ------------ -----------
Balance at
December 31, 1994 26,415,764 $264,157 $18,552,341 105,547 $(221,881) $(18,300,892) $ 293,725
Net loss -- -- -- -- -- (285,745) (285,745)
---------- -------- ----------- ------- --------- ------------ -----------
Balance at
December 31, 1995 26,415,764 $264,157 $18,552,341 105,547 $(221,881) $(18,586,637) $ 7,980
---------- -------- ----------- ------- --------- ------------ -----------
---------- -------- ----------- ------- --------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
UNITED MEDICORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------------------------------
BASIS FOR FINANCIAL STATEMENT PRESENTATION AND GOING CONCERN
The consolidated financial statements of United Medicorp, Inc. (the
"Company" or "UMC") have been prepared on a going concern basis which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business.
UMC has yet to generate sufficient revenues to cover operating expenses
and has incurred cumulative losses since inception of $18,586,637. Operating
funds to date have been obtained primarily through the sale of the Company's
Common Stock. At December 31, 1995, UMC had $58,078 in unrestricted cash and
cash equivalents and $138,970 in receivables due from customers. These
factors, among others, raise substantial doubt about the Company's ability to
continue as a going concern.
Subsequent to December 31, 1995, the Company's second largest customer
advised the Company that its contract for ongoing accounts receivable
management services would not be renewed upon its expiration on April 1,
1996. Revenues generated by this customer relationship during 1995 were
$364,365.
The Company's principal source of revenue in Puerto Rico results from a
contract between Healthcare Advisory Service of Puerto Rico, Inc. ("HAS"),
and a government agency known as "AFASS." Under this contract, the Company
serves as a subcontractor to HAS in processing claims with dates of service
from October 1, 1994 to June 30, 1995 for a government funded hospital ("GH")
and four government funded clinics. UMC's fees for services rendered to the
clinics are computed at 10% of collections. During 1995, the Company
recognized fees totaling $108,008 for services rendered to the GH. These
revenues were based on a fee structure which required that the Company meet a
collections baseline requirement of $1,875,000, above which the Company
received fees based on a percentage of collections. In June 1995, the HAS
contract with AFASS was amended to allow the continuation of services for an
undefined period beginning July 1, 1995. The baseline for the GH portion of
the contract was reset at $2,500,000 for collections from claims with dates
of service during the period from July 1, 1995 to June 30, 1996. In
addition, HAS and UMC received the right to process claims from four
additional clinics, thus increasing the number of AFASS clinics served to
eight.
37
<PAGE>
Due to differing interpretations surrounding the contract between HAS
and UMC, it is uncertain whether fees recognized by the Company during 1995
will be subject to a final reconciliation (and potential adjustment) between
HAS and AFASS. In management's judgement, any potential adjustment would not
be significant. Additionally, based on the July 1995 to June 1996 baseline
requirement in force and on the Company's collections projections, it is
uncertain whether the Company will recognize any revenue from the principal
Puerto Rican source during 1996. However, the $2,500,000 baseline
requirement related to claims incurred during the period from July 1995 to
June 1996 is currently under negotiation. In management's judgement, the
direct incremental costs of administering the GH portion of the contract are
not significant.
At December 31, 1995, the Company had $58,078 in cash and cash equivalents
on hand. These funds along with forecasted revenues are projected by management
to be adequate to fund current levels of operations through 1996. The Company
continues to pursue new business primarily through direct contacts with
prospective customers and through independent sales agent 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 will
not be sufficient to provide for the Company's working capital needs beyond
1996, 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.
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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiary, Sterling Hospital Systems, Inc. All significant
intercompany transactions and accounts have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and liquid investments with
original maturities of ninety days or less. At December 31, 1995 and 1994, UMC
held $58,078 and $351,233 in cash and prime-rated short-term investments and
government securities, respectively.
38
<PAGE>
RESTRICTED CASH
Restricted cash represents amounts, net of fees earned, collected by the
Company on behalf of its customers. These amounts are not subject to use by the
Company for its operations. At December 31, 1995 and 1994, the Company held
restricted cash of $0 and $4,851, respectively.
PURCHASED CLAIMS
Purchased claims represent claims purchased from a customer under a medical
claims purchase contract. At December 31, 1995, there were no outstanding
purchased claims.
ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1995 and 1994 represent fees which have
been billed to and are due from customers.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and include assets leased under
a capital lease agreement. Expenditures for repairs and maintenance are charged
to income as incurred, and expenditures for major renewals and betterments are
capitalized. Depreciation and amortization are computed using the straight-line
method over the estimated useful life of the asset, ranging from three to seven
years. Upon disposition of assets, the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss is
included in "Other."
Property and equipment is reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset or group of
assets may not be recoverable. The impairment review includes a comparison of
future cash flows expected to be generated by the asset or group of assets with
their associated carrying value. If the carrying value of the asset or group of
assets exceeds expected cash flows (undiscounted and without interest charges),
an impairment loss is recognized for the deficit of fair value compared to
carrying amounts.
PAYABLE TO CLIENTS
Payable to clients represents claim payments collected from insurance
carriers on behalf of UMC customers. These funds are remitted to the customer
by UMC on a weekly, semi-monthly, or monthly interval.
REVENUES
Fee income is generally recognized upon receipt of payment from a third
party payor or guarantor of a patient's account.
39
<PAGE>
LOSS PER SHARE OF COMMON STOCK
Net Loss per share of Common Stock is computed based on the weighted
average number of shares outstanding at December 31, 1995, 1994, and 1993 which
were 26,310,217, 24,730,218, and 21,078,278 shares, respectively. Common Stock
options and warrants were not included in the net loss per common share
calculation because their effect would be antidilutive.
INCOME TAXES
Effective January 1, 1993, income taxes are accounted for in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). The adoption of SFAS 109 changes the Company's method of
accounting for income taxes from the deferred method to the asset and liability
method. The asset and liability method requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement basis and the tax basis of assets
and liabilities.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, Statement of Financial accounting Standards No. 123,
"Accounting for Stock-based Compensation" was issued. This statement requires
the fair value of stock options and other stock-based compensation issued to
employees to either be included as compensation expense in the income statement
or the pro-forma effect on net income and earnings per share of such
compensation expense to be disclosed in the footnotes to the Company's financial
statements commencing with the Company's 1996 fiscal year. The Company has not
yet determined whether it will adopt SFAS No. 123 on an accounting basis, or on
a disclosure basis. As such, the impact of implementation of SFAS No. 123 on
the Company's consolidated balance sheet and income statement cannot yet be
determined.
RECLASSIFICATIONS
Certain reclassifications of 1994 and 1993 balances have been made to
conform to the current year presentation.
40
<PAGE>
NOTE B - THE COMPANY
- ----------------------------------------------------------------------------
United Medicorp, Inc. is a publicly held company which was established
to provide medical insurance claims management services to healthcare
providers throughout the United States. The Company was founded in March
1989 and as of March 1996 has raised approximately $18.5 million in capital
which has been invested in market research, systems development, employee
training and ongoing operations.
The Company offers claims management services to healthcare providers,
including the following:
1) Claims Management: This service involves processing, collection
follow-up, and accounting for current claims in an "ongoing" program.
2) Backlog Collections: UMC accepts portfolios of aged claims which in
most cases have been previously filed with third party payors, but have not
been paid. UMC determines the status of each claim, refiles claims, and then
follows up to effect collections.
3) Advance Funding: During September 1994 the Company reentered the
advance funding services market by signing a contract to purchase claims with
an anticipated realizable value of $145,643. To implement this service, the
Company purchases an undivided interest in a claim and advances between 45
and 60 percent of the insurance claim amount to the customer within seven
business days of purchase by the Company. When the carrier pays the claim,
it sends the payment directly to the Company's post office box for deposit
pursuant to a special power-of-attorney granted by the customer to the
Company. The Company then disburses the balance of that insurance claim
payment to the customer, minus the funds previously advanced and the
Company's fee. In the event payment from an insurance carrier is not
received within 60 days after a given claim is funded, the Company has the
right, under the terms of its standard customer contract, to require that the
customer repurchase the claim or offset the amount of the payment against
balances otherwise payable to the customer by the Company. The Company
generally continues its collection efforts for at least 120 days. The
advance funding fee is not payable by the customer unless the claim was
actually collected.
