<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended
June 30, 1997 Commission File No.1-10418
UNITED MEDICORP, INC.
(Exact name of registrant as specified in charter)
Delaware 75-2217002
- ------------ --------------
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
10210 N. Central Expressway, #400
Dallas, Texas 75231
- ---------------------------------- -------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
214/691-2140
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
As of July 1, 1997, there were outstanding 26,310,217 shares of Common Stock,
$.01 par value.
<PAGE>
UNITED MEDICORP, INC.
June 30, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Revenues and Expenses
for the Three Months Ended June 30, 1997 and 1996, and
for the Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 1997 and 1996, and
for the Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Default Upon Senior Securities . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . 15
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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UNITED MEDICORP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
(UNAUDITED) (AUDITED)
JUNE 30, DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 71,979 $ 188,868
Restricted Cash 125,967 8,143
Funded Claims 7,633 0
Accounts receivable, less allowance for
doubtful accounts of $19,368 and $18,177,
respectively 268,232 171,273
Notes receivable, less allowance for
doubtful accounts of $0 and $0, respectively 8,000 0
Prepaid expenses and other 15,623 19,920
----------- -----------
TOTAL CURRENT ASSETS 497,433 388,204
PROPERTY AND EQUIPMENT (NET) 165,892 120,142
OTHER ASSETS 10,760 15,301
----------- -----------
TOTAL ASSETS $ 674,086 $ 523,647
----------- -----------
----------- -----------
CURRENT LIABILITIES:
Payable to customers $ 72,598 $ 8,143
Payable to funding sources 63,171 0
Trade accounts payable 78,964 46,077
Accrued expenses 178,798 181,136
Current portion of capital lease obligations 41,416 36,862
----------- -----------
TOTAL CURRENT LIABILITIES 434,946 272,218
LONG TERM PORTION OF LEASE OBLIGATIONS 87,800 100,344
DEFERRED CREDITS 16,346 23,891
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 50,000,000 authorized,
26,415,764 shares issued and outstanding at 6/30/97
and 12/31/96. 264,157 264,157
Less: 105,547 shares of treasury stock, at cost (221,881) (221,881)
Additional paid-in capital 18,552,342 18,552,341
Retained deficit (18,459,626) (18,467,423)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 134,994 127,194
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 674,086 $ 523,647
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
UNITED MEDICORP, INC.
CONSOLIDATED STATEMENT OF REVENUES AND EXPENSES
(UNAUDITED)
<TABLE>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Fee income $ 587,962 $ 464,960 $ 1,036,339 $ 928,425
Other income 4,550 0 6,460 6,900
Interest income 1,450 0 3,552 0
----------- ----------- ----------- -----------
TOTAL REVENUES 593,962 464,960 1,046,351 935,325
EXPENSES:
Salaries and benefits 408,220 280,206 729,420 585,281
Selling, general and
administrative 118,526 106,982 188,000 212,942
Professional fees 13,534 22,015 29,432 36,505
Office and equipment rental 19,577 24,472 39,160 52,774
Depreciation and amortization 23,234 26,603 45,778 52,636
Interest 3,833 4,422 7,078 8,990
Other (38) 73 (316) 73
----------- ----------- ----------- -----------
TOTAL EXPENSES 586,885 464,773 1,038,554 949,202
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 7,077 $ 187 $ 7,798 $ (13,877)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME (LOSS) PER SHARE $ 0.00 $ 0.00 $ 0.00 $ (0.00)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 26,310,217 26,310,217 26,310,217 26,310,217
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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UNITED MEDICORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 7,077 $ 187 $ 7,798 $(13,877)
(Gain) on disposal of assets (38) 0 (316) 0
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 23,234 26,607 45,778 52,636
(Increase) Decrease in restricted cash 71,214 (50,081) (117,824) (50,081)
(Increase) Decrease in purchased claims 12,439 0 (7,633) 0
(Increase) Decrease in accounts receivable (63,437) 39,709 (96,959) (1,806)
(Increase) Decrease in notes receivable (8,000) 214 (8,000) 214
(Increase) Decrease in prepaid expenses and other 3,320 (162) 4,297 2,876
Increase (Decrease) in payable to customers (52,635) (10,861) 64,455 30,179
Increase (Decrease) in payable to funding sources (14,246) 0 63,171 0
Increase (Decrease) in accounts payable 20,823 43,937 32,887 66,614
