<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JANUARY 11, 1999
DATE OF EARLIEST EVENT REPORTED: AUGUST 7, 1998
UNITED MEDICORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COMMISSION FILE NUMBER 1-10418
DELAWARE 75-2217002
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
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
N.A.
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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<PAGE>
UNITED MEDICORP, INC.
This Current Report on Form 8-K/A1 amends the Current Report on Form 8-K
filed by United Medicorp, Inc. on August 21, 1998 solely to add the financial
statements of the business acquired required by Item 7(a) and the pro forma
financial information required by Item 7(b).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99.1 Financial Statements of Business Acquired.
The required financial statements of the business acquired are set forth
below:
1
<PAGE>
ALLIED HEALTH OPTIONS, INC.
FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD FROM
FEBRUARY 7, 1996 (INCEPTION) TO DECEMBER 31, 1996
AND AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1997
2
<PAGE>
ALLIED HEALTH OPTIONS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants - PricewaterhouseCoopers LLP.................4
Balance Sheets as of December 31, 1997 and 1996................................5
Statements of Operations for the period from February 7, 1996 (inception) to
December 31, 1996 and for the year ended December 31, 1997.....................6
Statements of Changes in Stockholder's Equity for the period from
February 7, 1996 (inception) to December 31, 1996 and for the year ended
December 31, 1997..............................................................7
Statements of Cash Flows for the period from February 7, 1996 (inception)
to December 31, 1996 and for the year ended December 31, 1997..................8
Notes to Financial Statements..................................................9
</TABLE>
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholder of Allied Health Options, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, of changes in stockholder's equity and of cash flows present
fairly, in all material respects, the financial position of Allied Health
Options, Inc. at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the year ended December 31, 1997 and for
the period from February 7, 1996 (inception) to December 31, 1996, 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 financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note M 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 M. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
December 16, 1998
4
<PAGE>
ALLIED HEALTH OPTIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1996
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 116,894 $ 25,472
Accounts receivable, net of allowance for doubtful accounts
of $280,520 and $86,888 at 12/31/97 and
12/31/96, respectively. . . . . . . . . . . . . . . . . . . . . . . 374,108 604,354
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . 3,551 - -
----------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . 494,553 629,826
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . 31,806 30,530
Other non-current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,395 3,546
----------- ----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 529,754 $ 663,902
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . . $ 103,008 $ 362,704
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 40,210 184,051
Current installments on long-term notes payable . . . . . . . . . . . 212,724 61,242
----------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 355,942 607,997
Medicare settlement reserve. . . . . . . . . . . . . . . . . . . . . . . . 833,605 210,336
Long-term notes payable, excluding current installments. . . . . . . . . . 374,797 251,798
Commitments and contingencies (Note I) . . . . . . . . . . . . . . . . . . - - - -
----------- ----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . $ 1,564,344 $1,070,131
----------- ----------
Stockholder's equity:
Common stock; $1.00 par value; 1,000 shares authorized
and outstanding at 12/31/97 and 12/31/96 . . . . . . . . . . . . 1,000 1,000
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . - - - -
Retained deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,035,590) (407,229)
----------- ----------
Total stockholder's equity . . . . . . . . . . . . . . . . . . . (1,034,590) (406,229)
----------- ----------
Total liabilities and stockholder's equity . . . . . . . . . . . $ 529,754 $ 663,902
----------- ----------
----------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
5
<PAGE>
ALLIED HEALTH OPTIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION> For the
Period From
FOR THE February 7, 1996
YEAR ENDED (Inception) to
DECEMBER 31, December 31,
1997 1996
-------------- ----------------
<S> <C> <C>
Net patient service revenue. . . . . . . . . . . . . . . . . . . . . . . . $ 1,983,608 $ 1,031,747
Expenses:
Wages and benefits. . . . . . . . . . . . . . . . . . . . . . . . . . 1,684,357 767,197