4) Repricing Claims: This service involves repricing managed care
claims to conform with contracted rates. Claims are repriced according to a
fee schedule provided by UMC's customer. Although the Company views this
activity as an area for future growth in revenues, 1995 revenues were not
significant to the Company's operations.
5) UMClaimPros: UMC's UMClaimPros interim staffing service involves
the placement of experienced medical billing and collection personnel in
temporary assignments within hospital and physician business offices. During
1995, the Company reported revenues totalling $116,489 from its UMClaimPros
service.
UMC's marketing strategy is to offer Electronic Claims Submission
("ECS") and claims processing services with either transaction or contingency
based pricing to clinics and hospitals throughout the United States.
41
<PAGE>
NOTE C - FINANCIAL INSTRUMENTS
- -------------------------------------------------------------------------------
The fair values of all financial instruments to which the Company is a
party approximate the recorded values at December 31, 1995 and 1994. The
fair value of such financial instruments is estimated by reference to market
data.
NOTE D - PROPERTY AND EQUIPMENT
- -------------------------------------------------------------------------------
At December 31, 1995 property and equipment consisted of the following:
<TABLE>
<CAPTION>
Purchased Leased Total
--------- -------- ---------
<S> <C> <C> <C>
Equipment $ 503,186 $118,480 $ 621,666
Software systems 113,372 0 113,372
Furniture and fixtures 104,238 0 104,238
Leasehold improvements 31,265 0 31,265
-------- -------- ---------
752,061 118,480 870,541
Accumulated depreciation and
amortization (630,052) (39,493) (669,545)
--------- -------- ---------
Net Property and equipment $ 122,009 $ 78,987 $ 200,996
--------- -------- ---------
--------- -------- ---------
</TABLE>
At December 31, 1994 property and equipment consisted of the following:
<TABLE>
<CAPTION>
Purchased Leased Total
--------- -------- ---------
<S> <C> <C> <C>
Equipment $ 503,129 $131,330 $ 634,459
Software systems 109,479 0 109,479
Furniture and fixtures 104,943 0 104,943
Leasehold improvements 31,265 0 31,265
--------- -------- ---------
748,816 131,330 880,146
Accumulated depreciation and
amortization (557,846) (0) (557,846)
--------- -------- ---------
Net Property and
equipment $ 190,970 $131,330 $ 322,300
--------- -------- ---------
--------- -------- ---------
</TABLE>
Depreciation and amortization expense related to property and equipment was
$124,735, $116,742 and $140,143, during 1995, 1994 and 1993, respectively.
42
<PAGE>
NOTE E - ACCRUED EXPENSES
- ----------------------------------------------------------------------------
The Company's accrued expenses at December 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accrued professional fees $ 73,773 $ 58,465
Accrued payroll 38,054 40,947
Accrued interest 0 7,583
Accrued other 29,674 30,467
-------- --------
Total $141,501 $137,462
-------- --------
-------- --------
</TABLE>
NOTE F - DEBT
- ----------------------------------------------------------------------------
The $200,000 promissory note outstanding at December 31, 1994, and bearing
interest at 15% per annum was repaid during 1995.
NOTE G - INCOME TAXES
- ----------------------------------------------------------------------------
Due to current and prior years operating losses, no provision or benefit
for income taxes has been recorded by the Company.
During 1992, an ownership change occurred which severely limits the use of
net operating loss carryforwards. Management estimates that the net operating
loss carryforwards which were generated prior to the ownership change and which
will be available as deductions against future taxable income, if and when the
Company achieves profitability, are limited to the $358,000 per year through
2007. Net operating loss carryforwards generated in 1992 through 1995 which are
not subject to limitation are approximately $4.3 million and will expire at
various times through 2009.
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", as of January 1, 1993. This change in accounting
principle had no effect on the Company's Consolidated Statement of Revenues and
Expenses for the year ended December 31, 1993.
Deferred tax assets and liabilities are recorded based upon differences
between the financial statement and tax bases of assets and liabilities and
available carryforwards. Deferred tax assets (liabilities) at December 31 are
comprised of the following:
43
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION 1995 1994
----------- ----------- -----------
<S> <C> <C>
Net operating loss carryforwards $ 3,594,727 $ 3,461,851
Allowance for doubtful accounts -- 37,098
Depreciation of property, plant and
equipment 24,994 20,660
Deferred credits 11,631 11,588
Other, net 13,748 16,623
----------- -----------
Total deferred tax asset 3,645,100 3,547,820
----------- -----------
Valuation allowance (3,645,100) (3,547,820)
----------- -----------
Net deferred tax assets (liabilities) $ 0 $ 0
----------- -----------
----------- -----------
</TABLE>
NOTE H - LEASE COMMITMENTS
- ----------------------------------------------------------------------------
Future minimum payments under non-cancelable operating leases on office
facilities at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 96,484
1997 90,528
1998 52,808
--------
Total $239,820
--------
--------
</TABLE>
On May 15, 1995, the Company leased a 1,260 square feet office space in
Ponce, Puerto Rico, for $2,250 a month. The term of the lease is five years,
with the Company having the option to terminate the lease after one year of
occupancy with ninety days written notice.
On August 1, 1995, the Company renewed its lease on UMC's corporate
offices in Dallas. The lease term extends through January 31, 2001. The first
six months are rent free through January 31, 1996. Effective February 1, 1996
through January 31, 1999, the Company's monthly rent is $7,544. From February
1, 1999 through January 31, 2000, and February 1, 2000 through January 31, 2001,
the monthly rent will be $7,887 and $8,230 respectively. Rent expense during
1995, 1994 and 1993 related to this lease was $64,111, $63,498 and $62,458,
respectively. The Company has the option to terminate the lease after three
years of occupancy, providing it gives ninety days notice to the lessor.
Management believes that its facilities are well-located and are in good
condition. The Company's future facilities requirements will depend upon the
success of its business. Management believes that there is adequate office
space available should its space requirements increase.
44
<PAGE>
On December 30, 1994, the Company leased a new IBM A/S 400 Advanced Series
9406 Model 300 computer, for a term of 66 months, with no payments due during
the first six months. The total amount financed, including the rollover of the
remaining lease payments under the previous A/S 400 lease and financing of the
maintenance contract on the new computer, was $182,752. Monthly lease payments
will be $4,196 from June 1995 until May 2000. The Company's capital lease
payment obligations totaled $222,388 as of December 31, 1995, of which $50,352
is payable each year through 1999 and $20,980 is payable in 2000. Of the total
future payments of $222,388 under this lease, $28,106 represents interest,
$12,132 represents maintenance and $10,547 represents sales tax. The equipment
financed under this lease may be purchased at the end of the lease for $1.
During 1993, the Company rented certain office equipment under operating
leases. Rental expense under such operating leases was $69,799 during 1993.
The Company had no operating leases for office equipment during 1995 and 1994.
Interest expense on capital lease obligations was $15,141, $11,055, and
$38,665 during 1995, 1994 and 1993, respectively. Amortization expense on
leased assets was $39,422, $31,080, and $65,179 during 1995, 1994, and 1993,
respectively.
Management executed a Settlement And Termination Agreement with the
Company's principal equipment lessor and its assignee on February 19, 1993.
Under the terms of this agreement, the Company paid $316,440 and issued 388,750
shares of its Common Stock in exchange for clear title to certain leased
computer hardware and telephone equipment. In addition the Company, the lessor
and its assignee released each other from all claims arising under the lease
contracts. On March 3, 1993 the Company also executed a Settlement And
Termination Agreement with an office equipment lessor relative to two lease
contracts covering the Company's copier equipment. Under the terms of this
agreement, the Company paid $16,238 for clear title to the equipment and a full
release from all claims arising under the copier lease contracts.