Increase (Decrease) in accrued expenses (1,962) 2,680 (2,338) (1,142)
(Decrease) in deferred revenue 0 (7,980) 0 (15,959)
(Increase) Decrease in deposits and other 23 0 4,541 0
Increase (Decrease) in deferred credits (3,772) (5,562) (7,545) 0
--------- --------- --------- --------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (5,960) 38,688 (17,687) 69,654
--------- --------- --------- --------
INVESTING ACTIVITIES:
Property and equipment, net (80,456) (5,627) (91,212) (10,054)
--------- --------- --------- --------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (80,456) (5,627) (91,212) (10,054)
--------- --------- --------- --------
FINANCING ACTIVITIES:
Common stock subscribed 0 0 0 0
Assets aquired via capital leases 10,122 0 10,122 0
Payments of capital lease obligations (8,767) (8,524) (18,112) (23,115)
--------- --------- --------- --------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 1,355 (8,524) (7,990) (23,115)
--------- --------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (85,061) 24,537 (116,889) 36,485
CASH AND CASH EQUIVALENTS, beginning of period 157,040 70,026 188,868 58,078
--------- --------- --------- --------
CASH AND CASH EQUIVALENTS, end of period $ 71,979 $ 94,563 $ 71,979 $ 94,563
--------- --------- --------- --------
--------- --------- --------- --------
Additional Cash Flow Information
Cash paid for interest $ 2,170 $ 3,163 $ 4,497 $ 6,773
Cash received from receivables funding sources $ 0 $ 0 $ 127,327 $ 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
United Medicorp, Inc. (the "Company" or "UMC") is a publicly held company traded
on the over the counter market under the symbol UMCI. UMC was founded in March,
1989 to provide medical insurance claims management services to healthcare
providers throughout the United States.
The accompanying consolidated financial statements as of June 30, 1997 and for
the three and six month periods ended June 30, 1997 and 1996 are unaudited.
However, in the opinion of management, all adjustments consisting of normal
recurring adjustments necessary for the fair presentation of financial position,
results of operations, and cash flows for the periods shown have been made,
except the consolidated financial statements do not include any adjustments that
might result from the uncertainty described in Note 2 below. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission, although management believes that the disclosures contained herein
are adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
2. CAPITAL INFUSION AND GOING CONCERN
At June 30, 1997, the Company had $71,979 in unrestricted cash and cash
equivalents on hand. These funds along with forecasted revenues are projected by
management to be adequate to fund operations. The Company continues to pursue
new business primarily through direct contacts with prospective customers in an
effort to generate additional revenues. There is no assurance that revenues
generated from existing customers will continue as forecasted or that the
Company will be successful in securing new customers or sources of revenue
before the Company's remaining capital is depleted. In the event such new
customers or sources of revenue are not secured, management projects that cash
flow from operations may not be sufficient to provide for the Company's working
capital needs beyond 1997, in which case the Company will be required to raise
additional capital in order to continue operating in its present form. Due to
the Company's history of operating losses there can be no assurance that
additional investment capital can be raised in the event the Company is not
successful in securing new customers or new sources of revenue.
3. RESTRICTED CASH
Restricted Cash represents payments collected from insurance carriers and
patients on behalf of UMC customers. These funds are remitted to customers by
UMC on a weekly, semi-monthly, or monthly interval.
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<PAGE>
4. ACCOUNTS RECEIVABLE
Accounts receivable represents fees which have been billed to and are due from
customers.
5. NOTES RECEIVABLE
Included in the notes receivable at June 30, 1997 are $8,000 related to services
rendered to Healthcare Advisory Service of Puerto Rico, Inc. ("HAS"). The
ability of HAS to pay UMC for services rendered is contingent upon receipt by
HAS of payment from its customers for services rendered. There can be no
assurance that such payment will be received, or if it will be received within
the timeframe anticipated by HAS and UMC management. The Company has not
established any reserve for bad debts related to the note receivable from HAS.