General and administrative expenses . . . . . . . . . . . . . . . . . 365,344 194,568
Bad debt expense. . . . . . . . . . . . . . . . . . . . . . . . . . . 193,632 86,888
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . 165,392 337,528
Office and equipment rental . . . . . . . . . . . . . . . . . . . . . 142,563 50,093
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . 52,557 799
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 8,124 1,903
----------- -----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 2,611,969 1,438,976
----------- -----------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . $ (628,361) (407,229)
----------- -----------
----------- -----------
Basic loss per common share . . . . . . . . . . . . . . . . . . . . . $ (628.36) (407.23)
Diluted loss per common share . . . . . . . . . . . . . . . . . . . . $ (628.36) (407.23)
Weighted average common shares outstanding. . . . . . . . . . . . . . 1,000 1,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
6
<PAGE>
ALLIED HEALTH OPTIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Total
---------------------- Paid Accumulated Stockholder's
Shares Amount Capital Deficit Equity
-------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at
February 7, 1996
(Inception) -- -- -- -- --
Shares issued at
$1.00 per share 1,000 $ 1,000 -- -- $ 1,000
Net loss -- -- -- $ (407,229) (407,229)
-------- -------- ---------- ----------- -----------
Balance at
December 31, 1996 1,000 1,000 -- (407,229) (406,229)
-------- -------- ---------- ----------- -----------
-------- -------- ---------- ----------- -----------
Net loss -- -- -- (628,361) (628,361)
-------- -------- ---------- ----------- -----------
Balance at
December 31, 1997 1,000 $ 1,000 -- $(1,035,590) $(1,034,590)
-------- -------- ---------- ----------- -----------
-------- -------- ---------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
7
<PAGE>
ALLIED HEALTH OPTIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
Period From
FOR THE February 7, 1996
YEAR ENDED (Inception) to
DECEMBER 31, December 31,
1997 1996
------------ ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(628,361) $(407,229)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 8,124 1,903
Bad debt expense . . . . . . . . . . . . . . . . . . . . . . 193,632 86,888
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, gross. . . . . . 36,614 (691,242)
(Increase) in prepaid expenses and other assets. . . . . . . (3,400) (3,546)
Increase in accounts payable . . . . . . . . . . . . . . . . 34,774 362,704
Increase (decrease) in accrued liabilities . . . . . . . . . (53,613) 184,051
Increase in Medicare settlement reserve. . . . . . . . . . . 623,269 210,336
--------- ---------
Net cash provided by (used in) operating activities. . . . . . . . . . 211,039 (256,135)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment. . . . . . . . . . . . . . . (9,400) (32,433)
--------- ---------
Net cash used in investing activities. . . . . . . . . . . . . . . . . (9,400) (32,433)
--------- ---------
Cash flows from financing activities:
Net proceeds from sale of common stock. . . . . . . . . . . . . - - 1,000
Proceeds from 1996 Alabama Medicare reimbursement
overpayment under an extended repayment plan . . . . . . . . - - 313,040
Principal payments on promissory note . . . . . . . . . . . . . (48,975) - -
Principal payments on Medicare overpayment. . . . . . . . . . . (61,242) - -
--------- ---------
Net cash provided by (used in) financing activities. . . . . . . . . . (110,217) 314,040
--------- ---------
Increase in cash and cash equivalents. . . . . . . . . . . . . . . . . 91,422 25,472
Cash and cash equivalents at beginning of year/period. . . . . . . . . 25,472 - -
--------- ---------
Cash and cash equivalents at end of year/period. . . . . . . . . . . . $ 116,894 $ 25,472
--------- ---------
--------- ---------
Supplemental disclosures:
Cash paid for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,557 $ 799
Non-cash financing activities:
Conversion of accounts payable to note payable. . . . . . . . . $ 294,470 $ - -
Conversion of accrued liabilities to note payable . . . . . . . $ 90,228 $ - -
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
8
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Allied Health Options, Inc. ("AHO") was incorporated as an subchapter S
corporation in the State of Alabama on February 7, 1996 to provide:
outpatient services, including specialized outpatient services for children,
the elderly, individuals who are chronically mentally ill, and residents of
the community mental health services area who have been discharged from
inpatient treatment at a mental health facility; twenty four hour a day
emergency care services; day treatment, other partial hospitalization
services, or psychosocial rehabilitation services; screening for patients
being considered for admission to state mental health facilities to determine
the appropriateness of such admission; and consultation and education
services. AHO operates three Community Mental Health Centers ("CMHC's")