NOTE I - DEFERRED CREDITS
- ----------------------------------------------------------------------------
Deferred Credits of $31,434, $31,319, and $89,125 as of December 31, 1995,
1994, and 1993, respectively, relate to escalating lease payments as specified
in the lease contract for the Company's corporate office facilities which was
executed on August 1, 1995 and April 4, 1990, respectively. The Company's
current lease on its corporate offices is an escalating rental schedule
extending until January 31, 2001 with the first six months of rent free. In
order to properly record monthly rent expense during the six month period when
no cash outlay for rent was required, the Company reported monthly rental
expense and related deferred credits which were calculated using the total of
rentals due under the amended lease agreement dated August 1, 1995, divided by
the minimum non-cancelable term of 36 months. The deferred credits accumulated
during the first six months of the term of the amended lease will be amortized
on a straight line basis beginning in February 1996, as a $1,257 per month
reduction in rent expense through the expiration of the non-cancelable term of
the lease in July 1998.
45
<PAGE>
NOTE J - ORGANIZATION AND COMMON STOCK
- ----------------------------------------------------------------------------
United Medicorp Texas, Inc. was incorporated in the State of Texas on March
13, 1989 ("UMC-Texas"). On July 10, 1989, UMC-Texas was acquired by Gamma
Resources, Inc., a publicly-owned shell corporation, which simultaneously
changed its name to United Medicorp, Inc., pursuant to an Agreement and Plan of
Reorganization among the Company, UMC-Texas and the stockholders of
UMC-Texas. Under the terms of the agreement, Gamma issued $.01 par value common
stock to the shareholders of UMC-Texas in exchange for all of the then
outstanding shares of UMC-Texas.
On February 22, 1993, the Company completed a private sale of 3,283,000
shares of Common Stock at a price of $.35 per share. The Company received net
proceeds of $1,138,199 after deducting legal fees and other expenses of the
offering.
On July 22, 1993, the Company completed a private offering to offshore
investors of 4,000,000 shares of UMC Common Stock at the price of $.28 per
share. The Company received net proceeds of $1,115,347 after deducting legal
fees and other expenses of the offering.
On September 1, 1994, the Company completed a private offering to offshore
investors of 2,369,999 shares of UMC Common Stock at a price of $.15 per share.
The offering generated net proceeds of $348,011 after deducting legal fees and
other expenses of the offering.
At December 31, 1995, there were 5,000,000 shares of Preferred Stock
authorized but unissued. There were 50,000,000 shares of $.01 par value Common
Stock authorized, of which 26,415,764 shares were issued and outstanding, with
105,547 shares held in Treasury Stock. In addition, 2,295,500 shares of Common
Stock were reserved at December 31, 1995 for issuance of outstanding warrants
and options.
NOTE K - WARRANTS
- ----------------------------------------------------------------------------
During May, June, and July 1990, the Company issued warrants to purchase
88,750 shares of Common Stock, at $5.50 per share, to five parties as additional
compensation for extending Bridge Loans to the Company at the rate of one share
for each $8 loaned. Two trusts related to (and beneficially attributable to)
the person who was then the Company's Chairman and Chief Executive Officer
received warrants to purchase 38,750 shares in these transactions. These
warrants expire between November 1997 and January 1998.
On August 14, 1992, the Company issued a warrant to purchase 12,500 shares
at $.25 per share to the Company's former Controller in consideration of her
past service to the Company following the elimination of her position in a
reduction-in-force. This warrant expires on August 14, 1996.
46
<PAGE>
On August 21, 1992, the Company issued a warrant to purchase 25,000 shares
at $.75 per share as additional consideration for the acquisition of Sterling
Hospital Systems, Inc. This warrant expires on August 21, 1996.
On August 6, 1993, warrants to purchase 750,000 shares of Common Stock at
an exercise price of $.25 per share were granted to a sales agent. Of these
150,000 warrants are exercisable immediately, with the remaining 600,000
warrants becoming exercisable based on fees billed to customers referred to UMC
by the sales agent over a three year period. The warrants expire on August 6,
1998. The Company recorded an expense of $10,950 upon issuance of these
warrants.
On August 9, 1993, warrants to purchase 85,000 shares of UMC Common Stock
were issued to two former directors of UMC. The warrants are exercisable over a
three year period at an exercise price of $.31. These warrants expire on August
6, 1996. The Company recorded an expense of $6,205 upon issuance of these
warrants.
On August 29, 1994, a warrant to purchase 40,000 shares of UMC Common Stock
at $.31 per shares was issued to a former director of UMC.
The shares of common stock represented by the warrants, listed above, have
not been registered under the Securities Act of 1933.
NOTE L - STOCK OPTIONS
- ----------------------------------------------------------------------------
At the Annual Meeting of Stockholders on August 14, 1995, the Company's
stockholders approved the adoption of the 1995 Stock Option Plan (the 1995
Plan), which provides for the issuance of both "incentive" and "nonqualified"
stock options. A total of 1,000,000 shares are issuable under the 1995 Plan.
At the Annual Meeting of Stockholders on July 13, 1992, the Company's
stockholders approved the adoption of the 1992 Stock Option Plan (the 1992
Plan), which provides for the issuance of both "incentive" and "nonqualified"
stock options. A total of 1,000,000 shares are issuable under the Plan.
In addition, the Company's Third Amended And Restated 1989 Stock Option Plan
(the 1989 Plan) was revised such that no more options may be granted under that
plan. Options outstanding on July 13, 1992 under the 1989 Plan will continue in
force consistent with the terms and conditions under which they were originally
issued.
Under the terms of the Plan, both incentive and nonqualified stock options
to purchase shares of the Company's Common Stock may be granted at a price not
less than the market price of the stock at the date of grant. Stock options may
be granted to holders of 10 percent or more of the Company's voting power at
exercise prices no less than 110 percent of the market price of the stock at the
date of grant. Both option types are exercisable, in annual increments of one-
third or one half of the total options granted, on the anniversary dates
following the award.
47
<PAGE>
SUMMARY OF STOCK OPTIONS
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ ---------------------- ----------------------
NUMBER PRICE NUMBER PRICE NUMBER PRICE
OF PER OF PER OF PER
SHARES SHARE SHARES SHARE SHARES SHARE
--------- ------------ ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 913,750 $.20 to $.31 831,250 $.20 to $.31 619,750 $.20 to $.25
Options granted 362,000 $.06 to $.31 330,000 $.25 to $.31 405,000 $.28 to $.31
Options exercised 0 0 0 0 0 0
Options canceled 30,000 $.13 to $.43 247,500 $.25 to $.43 193,500 $.25 to $.43
--------- ------- -------
Options outstanding at end of year 1,245,750 $.06 to $.31 913,750 $.20 to $.31 831,250 $.20 to $.31
--------- ------- -------
--------- ------- -------
Options exercisable at end of year 628,917 $.06 to $.31 392,084 $.20 to $.31 726,250 $.20 to $.31
</TABLE>
NOTE M - RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The Company paid approximately $77,546, $103,137, and $125,480 during 1995,
1994 and 1993, respectively, in sales commissions to marketing companies in
which a former member of the Board of Directors holds an interest.
On February 24, 1993, the Company issued 126,000 shares of Common Stock to an
investment banking firm. The stock was issued as payment in full for $44,021
in placement agent fees for services rendered in connection with the private
sale of the Company's Common Stock which was completed in August, 1992. A
former director, who served as Chairman of The Board of Directors of the
Company from February 18, 1992 to January 12, 1993, was employed as an
executive by this investment banking firm at the time these services were
performed. The amount of $44,021 was included in "trade accounts payable" at
December 31, 1992.
In September 1993, the Company sold 110,000 shares of UMC Common Stock
to its Chief Executive Officer and Chief Financial Officer at $.25 per share.
NOTE N - COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
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 Plaintiff seeks compensation for 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.
48
<PAGE>
NOTE O - SIGNIFICANT CUSTOMERS
- --------------------------------------------------------------------------------
During 1995, 91% of fee revenue was earned from three customers. The
Washington Hospital Center (WHC) provided fees totaling 64% of total fee
revenue. Of the revenue generated by WHC during 1995, 99% was generated as a
result of an ongoing contract and 1% was generated as a result of backlog
contracts. Accounts receivable from the three customers were $80,505, $36,579,
and $3,614 at December 31, 1995.