6. PAYABLE TO CUSTOMERS
Payable To Clients includes payments collected from insurance carriers and
patients on behalf of UMC customers. These funds are remitted to customers by
UMC on a weekly, semi-monthly, or monthly interval.
7. PAYABLE TO FUNDING SOURCES
In order to access capital with which to provide advance funding services to a
new customer, the Company completed an "Assignment And Agency Agreement" on
January 31, 1997 (the "Agreement"). Under the Agreement, UMC assigned certain
rights under a Medical Claims Purchase Contract between UMC and its customer to
two members of its Board of Directors (the "Funding Sources"). The Funding
Sources provided UMC with $127,327 in funds, which UMC in turn used to advance
fund certain eligible receivables of its customer. As of June 30, 1997, the
"Payable To Funding Sources" represents cash held by UMC in its capacity as the
agency of the Funding Sources, which is payable to the Funding Sources to the
extent not invested in eligible receivables. Fees earned attributable to
capital provided by the Funding Sources are credited to the Funding Sources,
while UMC retains all fees attributable to the billing and collection services
rendered and funding provided with UMC's capital. Other than acting as the
agent of the Funding Sources for the purchase of eligible receivables, and
assuming custodial responsibility for cash held as the agency of the Funding
Sources pending investment in funded receivables, UMC has not guaranteed
repayment of the funds advanced by the Funding Sources.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NEW CONTRACTS SIGNED BY UMC:
During the Second Quarter ended June 30, 1997, UMC completed two contracts which
are expected to generate new revenues during the second half of 1997:
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<PAGE>
1) On May 9, 1997, UMC completed two addenda to its existing Customer Service
Agreement with the Washington Hospital Center. Under the addenda, UMC will
provide the following services to the WHC Physician Billing Department ("WHC
PBD"):
a) Collection follow up, rebilling and collection services with respect to a
backlog of aged claims.
b) Collection follow up, rebilling and collection services with respect to WHC
non-emergency physician claims beginning at 31 days from date of service.
c) Collection follow up, rebilling and collection services with respect claims
originated by physicians in the WHC Department of Emergency Medicine beginning
on the first day following date of service.
UMC management estimates that the WHC PBD contract will generate $50K to $80K in
additional ongoing monthly fees once full ramp up is attained. UMC management
believes that additional non-recurring fees will be derived from the backlog of
aged claims, but is unable to provide a specific estimate of these fees.
2) On June 16, 1997, UMC completed a contract with a hospital in Oklahoma which
is owned by a nationally prominent hospital chain. Under this contract, UMC will
provide collection follow up of outpatient claims. Once the claims have been
worked, UMC will hand off responsibility for collecting the balances due from
the guarantors of patient accounts to a collection agency in Oklahoma ("CA")
with which UMC has established an alliance. CA was instrumental in assisting UMC
to complete this contract, and UMC will pay CA a sales commission equal to 10
percent of the revenues earned from this contract. UMC management estimates that
UMC will earn fees of $10K to $15K per month from this contract.
NEW MANAGEMENT HIRED:
On May 6, 1997, UMC hired Ms. Linda Underwood as Director of Claims Operations.
Ms. Underwood's experience includes twelve years of physician billing experience
with the University of Texas Southwestern Medical Center, Desert Sun Life
Insurance Company, and Employee Benefits of America.
On May 12, 1997, the Company hired Michael J. Pohorilla as Director of
Operations for United MoneyCorp. Mr. Pohorilla's background includes twenty five
years of collection agency experience with GC Services, TRW Receivables
Management Services, and National Revenue Corporation.
UNITED MONEYCORP OPERATIONS:
United MoneyCorp, Inc. ("UMY") has been designated as the legal entity under
which UMC will operate a collection agency. UMC management believes that there
is a large and growing market for bad debt collections and other collection
agency services, and that offering these services to healthcare providers will
complement the medical claims processing and billing services already offered by
UMC. In addition, given that United MoneyCorp is a generic name,
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<PAGE>
this entity will be positioned to offer collection services to customers
outside of the healthcare market.