under the names: Behavioral Health of Mobile ("BHM"), Calhoun County
Behavioral Health ("CCBH"), and Pensacola Center for Behavioral Health
("PCBH"). BHM, located in Mobile, Alabama, began operations on March 8,
1996. CCBH, located in Oxford, Alabama, began operations on August 26, 1996.
PCBH, located in Pensacola, Florida, began operations on October 9, 1996.
(The statement "for the period from February 7, 1996 (inception) to December
31, 1996," placed throughout the notes to the financial statements and the
accompanying financial statements, takes into consideration the various start
dates of the three CMHCs). BHM and CCBH obtained Health Care Financing
Administration ("HCFA") certification to provide partial hospitalization
services as a CMHC under Medicare Part A effective February 1, 1996. PCBH
obtained HCFA certification to provide partial hospitalization services as a
CMHC under Medicare Part A effective October 2, 1996.
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. Significant estimates included in the accompanying
financial statements include the allowance for doubtful accounts and the
Medicare settlement reserve. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and liquid investments
in money market accounts. Such investments have an original maturity of
three months or less.
ACCOUNTS RECEIVABLE
Accounts receivable principally represents receivables from third-party
payors for services provided. Such amounts are recorded net of contractual
allowances, indigent write-offs and estimated bad debts. Retroactive Medicare
adjustments and reserves are accrued as a liability on an estimated basis in
the period the related services are rendered and adjusted in future periods
as final settlements are determined.
9
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. 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
assets, ranging from three to seven years.
Property and equipment are 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 excess of
carrying amounts over fair value. No such impairment has been recognized.
INCOME TAXES
As a subchapter S corporation, AHO is not a separate taxable entity.
AHO losses were reported on the tax returns of its shareholder.
LOSS PER SHARE
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" was issued requiring companies to present on the face of
the income statement, basic earnings per share (EPS) and diluted EPS, instead
of the primary and fully diluted EPS that was previously required. Companies
with complex capital structures are required to reconcile the numerator and
denominator used in the basic EPS computation to the numerator and
denominator used in the diluted EPS computation. AHO's capital structure is
comprised solely of common stock. There were no dilutive common share
equivalents outstanding during each period. As such, for each of the periods
presented, basic and diluted EPS calculations are based on the
weighted-average number of common shares outstanding during the period.
NET PATIENT SERVICE REVENUE
Net patient service revenue is reported at the estimated net realizable
amounts from third-party payors and patients for services rendered, including
estimated retroactive Medicare adjustments and reserves. Retroactive Medicare
adjustments and reserves are accrued as a liability on an estimated basis in
the period the related services are rendered and adjusted in future periods
as final settlements are determined.
Certain partial hospitalization services costs related to Medicare
beneficiaries are reimbursed to AHO from Medicare based on a cost
reimbursement methodology. AHO is reimbursed for cost reimbursable items at
a tentative rate with final settlement determined after submission of annual
cost reports by AHO and audits thereof by the Medicare fiscal intermediary.
AHO's Medicare cost reports have not yet been audited by the Medicare fiscal
intermediary for the year ended December 31, 1997 and for the period from
February 7, 1996, (inception) to December 31, 1996.