During 1994, 90% of fee revenue was earned from three customers. The
Washington Hospital Center (WHC) provided fees totaling 85% of total fee
revenue. Of the revenue generated by WHC during 1994, 99% was generated as a
result of an ongoing contract and 1% was generated as a result of backlog
contracts. Accounts receivable from the three customers were $145,944, $8,765,
and $1,813 at December 31, 1994.
During 1993, 86% of fee revenue was earned from WHC. Of the revenue
generated by WHC, 79% was generated as a result of the ongoing contract and 21%
was generated as a result of backlog contracts with this customer.
49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
United Medicorp, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of revenues and expenses, of cash flows and of changes
in stockholders' equity present fairly, in all material respects, the financial
position of United Medicorp, Inc. and its subsidiary at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note A to
the financial statements, the Company has suffered recurring losses from
operations and has a net capital deficiency that raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note A. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
PRICE WATERHOUSE LLP
Dallas, Texas
March 14, 1996
50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of
United Medicorp, Inc.
Our audits of the consolidated financial statements referred to in our report
dated March 14, 1996 appearing on page 50 of this Annual Report on Form 10-K
also included an audit of the Consolidated Financial Statement Schedule listed
in Item 14(a) of this Form 10-K. In our opinion, this Consolidated Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PRICE WATERHOUSE LLP
Dallas, Texas
March 14, 1996
51
<PAGE>
SCHEDULE VIII
UNITED MEDICORP, INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
DEDUCTIONS FROM
ADDITIONS RESERVES FOR
BALANCE AT CHARGED TO PURPOSES FOR BALANCE
BEGINNING COSTS AND WHICH RESERVES AT END
DESCRIPTION OF YEAR EXPENSES WERE CREATED OF YEAR
----------- ---------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
Reserves for doubtful
accounts applicable to
current receivables:
1995 $107,765 $8,036 $108,308 $7,493
1994 $99,344 $8,801 $380 $107,765
1993 $120,417 $21,121 $42,194 $99,344
Valuation allowance for
deferred tax assets:
1995 $3,547,820 $97,280 $0 $3,645,100
1994 $2,948,440 $599,380 $0 $3,547,820
</TABLE>
52
<PAGE>
EXHIBIT INDEX
3.1 Certificate of Incorporation of the Company, filed with Secretary of
State of Delaware on February 26, 1988, is incorporated herein by
reference to Exhibit 3(a) of the Company's Registration Statement on
Form S-1, Commission File No. 33-20989, filed with the Commission on
March 30, 1988 and declared effective June 7, 1988.
3.2 By-Laws of the Company are incorporated herein by reference to Exhibit
3(b) of the Company's Registration Statement on Form S-1, Commission
File No. 33-20989, filed with the Commission on March 30, 1988 and
declared effective June 7, 1988.
3.3 Certificate of Amendment to Certificate of Incorporation of the
Company, filed with Secretary of State of Delaware on July 12, 1989,
is incorporated herein by reference to Exhibit 3 of the Company's
Current Report on Form 8-K, filed with the Commission on July 25,
1989.
3.4 Certificate of Amendment to Certificate of Incorporation of the
Company, filed with Secretary of State of Delaware on August 9, 1989,
is incorporated herein by reference to Exhibit 3.2 of the Company's
Form 10-Q filed for the fiscal quarter ended September 30, 1989.
4.1 Certificate of Designations, Preferences and Rights of 10% Cumulative
Convertible Preferred Stock of the Company, filed with the Secretary
of State of Delaware on August 9, 1989, is incorporated herein by
reference to Exhibit 4 of the Company's Form 10-Q filed for the fiscal
quarter ended September 30, 1989.
4.2 First Amended Certificate of Designations, Preferences and Rights of
10% Cumulative Convertible Preferred Stock of the Company, filed with
the Secretary of State of Delaware on December 7, 1989 is incorporated
herein by reference to Exhibit 4.2 of the Company's Form 10-K filed
for the fiscal year ended December 31, 1989.
4.3 Specimen Form of Certificate of Common Stock of the Company is
incorporated herein by reference to Exhibit 4.3 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35177,
originally filed with the Commission on June 1, 1990 and declared
effective July 27, 1990.
<PAGE>
4.4 Article Fourth of the Company's Certificate of Incorporation is
incorporated herein by reference to Exhibit 3 of the Company's Current
Report on Form 8-K, filed with the Commission on July 25, 1989.
4.5 Certificate of Amendment to Certificate of Incorporation, filed with
the Secretary of State of Delaware on June 21, 1990 is incorporated
herein by reference to Exhibit 4.5 of the Company's Registration
Statement on Form S-1, Commission File No. 33-35177, originally filed
with the Commission on June 1, 1990 and declared effective on July 27,
1990.
9. Not Applicable.
10.1 1989 Stock Option Plan of the Company is incorporated herein by
reference to Exhibit 10.1 of the Company's Form 10-Q filed for the
fiscal quarter ended September 30, 1989.
10.2 Form of Warrant to purchase shares of the Company's Common Stock
granted to certain persons during 1990 in connection with the
provision of interim financing is incorporated herein by reference to
Exhibit 10.14 of the Company's Registration Statement on Form S-1,
Commission File No. 33-35177, originally filed with the Commission on
June 1, 1990 and declared effective July 27, 1990.
10.3 Medical Claims Management/Collection Agreement, dated May 25, 1990, by
and between the Company and University Hospital is incorporated herein
by reference to Exhibit 10.20 of the Company's Registration Statement
on Form S-1, Commission File No. 33-35177, originally filed with the
Commission on June 1, 1990 and declared effective July 27, 1990.
10.4 Master Equipment Lease Agreement, dated February 2, 1990, by and
between the Company and Com Resources, Inc., together with certain
Schedules attached thereto is incorporated herein by reference to
Exhibit 10.22 of the Company's Registration Statement on Form S-1,
Commission File No. 33-35177, originally filed with the Commission on
June 1, 1990 and declared effective July 27, 1990.
10.5 First Amended and Restated 1989 Stock Option Plan of the Company is
incorporated herein by reference to Exhibit 10.23 of the Company's
Form 10-K filed for the fiscal year ended December 31, 1990.
10.6 Third Amended and Restated 1989 Stock Option Plan of the Company.
(Previously filed.)
10.7 1992 Stock Option Plan of the Company is incorporated herein by
reference to Exhibit 10.24 of the Company's Registration Statement on
Form S-1, Commission File No. 33-35178.
<PAGE>
10.8 Warrant dated August 21, 1992, issued to Gary R. Beauchamp is
incorporated herein by reference to Exhibit 10.25 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35178.
10.9 Warrant dated August 21, 1992 issued to Walid E. Moukarzel is
incorporated herein by reference to Exhibit 10.26 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35178.
10.10 Warrant dated August 14, 1992, issued to Mary G. Merritt is
incorporated herein by reference to Exhibit 10.27 of the Company's
Registration Statement on Form S-1, Commission File No. 33-35178.
10.11 Customer Service Agreement dated December 15, 1992 by and between
the Company and the Washington Hospital Center is incorporated herein
by reference to Exhibit 10.27 of the Company's Registration Statement
on Form S-1, Commission File No. 33-35178.
10.12 Settlement and Termination Agreement dated as of February 19, 1993 by
and between the Registrant, American Pacific Acceptance Corporation
and Summit Capital Corporation, is incorporated herein by reference
to Exhibit 10.1 of the Company's Current Report on Form 8-K, filed
with the Commission on March 3, 1993.
10.13 Warrant dated March 2, 1993, issued to Walid E. Moukarzel.
(Previously filed.)
10.14 Standard Office Building Lease Agreement dated June 1, 1989, between
the Registrant and Aetna Life Insurance Company. (Previously filed.)
10.15 Third Amendment to Lease, dated May 1, 1992, between the Registrant
and Aetna Life Insurance Company. (Previously filed.)
10.16 Sales Agent Agreement dated August 6, 1993, between UMC and
Consolidated Associates, Inc., is incorporated herein by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
10.17 Sales Agent Agreement dated August 6, 1993, between UMC and Tomar
Investments, is incorporated herein by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
10.18 Warrant dated August 9, 1993 issued to Tomar Investments.
(Previously filed.)