On May 1, 1997, UMY completed an "Early Out Collection Agreement" ("EOCA") with
a major hospital system in Texas. UMC management estimates that this EOCA will
generate $30K to $45K in monthly fees once full ramp up is attained.
During the Second Quarter, UMY received placements of accounts totalling
approximately $19.0 million. Although the majority of these accounts are
classified as "second placement" bad debts and are thus of questionable
collectibility, about $7 million of the accounts placed were "early out"
accounts which were placed pursuant to the EOCA mentioned above. Total Headcount
for UMY increased from 7 employees at April 1, 1997, to 10 at June 30, 1997.
CAPITAL REQUIREMENTS:
In anticipation of the increased volume of claims and accounts to be worked
pursuant to the new contracts completed by UMC and UMY as outlined above, UMC
made several improvements to its leased office space, purchased additional
workstation furniture, and leased additional computer terminals and online
storage capacity for its computer system (see "Liquidity and Capital Resources -
Capital Expenditures"). The Company also began recruiting and training
additional operations management and personnel. These expenditures together with
increased requirements for working capital caused the Board of Directors to
approve a private offering of shares of UMC Common Stock during a meeting on
June 17, 1997. That offering was subsequently completed as described below under
"Liquidity and Capital Expenditures - Subsequent Events".
PUERTO RICAN OPERATIONS:
Following the termination of the Company's contract with Healthcare Advisory
Service of Puerto Rico, Inc. ("HAS") in mid-1996 and the closure of the
Company's office in Ponce, Puerto Rico late in the fourth quarter of 1996, the
Company has made numerous sales calls on hospitals and governmental authorities
in Puerto Rico in attempts to establish a customer base for its services in that
market. To date no contracts have been signed, and there can be no assurance
that UMC will be successful in obtaining new business or producing profitable
revenues as a result of these sales efforts.
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<PAGE>
FORWARD LOOKING STATEMENTS:
This report contains statements which constitute "forward-looking statements"
within the meaning of the Securities Act of 1993 and the Securities Exchange Act
of 1934, as amended by the Private Securities Litigation Reform Act of 1995, 15
U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996). Those forward-looking
statements include the intent, belief, or current expectations of the Company
and members of its senior management team, as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Important factors currently known to management that could cause actual results
to differ materially from those in forward-looking statements include, but are
not limited to, the need to successfully start up the Company's collection
agency subsidiary, United MoneyCorp, Inc., the efficiency of the Company's
billing and accounts receivable management services operations, continued
availability of credit on terms and conditions acceptable to the Company,
continued service of existing employees and availability of qualified new hires
to staff the Company's operations, on-going management initiatives designed to
reduce costs and enhance efficiencies, the Company's pending outstanding
litigation, and prospective changes in law, regulations or policies affecting
the Company's business and/or operations. Additional factors that could cause
actual results to differ materially from those contemplated by the forward-
looking statements in this report may be found in the Company's previous public
filings with the Securities & Exchange Commission, which are incorporated by
reference herein. The Company undertakes no obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over time.
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<PAGE>
The following table sets forth for each period indicated the volume and gross
dollar amount of insurance claims received and fees recognized for each of the
Company's two principal services. In general, collections on most healthcare
providers' new claims ("Ongoing") tend to average about 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.
UNITED MEDICORP, INC.
THIRD PARTY CLAIMS PROCESSING VOLUME AND FEES
<TABLE>
<CAPTION>
1995 1996 1997
---------------- ------------------------------------- ----------------
THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NUMBER OF CLAIMS
ACCEPTED FOR
PROCESSING
ONGOING 43,161 47,249 48,280 46,860 40,179 37,127 28,729 42,833
BACKLOG 0 3,455 41 1 1 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
TOTAL 43,161 50,704 48,321 46,861 40,180 37,127 28,729 42,833
GROSS AMOUNT OF
CLAIMS ACCEPTED FOR
PROCESSING ($000)
ONGOING 18,791 21,660 19,923 21,055 18,068 18,325 20,269 20,124
BACKLOG 0 1,269 17 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
TOTAL 18,791 22,929 19,940 21,055 18,068 18,325 20,269 20,124
COLLECTIONS ($000)
ONGOING 9,613 8,694 9,019 8,257 7,533 7,063 7,545 10,143
BACKLOG 28 60 70 6 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
TOTAL 9,641 8,754 9,089 8,263 7,533 7,063 7,545 10,143
FEES EARNED ($000)
ONGOING 449 447 408 386 379 376 366 428
BACKLOG 2 3 3 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------
TOTAL 451 450 411 386 379 376 366 428
</TABLE>
For Ongoing claims, there is typically a time lag of approximately 15 to 45 days
from contract execution to computer hardware installation and training of
personnel. During this period, Company personnel survey the customer's existing
operations and prepare for implementation. Following training of personnel, the
customer begins transmitting claims to the Company. There
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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.
The following table sets forth for each period indicated the volume and gross
dollar amount of collection accounts received and fees recognized for the
Company's subsidiary, United MoneyCorp, Inc. In general, collections on most
new placements range from about 0 to 27 percent of the gross placement amount.
UNITED MONEYCORP, INC.
COLLECTION ACCOUNTS PROCESSING VOLUME AND FEES
1997
-----------------
FIRST SECOND
QUARTER QUARTER
------- -------
NUMBER OF ACCOUNTS
ACCEPTED FOR
COLLECTION 3,916 22,209
GROSS DOLLAR AMOUNT
OF ACCOUNTS ACCEPTED
FOR COLLECTION ($000) 2,264 19,037
COLLECTIONS ($000) 96 632
FEES EARNED ($000) 20 79
For Placements of collection accounts, there is typically a time lag
of approximately 15 to 45 days from contract execution to computer
download of accounts.
QUARTERLY INFORMATION: Fee income increased $129,002 or 28 percent, from
$464,960 for the three months ended June 30, 1996 to $593,962 for the three
months ended June 30, 1997. The increase was due to increased revenue of
$194,887 from domestic operations, offset by decreased revenue of $65,885 from
Puerto Rican operations.
For domestic operations, fee income from "Ongoing" claims processing, management
and collection services increased by 12 percent from $367,811 for the three
months ended June 30, 1996 to $412,439 for the three months ended June 30, 1997
due to increased claims volume from the Company's largest customer. Fees earned
by UMY increased from $0 for the three months ended June 30, 1996 to $79,309 for
the three months ended June 30, 1997, due to the completion of new contracts and
hiring of additional collectors and management personnel by UMY. UMClaimPro
fees increased 267 percent from $13,516 for the three months ended June
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30, 1996 to $49,659 for the three months ended June 30, 1997 due to interim
staffing services provided to a major hospital system in the Dallas area.
Patient billing fees increased 225 percent from $12,271 for the three months
ended June 30, 1996 to $39,887 for the three months ended June 30, 1997 due to
the contract signed in September, 1996 with the company's largest customer to
bill and collect on patient balances. Repricing fees increased 16 percent
from $3,729 for the three months ended June 30, 1996 to $4,314 for the three
months ended June 30, 1997. During the second quarter of 1997, the Company
was notified by its only repricing customer that they had elected to cancel
their contract with UMC. Funding fees increased from $0 for the three months
ended June 30, 1996 to $2,355 for the three months ended June 30, 1997.
Interest income increased from $0 for the three months ended June 30, 1996 to
$1,450 for the three months ended June 30, 1997. Other trade income increased
from $0 for the three months ended June 30, 1996 to $4,550 for the three
months ended June 30, 1997, due to consulting services provided to a new
customer.
For Puerto Rican operations, fees decreased 100 percent from $65,885 for the
three months ended June 30, 1996 to $0 for the three months ended June 30, 1997.
The company closed its Puerto Rican office on January 3, 1997, after completing
a settlement and termination agreement with Healthcare Advisory Service of
Puerto Rico, Inc. (H.A.S.) in August of 1996.