10.19 Certificate of Amendment to Certificate of Incorporation of the
Company, filed with Secretary of State of Delaware on August 3, 1993.
(Previously filed.)
10.20 Promissory Note dated September 30, 1994 made by the Registrant to BFI
Banque de Financement et D'Investissement. (Previously filed.)
<PAGE>
10.21 Term Lease Supplement dated December 30, 1994 between the Registrant
and IBM Credit Corporation. (Previously filed.)
10.22 1995 Stock Option Plan
10.23 Modification and Ratification of Lease, dated July 19, 1995.
22.1 Subsidiaries of the Company. (Previously filed.)
23.1 Consent of Price Waterhouse LLP, Independent Accountants
27 Financial Data Schedule
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UNITED MEDICORP, INC.
1995 STOCK OPTION PLAN
TABLE OF CONTENTS
ARTICLE I
THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purpose. . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Date . . . . . . . . . . . . . . . . . . . 1
1.4 Eligibility to Participate . . . . . . . . . . . . . 1
1.5 Shares Subject to the Plan . . . . . . . . . . . . . 1
1.6 Options and Stock Granted Under Plan . . . . . . . . 2
1.7 Conditions Precedent . . . . . . . . . . . . . . . . 2
1.8 Reservation of Shares of Common Stock. . . . . . . . 2
1.9 Tax Withholding. . . . . . . . . . . . . . . . . . . 2
1.10 Exercise of Options. . . . . . . . . . . . . . . . . 2
1.11 Acceleration of Right to Exercise Options. . . . . . 3
1.12 Written Notice Required. . . . . . . . . . . . . . . 4
1.13 Compliance with Securities Laws. . . . . . . . . . . 4
1.14 Employment of Optionee . . . . . . . . . . . . . . . 4
1.15 Option Upon Termination of Employment. . . . . . . . 4
1.16 Termination of Employment for Cause. . . . . . . . . 5
1.17 Option Upon Death or Disability of Optionee. . . . . 5
1.18 Options Not Transferable . . . . . . . . . . . . . . 5
1.19 Information to Optionees . . . . . . . . . . . . . . 5
ARTICLE II
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Committee. . . . . . . . . . . . . . . . . . . . . . 5
2.2 Majority Rule; Unanimous Written Consent . . . . . . 6
2.3 Company Assistance . . . . . . . . . . . . . . . . . 6
ARTICLE III
INCENTIVE STOCK OPTIONS. . . . . . . . . . . . . . . . . . . 6
3.1 Option Terms and Conditions. . . . . . . . . . . . . 6
3.2 Duration of Options. . . . . . . . . . . . . . . . . 6
3.3 Purchase Price . . . . . . . . . . . . . . . . . . . 6
3.4 Maximum Amount of Options First Exercisable in Any
Calendar Year. . . . . . . . . . . . . . . . 7
3.5 Requirements as to Certain Options . . . . . . . . . 7
3.6 Individual Option Agreements . . . . . . . . . . . . 7
ARTICLE IV
NONQUALIFIED STOCK OPTIONS . . . . . . . . . . . . . . . . . 7
4.1 Option Terms and Conditions. . . . . . . . . . . . . 7
4.2 Duration of Options. . . . . . . . . . . . . . . . . 7
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4.3 Purchase Price . . . . . . . . . . . . . . . . . . . 7
4.4 Individual Option Agreements . . . . . . . . . . . . 8
4.5 Option Grants to Nonemployee Directors . . . . . . . 8
ARTICLE V
TERMINATION, AMENDMENT AND ADJUSTMENT. . . . . . . . . . . . 8
5.1 Termination and Amendment. . . . . . . . . . . . . . 8
5.2 Adjustments. . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Other Optional Plans . . . . . . . . . . . . . . . . 9
6.2 Plan Binding on Successors . . . . . . . . . . . . . 9
6.3 Number and Gender. . . . . . . . . . . . . . . . . . 9
ARTICLE VII
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 10
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UNITED MEDICORP, INC.
1995 STOCK OPTION PLAN
ARTICLE I
THE PLAN
1.1 NAME. This plan shall be known as the United Medicorp,
Inc. 1995 Stock Option Plan (the "Plan").
1.2 PURPOSE. The purpose of the Plan is to promote the
growth and general prosperity of the Company by permitting the
Company to grant its full-time employees and nonemployee members
of the Board ("Eligible Participants") Options to purchase Common
Stock of the Company. This Plan is designed to help the Company
and its subsidiaries and affiliates attract and retain superior
personnel for positions of substantial responsibility and to
provide full-time employees and nonemployee members of the Board
with an additional incentive to contribute to the success of the
Company. The Company intends that Incentive Stock Options
granted pursuant to Article III will qualify as "incentive stock
options" within the meaning of Section 422(b) of the Internal
Revenue Code of 1986 (the "Code"). Any Option granted pursuant
to Article IV shall be clearly and specifically designated as not
being an incentive stock option as defined in Section 422(b) of
the Code.
1.3 EFFECTIVE DATE. The Plan shall become effective upon
the Effective Date.
1.4 ELIGIBILITY TO PARTICIPATE. Any Employee shall be
eligible to participate in the Plan; provided that Incentive
Stock Options may be granted only to persons who are employees of
the Company or a subsidiary or affiliate thereof. The Board or,
if applicable, the Committee (as defined in Section 2.1) may
grant Options to an Employee in accordance with such
determinations as the Board or, if applicable, the Committee from
time to time in its sole discretion shall make. Nonemployee
members of the Board shall receive Options as provided in Article
IV. Notwithstanding the foregoing, the Board may at any time
specify individuals who shall not be eligible for the grant of
Options or options under any other plan of the Company to meet
the requirements of Section 2.1 below.
1.5 SHARES SUBJECT TO THE PLAN. Subject to adjustment
pursuant to the provisions of Section 5.2, and subject to any
additional restrictions elsewhere in the Plan, the number of Plan
Shares that may be issued and sold hereunder shall not exceed
1,000,000 shares. Plan Shares may be either authorized and
unissued shares or shares issued and thereafter acquired by the
Company.
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1.6 OPTIONS AND STOCK GRANTED UNDER PLAN. Plan Shares with
respect to which an Option shall have been exercised shall not
again be available for grant hereunder. If Options terminate for
any reason without being wholly exercised, new Options may be
granted hereunder covering the number of Plan Shares to which
such Option termination relates.
1.7 CONDITIONS PRECEDENT. The Company shall not issue or
deliver any certificate for Plan Shares pursuant to the Plan
prior to the admission of the Plan Shares to listing on all stock
exchanges, if any, on which the Common Stock is then listed, the
completion of any registration or other qualification of the sale
of Plan Shares under any federal or state law and the obtaining
of any approval or other clearance from any federal or state
government, each if and to the extent that the Board shall in its
sole discretion determine to be necessary or advisable.
1.8 RESERVATION OF SHARES OF COMMON STOCK. During the term
of the Plan, the Company will at all times reserve and keep
available such number of shares of Common Stock as shall be
necessary to satisfy the requirements of the Plan as to the
number of Plan Shares. In addition, the Company will from time
to time, as is necessary to accomplish the purposes of the Plan,
seek or obtain from any regulatory agency having jurisdiction any
requisite authority in order to issue Plan Shares hereunder. The
inability of the Company to obtain from any regulatory agency
having jurisdiction the authority deemed by the Company's counsel
to be necessary to the lawful issuance of any Plan Shares shall
relieve the Company of any liability in respect of the
nonissuance of Plan Shares as to which the requisite authority
shall not have been obtained.
1.9 TAX WITHHOLDING. The issuance, delivery or exercise of
any Options under the Plan is subject to the condition that if at
any time the Board shall determine, in its discretion, that the
satisfaction of withholding tax or other withholding liabilities
under any state or federal law is necessary or desirable as a
condition of, or in connection with, the issuance, delivery or
exercise of the Options, then the issuance, delivery or exercise
of the Options shall not be effective unless the withholding
shall have been effected or obtained in a manner acceptable to
the Board, including, at the sole discretion of the Board, the
acceptance by the Company of Shares equal to such withholding
requirement in lieu of a cash payment.
1.10 EXERCISE OF OPTIONS. Each Option shall be exercisable
in accordance with the terms of the option agreement (the "Option
Agreement") pursuant to which the Option was granted. No Option
may be exercised for a fraction of a Plan Share.
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The purchase price of any Plan Shares purchased shall be paid at
the time of exercise of the Option either in cash, by certified
or cashier's check, by money order or, at the sole discretion of
the Board, by personal check.
1.11 ACCELERATION OF RIGHT TO EXERCISE OPTIONS.
Notwithstanding the provisions of any Option Agreement regarding
the time for exercise of an Option, the following provisions
shall apply:
(a) MERGERS AND REORGANIZATIONS. If the Company or its
stockholders enter into an agreement to dispose of all or
substantially all of the assets of the Company by means of a
sale, merger or other reorganization or liquidation, or otherwise
in a transaction in which the Company is not the surviving
corporation, any Option shall become immediately exercisable with
respect to the full number of shares subject to that Option
during the period commencing as of the date of the agreement to
dispose of all or substantially all of the assets or stock of the
Company and ending when the disposition of assets or stock
contemplated by that agreement is consummated or the Option is
otherwise terminated in accordance with its provisions or the
provisions of the Article pursuant to which it was granted,
whichever occurs first. The Option shall not become immediately
exercisable, however, if the transaction contemplated in the
agreement is a merger or reorganization in which the Company will
survive.
(b) CHANGE IN CONTROL. In the event of a change in control
or threatened change in control of the Company, all Options
granted prior to the change in control shall become immediately
exercisable. The term "change in control" for purposes of this
Section shall refer to (i) the acquisition of 50% or more of the
voting securities of the Company by any person or by persons
acting as a group within the meaning of Section 13(d)(3) of the
Exchange Act of 1934, as amended (the "Exchange Act"); provided
that no change in control or threatened change in control shall
be deemed to have occurred if prior to the acquisition of, or
offer to acquire, 50% or more of the voting securities of the
Company, the Board of Directors shall have adopted by not less
than two-thirds vote of directors then serving a resolution
specifically approving such acquisition or offer, or (ii) the
election, at any annual or special meeting of stockholders, of
individuals, who were not nominated by management to serve as
directors, as directors constituting a majority of the Board of
Directors. The term "person" for purposes of this Section refers
to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. Whether a change in control is
threatened shall be determined solely by the Board.
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1.12 WRITTEN NOTICE REQUIRED. Any Option shall be deemed to
be exercised for purposes of the Plan when written notice of
exercise has been received by the Company at its principal office
from the person entitled to exercise the Option and payment for
the Plan Shares with respect to which the Option is exercised has
been received by the Company in accordance with Section 1.11.
1.13 COMPLIANCE WITH SECURITIES LAWS. Plan Shares shall not
be issued with respect to any Option unless the exercise of the
Option and the issuance and delivery of the Plan Shares shall
comply with all relevant provisions of state and federal law,
including without limitation the Securities Act of 1933, as
amended (the "Securities Act"), the rules and regulations
promulgated thereunder and the requirements of any stock exchange
upon which the Plan Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with
respect to such compliance. The Board may also require an
Optionee to furnish evidence satisfactory to the Company,
including a written and signed representation letter and consent
to be bound by any transfer restrictions imposed by law, legend,
condition or otherwise, that the Plan Shares are being acquired
only for investment and without any present intention to sell or
distribute the shares in violation of any state or federal law,
rule or regulation. Further, each Optionee shall consent to the
imposition of a legend on the certificate representing the Plan
Shares issued upon the exercise of the Option restricting their
transferability as required by law or by this Section.
1.14 EMPLOYMENT OF OPTIONEE. Nothing in the Plan or in any
Option granted hereunder shall confer upon any Optionee any right
to continued employment by the Company or any of its subsidiaries
or affiliates or limit in any way the right of the Company or any
subsidiary or affiliate at any time to terminate or alter the
terms of that employment.
1.15 OPTION UPON TERMINATION OF EMPLOYMENT. If an Optionee
ceases to be employed by the Company or any subsidiary or
affiliate for any reason other than retirement, death or
disability, his Option may be exercised (but only to the extent
exercisable on the date of termination of employment) at any time
within three months after the date of termination of employment,
unless either the Option or the Article pursuant to which it was
granted otherwise provides for earlier termination. If an
Optionee ceases to be employed by the Company or any subsidiary
or affiliate because the Optionee has retired, as determined by
the Board, under a qualified retirement plan of the Company, his
Option shall be exercisable (but only to the extent exercisable
on the effective date of such retirement) at any time within
three months after the effective date of such retirement unless
by its terms the Option expires sooner.
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1.16 TERMINATION OF EMPLOYMENT FOR CAUSE. If an Optionee
ceases to be employed by the Company or any subsidiary or
affiliate of the Company because the Optionee is terminated for
cause, the Option shall automatically expire on the date of
termination. For purposes of this Section, "cause" shall mean an
act or acts involving a felony, fraud, willful misconduct, the
commission of any act that causes or reasonably may be expected
to cause substantial injury to the Company or gross negligence.
1.17 OPTION UPON DISABILITY OR DEATH OF OPTIONEE. If an
Optionee becomes disabled within the meaning of Section 22(e)(3)
of the Code while employed by the Company or any subsidiary or
affiliate of the Company, his Option shall become fully
exercisable and shall expire 12 months after the date of
termination by reason of disability as determined by the
Committee, unless either the Option or the Article pursuant to
which it was issued otherwise provides for earlier termination.
If an Optionee dies while employed by the Company or any
subsidiary or affiliate thereof, his Option shall expire 12
months after the date of death, unless by its terms it expires
sooner. During this 12-month or shorter period, the Option may
be fully exercised, to the extent that it remains unexercised on
the date of death, by the Optionee's personal representative or
by the distributee to whom the Optionee's rights under the Option
shall pass by will or by the laws of descent and distribution.
1.18 OPTIONS NOT TRANSFERABLE. Options may not be sold,
pledged, assigned or transferred in any manner otherwise than by
will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code and may
be exercised during the lifetime of an Optionee only by that
Optionee or by his legally authorized representative.
1.19 INFORMATION TO OPTIONEES. The Company shall furnish to
each Optionee a copy of the annual report, proxy statements and
all other reports sent to the Company's stockholders. Upon
written request, the Company shall furnish to each Optionee a
copy of its most recent Annual Report on Form 10-K and each
quarterly report to stockholders issued since the end of the
Company's most recent fiscal year.
ARTICLE II
ADMINISTRATION
2.1 COMMITTEE. The Plan shall be administered either by
the Board of Directors or, at the Board's discretion, by a
Committee (the "Committee") of not fewer than two members, which
persons shall all be nonemployee members of the Board. In its
sole discretion, the Board may appoint Disinterested Persons as
members of the Committee. Subject to the express provisions of
the Plan,
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the Board or the Committee, as the case may be, shall have the
sole discretion and authority to determine from among Eligible
Participants the ones to whom and the time or times at which
Options may be granted and the number of Plan Shares to be
subject to each Option. Any member of the Committee may be
removed at the discretion of the Board.
2.2 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. A majority
of the members of the Committee shall constitute a quorum, and
any action taken by a majority present at a meeting at which a
quorum is present or any action taken without a meeting evidenced
by a writing executed by all members of the Committee shall
constitute the action of the Committee. Meetings of the
Committee may take place by telephone conference call.
2.3 COMPANY ASSISTANCE. The Company shall supply full and
timely information to the Committee on all matters relating to
Eligible Participants, their employment, death, retirement,
disability or other termination of employment, and such other
pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as
is necessary in the performance of its duties.
ARTICLE III
INCENTIVE STOCK OPTIONS
3.1 OPTION TERMS AND CONDITIONS. The terms and conditions
of Options granted under this Article ("Incentive Stock Options")
may differ from one another as the Board shall, in its
discretion, determine, as long as all Options granted under this
Article satisfy the requirements of this Article.