Salaries and benefits for the second quarter of 1997 increased $128,014, or 46
percent, from $280,206 for the three months ended June 30, 1996 to $408,220 for
the three months ended June 30, 1997. Total headcount increased from 34 at June
30, 1996 to 58 at June 30, 1997, excluding temporary and part-time employees.
Selling, general and administrative expenses increased $11,544, or 11 percent,
from $106,982 for the three months ended June 30, 1996 to $118,526 for the three
months ended June 30, 1997, due to start-up costs associated with the Company's
new physician billing department and bad debt collection business.
Professional fees decreased by $8,482, or 39 percent, from $22,015 in the second
quarter of 1996 to $13,534 in the second quarter of 1997, due to additional
expenses incurred in the second quarter of 1996 to comply with new SEC
requirements for electronic filing of Forms 10-K and 10-Q.
Office and equipment rental expense decreased $4,895, or 20 percent, from
$24,472 in the second quarter of 1996 to $19,577 in the second quarter of 1997,
due to the closing of the office located in Ponce, Puerto Rico.
Depreciation expense decreased $3,369, or 13 percent, from $26,603 in the second
quarter of 1996 to $23,234 in the second quarter of 1997, due to a number of
assets becoming fully depreciated.
Interest expense decreased by $589, or 13 percent, from $4,422 in the second
quarter of 1996 to $3,833 in the second quarter of 1997, due to the reduced
principal owed by the company on a capital lease obligation.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF CAPITAL: Operating funds through March 31, 1995 have been derived
primarily from the issuance of Common Stock ($18.8 million)and fees billed to
customers.
CAPITAL EXPENDITURES: During the second quarter of 1997, the Company
incurred $80,456 in capital expenditures associated with the Company's
rapidly growing collection agency business and the Company's newly developed
Physicians Billing Department. These capital expenditures included a
leasehold improvement expanding the Company's operations area, the purchasing
of additional computer hardware, computer software, telephone equipment, and
furniture and fixtures. The Company also signed a capital lease agreement
increasing the online storage capacity of the Company's leased IBM AS/400.
LIQUIDITY OUTLOOK: At June 30, 1997, the Company had $71,979 in unrestricted
cash and cash equivalents and $268,232 in net accounts receivable. The
Company generated negative cash flow of $85,061 during the second quarter of
1997 compared to positive cash flow of $24,537 during the second quarter of
1996.
Although the Company generated net income during the second quarter of 1997,
there are considerable risks, including primarily the need for additional
sustainable revenues, that additional capital will be needed. There can be
no assurance that such capital will be available, or of the terms upon which
such capital might be made available. Additionally, UMC has incurred
cumulative losses of $18,459,626 since inception. These factors raise
substantial doubt as to the Company's ability to continue as a going concern.
SUBSEQUENT EVENT: On July 11, 1997, UMC completed a private offering of
shares of its Common Stock. 1,600,000 shares were sold at $.10 per share,
raising $160,000 in new capital before expenses, which totalled $513. Of the
shares sold, 1,300,000 shares were purchased by a member of the UMC Board of
Directors, who subsequently donated 300,000 of such shares to trusts in which
that director does not hold a beneficial interest. In addition, a second
member of the UMC Board of Directors purchased 100,000 shares via this
offering.
-14-
<PAGE>
UNITED MEDICORP, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is the defendant in a lawsuit filed on March 2, 1995 by a former
employee of the Company. The lawsuit charges the Company with wrongful
discharge. The former employee seeks unspecified past and future economic
loss, damages, exemplary damages, reinstatement, attorney's fees and
interest. The plaintiff has requested a trial by jury. Management believes
this lawsuit to be without merit and intends to vigorously defend against the
claim.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
UNITED MEDICORP, INC.
(REGISTRANT)
By: /s/Peter W. Seaman Date: August 14, 1997
----------------------------------- ---------------
Peter W. Seaman, Chairman and
Chief Executive Officer
(Principal Accounting Officer)
-16-
<PAGE>
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