3.2 DURATION OF OPTIONS. Each Option granted pursuant to
this Article and all rights thereunder shall expire on the date
determined by the Board, but in no event shall any Option granted
under this Article expire earlier than one year or later than ten
years after the date on which the Option is granted. In
addition, each Option shall be subject to early termination as
provided elsewhere in the Plan.
3.3 PURCHASE PRICE. The purchase price for Plan Shares to
be acquired pursuant to the exercise, in whole or in part, of
any Option granted under this Article shall not be less than the
Fair Market Value of the Plan Shares at the time of the grant of
the Option.
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3.4 MAXIMUM AMOUNT OF OPTIONS FIRST EXERCISABLE IN ANY
CALENDAR YEAR. The maximum aggregate Fair Market Value of Plan
Shares (determined at the time the Option is granted) with
respect to which Options issued under this Article are
exercisable for the first time by any Employee during any
calendar year under all incentive stock option plans of the
Company and its subsidiaries and affiliates shall not exceed
$100,000. Any Option granted under the Plan and first
exercisable in excess of the foregoing limitations shall be
considered granted pursuant to Article IV and shall be clearly
and specifically designated as not being an incentive stock
option.
3.5 REQUIREMENTS AS TO CERTAIN OPTIONS. In the event of
the grant of any Option under this Article to an individual who,
at the time the Option is granted, owns shares of stock
representing more than 10% of the total combined voting power of
all classes of stock of the Company or any subsidiary or
affiliate thereof within the meaning of Section 422(b)(6) of the
Code, the purchase price for the Plan Shares subject to that
Option must be at least 110% of the Fair Market Value of those
Plan Shares at the time the Option is granted and the Option must
not be exercisable after the expiration of five years from the
date of its grant.
3.6 INDIVIDUAL OPTION AGREEMENTS. Each Employee receiving
Options pursuant to this Article shall be required to enter into
a written Option Agreement with the Company as a precondition to
receiving an Option under this Article. In such Option
Agreement, the Employee shall agree to be bound by the terms and
conditions of the Plan, the awards made pursuant hereto, and such
other matters as the Board deems appropriate.
ARTICLE IV
NONQUALIFIED STOCK OPTIONS
4.1 OPTION TERMS AND CONDITIONS. The terms and conditions
of Options granted under this Article ("Nonqualified Stock
Options") may differ from one another as the Board shall in its
discretion determine, as long as all Options granted under this
Article satisfy the requirements of this Article.
4.2 DURATION OF OPTIONS. Each Option granted pursuant to
this Article and all rights thereunder shall expire on the date
determined by the Board, but in no event shall any Option granted
under this Article expire later than ten years after the date on
which the Option is granted. In addition, each Option shall be
subject to early termination as provided elsewhere in the Plan.
4.3 PURCHASE PRICE. The purchase price for Plan Shares
acquired pursuant to the exercise, in whole or in part, of any
Option shall not be less than the Fair Market Value of the Plan
Shares at the time of the grant of the Option.
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4.4 INDIVIDUAL OPTION AGREEMENTS. Each Employee receiving
Options pursuant to this Article shall be required to enter into
a written Option Agreement with the Company as a precondition to
receiving an Option under this Article. In such Option
Agreement, the Employee shall agree to be bound by the terms and
conditions of the Plan, the awards made pursuant hereto, and such
other matters as the Board deems appropriate.
4.5 AUTOMATIC GRANTS. Upon the first and each subsequent
anniversary of the approval of the Plan by the stockholders of
the Company, each non-employee director shall receive
Nonqualified Stock Options to purchase 25,000 Plan Shares per
year. The purchase price for such Plan Shares shall be the Fair
Market Value of the Plan Shares on the date the Nonqualified
Stick Options are granted. One half of each such Option shall
become exercisable immediately and the remainder of each such
Option shall become exercisable on the first anniversary date of
such grant. Such Options shall all expire on the tenth
anniversary of the date granted.
ARTICLE V
TERMINATION, AMENDMENT AND ADJUSTMENT
5.1 TERMINATION AND AMENDMENT. The Plan shall terminate
ten years after the Effective Date. No Options shall be granted
under the Plan after that date of termination. Subject to the
limitation contained in this Section, the Board may at any time
amend or revise the terms of the Plan, including the form and
substance of the Option Agreements to be used in connection
herewith; provided that no amendment or revision shall (i)
increase the maximum aggregate number of Plan Shares, except as
permitted under Section 5.2, (ii) change the minimum purchase
price for Shares under Article III or Article IV; (iii) increase
the maximum term established under the Plan for any Option or
(iv) permit the granting of an Option to anyone other than as
provided in the Plan; and provided further that without
stockholder approval no amendment to the Plan shall be effective
that materially increases the benefits accruing to Eligible
Participants, materially increases the number of securities that
may be issued under the Plan, or otherwise materially modifies
the requirements as to eligibility for participation in the Plan,
all within the meaning of Rule 16b-3 promulgated under the
Exchange Act; and provided further that
Section 4.5 hereof shall not be amended more than once in any six
month period. No amendment, suspension or termination of the
Plan shall, without the consent of the Optionee who has received
an Option hereunder, alter or impair any of that Optionee's
rights or obligations under any Option granted under the Plan
prior to that amendment, suspension or termination.
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5.2 ADJUSTMENTS. If the outstanding Common Stock is
increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through merger,
consolidation, combination, exchange of shares, other
reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split, an appropriate and
proportionate adjustment shall be made in the maximum number and
kind of Plan Shares as to which Options may be granted under the
Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised Options or portions thereof,
which shall have been granted prior to any such change, shall
likewise be made. Any such adjustment in outstanding Options
shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the Option, but with a
corresponding adjustment in the price for each share covered by
the Option. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined
solely by the Board, and any such adjustment may provide for the
elimination of fractional share interests.
ARTICLE VI
MISCELLANEOUS
6.1 OTHER OPTION PLANS. The adoption of the Plan shall not
affect any other stock option or incentive or other compensation
plans in effect for the Company or any subsidiary or affiliate of
the Company, nor shall the Plan preclude the Company or any
subsidiary or affiliate thereof from establishing any other forms
of incentive or other compensation for Employees.
6.2 PLAN BINDING ON SUCCESSORS. The Plan shall be binding
upon the successors and assigns of the Company and any subsidiary
or affiliate of the Company that adopts the Plan.
6.3 NUMBER AND GENDER; HEADINGS. Whenever used herein,
nouns in the singular shall include the plural where appropriate,
and the masculine pronoun shall include the feminine gender.
Headings of articles and sections hereof are inserted for
convenience of reference and constitute no part of the Plan.
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ARTICLE VII
DEFINITIONS
As used herein with initial capital letters, the following
terms have the meanings hereinafter set forth unless the context
clearly indicates to the contrary:
7.1 "Board" shall mean the Board of Directors of the
Company.
7.2 "Common Stock" shall mean the Common Stock, par value
$0.01 per share, of the Company or, in the event that the
outstanding shares of such Common Stock are hereafter changed
into or exchanged for shares of a different stock or security of
the Company or some other corporation, such other stock or
security.
7.3 "Company" shall mean United Medicorp, Inc., a Delaware
corporation.
7.4 "Disinterested Person" shall mean an individual who is
a "disinterested person" within the meaning of Rule 16b-3
promulgated under the Exchange Act.
7.5 "Effective Date" shall mean the date of the Plan's
adoption by the Board subject to approval of the Plan by a
majority of the stockholders of the Company voting in person or
by proxy at a meeting of stockholders following adoption of the
Plan by the Board, which approval shall be obtained within 12
months after adoption of the Plan by the Board; provided that
Options may be granted under the Plan prior to obtaining stockholder
approval of the Plan, but any such Options shall be contingent upon
such stockholder approval being obtained and may not be exercised
prior to such approval.
7.6 "Employee(s)" shall mean employee(s) of the Company or
of any subsidiary or affiliate of the Company the board of
directors of which adopts the Plan and any other person(s)
performing services for the Company or any such subsidiary or
affiliate, with or without compensation, to whom the Company
chooses to grant Options in accordance with the Plan, but shall
not include members of the Board who are not also otherwise
employed by the Company.
7.7 "Fair Market Value" shall mean such value as determined
by the Board on the basis of such factors as it deems
appropriate; provided that if the Common Stock is traded on a
national securities exchange or transactions in the Common Stock
are quoted on the NASDAQ National Market System, such value shall
be determined by the Committee on the basis of the last reported
sales price for the Common Stock on the date for which such
determination is relevant, as reported on the national securities
exchange or the NASDAQ National Market System, as the case may
be. If the Common Stock is not listed and traded upon a
recognized
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securities exchange or on the NASDAQ National Market System, the
Committee shall make a determination of Fair Market Value on the
basis of the mean between the closing bid and asked quotations
for such stock on the date for which such determination is
relevant (as reported by a recognized stock quotation service)
or, in the event that there shall be no bid or asked quotations
on the date for which such determination is relevant, then on the
basis of the mean between the closing bid and asked quotations on
the date nearest preceding the date for which such determination
is relevant for which such bid and asked quotations were
available.
7.8 "Option" shall mean an Incentive Stock Option or a
Nonqualified Stock Option.
7.9 "Optionee" shall mean an Employee or nonemployee member
of the Board to whom an Option has been granted hereunder.
7.10. "Plan Shares" shall mean shares of Common Stock
issuable pursuant to the Plan.
A-11
<PAGE>
MODIFICATION AND RATIFICATION OF LEASE
This Modification and Ratification of Lease Agreement is made and entered
into between 10210 North Central Expressway Centex J.V. (Lessor) and United
Medicorp, Inc. (Lessee) for and in consideration of One Dollar ($1.00) and
other good and valuable consideration.
WITNESSETH:
1) Lessor and Lessee confirm and ratify, except as modified below, all of the
terms, conditions, and covenants in that certain Commercial Lease Agreement
dated June 1, 1989, and amended June 20, 1989; April 4, 1990; January 8,
1992; and May 1, 1992, between Aetna Life Insurance Company and Lessee, for
the rental of the following described property:
8,200 rentable square feet in Suite 400, situated at 10210 North Central
Expressway, Dallas, Texas 75231.
2) Lessee warrants that Lessee has accepted and is now in possession of the
Leased Premises and that the Commercial Lease Agreement is valid and presently
in full force and effect.
3) LESSOR CHANGE. Lessor and Lessee agree that Lessor is changed from Aetna
Life Insurance Company to 10210 North Central Expressway Centex J.V.
4) LEASE TERM. Lessor and Lessee agree that the term of the Commercial Lease
Agreement is extended for sixty five (65) months so that the expiration date
shall be changed from August 31, 1995 to January 31, 2001.
5) BASE MONTHLY RENT. Lessor and Lessee agree that beginning September 1,
1995, the monthly rent for the renewal term shall be as follows:
MONTHS BASE MONTHLY RENT RENT PSF
- ------ ----------------- --------
9/1/95-1/31/96 $0.00 $0.00
2/1/96-1/31/99 $7,544.17 $11.00
2/1/99-1/31/2000 $7,887.08 $11.50
2/1/2000-1/31/2001 $8,230.00 $12.00
6) WAIVER OF MONTHLY RENT. Lessor and Lessee agree that the monthly rental
payment of $9,142.16 which would otherwise be due on August 1, 1995, is
hereby waived.
7) ESCALATIONS. For purposes of ascertaining the adjustment to Monthly Base
Rent where Base Amount is referred to Addendum B of the primary lease, Base
Amount shall be changed from $5.50 psf to 1996 Base Year.
1
<PAGE>
8) TERMINATION OPTION. After three years of occupancy, Lessee shall have the
right to cancel this lease with ninety days notice to Lessor.
9) EXPANSION OPTION. During the first two years of this lease extension
beginning September 1, 1995, Lessee shall have the right to expand into any
available space in the building up to an additional 8,200 rentable square
feet. Such expansion shall be at the same rate that Lessee is paying at the
time of such expansion for Lessee's primary space and shall increase, on a
per square foot basis, in accordance with #5 above. Such expansion shall be
granted only on space that is not encumbered by options of other tenants in
the building. All other terms and conditions of such expansion will be the
same as this lease renewal for the primary space.
10) LEASEHOLD IMPROVEMENTS. Lessor and Lessee agree that the premises shall
be accepted "as is", except for the following improvements which are to be
completed at Lessor's expense no later than September 30, 1995.
a) New carpet in the central hallway from a point beginning at the junction
with the large open area at the west end all the way to the east end of the
hallway, including the conference area, UMC to have choice of color.
b) New carpet in the office immediately in front of the main entrance to
Suite 400, UMC to have choice of color.
c) One new wall and doorway to be constructed so as to enclose the existing
conference area.
d) One "coffee bar", consisting of a counter top measuring about 6 feet by 3
feet, with built in cabinets underneath and a water line for a coffee maker.
The location of the "coffee bar" will be determined by UMC in the western end
of Suite 400.
11) SPACE REDUCTION OPTION. Lessor and Lessee agree that Lessee shall have a
space reduction option on up to 4,100 rentable square feet of Suite 400
whereby Lessee can at any time following July 31, 1996 make a payment equal
to four times the then current monthly rental for the portion of Suite 400
which Lessee is vacating. Lessee shall have thirty (30) days to vacate that
portion of Suite 400 following its notice to Lessor to reduce its space.
12) SIGNAGE. Lessor and Lessee agree that Lessor shall allow Lessee to place
its name "United Medicorp" on the existing sign located next to the driveway
in front of the building on Blair Street. Lessee shall have exclusive use of
this sign. The design of the sign will be mutually agreed upon by Lessor and
Lessee.
13) Lessor and Lessee agree that all other terms and conditions remain the
same.
2
<PAGE>
Signed at Dallas, Texas, this 19th day of July, 1995.
LESSOR:
10210 North Central Expressway Centex J.V.
BY: /s/ SUE SHELTON
----------------------------
Sue Shelton
TITLE: Agent
LESSEE:
United Medicorp, Inc.
BY: /s/ P.W. SCARNAN
----------------------------
P.W. Scarnan
TITLE: President & C.E.O.
3
<PAGE>
MODIFICATION AND RATIFICATION OF LEASE
This Modification and Ratification of Lease Agreement is made and entered
into between 10210 NORTH CENTRAL EXPRESSWAY CENTEX J.V. (Lessor) and UNITED
MEDICORP (Lessee) for and in consideration of One Dollar ($1.00) and other
good and valuable consideration, receipt of which is hereby acknowledged.
W I T N E S S E T H:
1. Lessor and Lessee hereby confirm and ratify, except as modified below,
all of the terms, conditions, and covenants in that certain written
Commercial Lease Agreement dated June 1, 1989, and amended June 20, 1989;
April 4, 1990; January 8, 1992; May 1, 1992; and July 19, 1995, between
Lessor and Lessee, for the rental of the following described property:
8,200 RENTABLE SQUARE FEET IN SUITE 400, SITUATED AT
10210 NORTH CENTRAL EXPRESSWAY, DALLAS, TEXAS, 75231.
2. Lessee warrants that Lessee has accepted and is now in possession of
the Leased Premises and that the Commercial Lease Agreement is valid and
presently in full force and effect.
3. Lessor and Lessee agree that square footage of the premises shall be
changed from 8,200 s.f. to 8,230 s.f.
4. Lessor and Lessee agree the all other terms and conditions remain the
same.
SIGNED AT Dallas, Texas, this 26 day of July, 1995.
LESSOR:
10210 NORTH CENTRAL EXPRESSWAY CENTEX J.V.
BY: /s/ SUE SHELTON
--------------------------------------
Sue Shelton
TITLE: Authorized Agent
-----------------------------------
LESSEE:
UNITED MEDICORP, INC.
BY: /s/ P.W. SCARNAN
--------------------------------------
P.W. Scarnan
ITS: President & C.E.O.
-------------------------------------
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-35177) of United Medicorp, Inc. of our report
dated March 14, 1996 appearing on page 50 of this Annual Report on Form 10-K.
We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 51 of this Annual Report
on Form 10-K.
PRICE WATERHOUSE LLP
Dallas, Texas
March 14, 1996
<TABLE> <S> <C>
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 58,078
<SECURITIES> 0
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0
0
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