10
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
Net patient service revenue, as reported in the accompanying statements
of operations, consists of:
<TABLE>
<CAPTION>
For the
Period From
FOR THE February 7, 1996
YEAR ENDED (Inception) to
DECEMBER 31, December 31,
1997 1996
------------ ----------------
<S> <C> <C>
Gross patient charges . . . . . . $4,772,466 $2,863,506
Deductions from gross patient charges:
Contractual adjustments. . . . 1,851,999 1,027,525
Medicare settlement reserve. . 562,027 523,376
Indigent write-offs. . . . . . 374,832 280,858
---------- ----------
Net patient service revenue . . . $1,983,608 $1,031,747
---------- ----------
---------- ----------
</TABLE>
INDIGENT WRITE-OFFS
AHO has established policies which define the assessment of patient
indigence, the corresponding collection process and the Medicare bad debt
write-off process with respect to Medicare co-insurance and Medicare bad debt
reimbursement. AHO utilizes the federal poverty level in assessing a
patient's ability to pay either the 20% Medicare co-coinsurance or that
portion of the 20% Medicare co-insurance that is not covered by secondary
insurance. Since AHO does not pursue collections of amounts which meet its
indigency criteria and there is no related secondary insurance, charges
related to indigent write-offs are excluded from net patient service revenue.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 130, "Reporting Comprehensive Income,"
and No. 131, "Disclosure About Segments of an Enterprise and Related
Information." In February 1998, the Board issued No. 132, "Employers'
Disclosure About Pension and Other Postretirement Benefits." These
statements will be adopted in 1998. As these statements require only
additional disclosures in AHO's notes to the financial statements, their
adoption will not have any effect on AHO's financial position or results of
operations.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This statement will be
adopted in 1998. AHO anticipates that the adoption of this statement will
not have a significant effect on its financial position or results of
operations.
11
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
B. CONCENTRATIONS OF MARKET AND CREDIT RISK
Financial instruments which potentially subject AHO to concentrations of
credit risk are primarily cash equivalents and net accounts receivable. It is
AHO's practice to place its cash equivalents in high quality accounts. The
percentage mix of net accounts receivable from third-party payors at December
31, was:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Medicare claims . . . . . . . . . . . . . . . . . . . . 84% 82%
Medicare secondary insurance claims . . . . . . . . . . 9 18
Other commercial insurance claims . . . . . . . . . . . 7 -
---- ----
100% 100%
---- ----
---- ----
</TABLE>
AHO does not expect its payors to fail to meet their obligations and, as
such, considers the credit risk associated with its trade accounts receivable
to be minimal. AHO grants credit without collateral to its patients.
All of AHO's revenue is generated from the healthcare industry. The
percentage market mix of net patient service revenue from third-party payors
was:
<TABLE>
<CAPTION>
For the
Period From
FOR THE February 7, 1996
YEAR ENDED (Inception) to
DECEMBER 31, December 31,
1997 1996
----------- ----------------
<S> <C> <C>
Medicare claims, net of Medicare
settlement reserve. . . . . . . . . . . . . . . . . 64% 77%
Medicare secondary insurance claims . . . . . . . . . 27 23
Other commercial insurance claims . . . . . . . . . . 9 -
---- -----
100% 100%
---- -----
---- -----
</TABLE>
C. FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1997 and 1996, the fair value of AHO's cash and cash
equivalents, accounts receivable, accounts payable, and accrued expenses
approximated their carrying value because of the short maturities of those
financial instruments. The fair value of AHO's long term debt also
approximates its carrying value since the related notes bear interest at
approximate current market rates.
D. ASSETS PLEDGED AS COLLATERAL
Effective February 19, 1997, AHO executed a Medical Claims Purchase
Agreement with United Medicorp, Inc. ("UMC") whereby UMC purchased an
undivided interest in certain AHO claims. AHO pledged all current and future
accounts receivable as collateral for advances against purchased claims. At
December 31, 1997, there were no outstanding advances or purchased claims
for which assets had been pledged.
12
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
On March 7, 1997, a petition for relief under title 11, chapter 7 of the
US Bankruptcy Code was filed against AHO by certain vendors ("Vendors")
seeking relief of unpaid claims totaling $526,861 related to: loans;
advances; rentals; management; computers and other services. As final
settlement of the bankruptcy petition, effective May 14, 1997, AHO and
Vendors executed a promissory note (the "Vendor Note") for $384,698. As
collateral for this note, AHO pledged the balance of all current and future
accounts receivable in excess of $200,000. In conjunction with this pledge,
UMC executed a subordination agreement with Vendors whereby UMC subordinated
to Vendors its security interest in AHO's current and future accounts
receivable in excess of $200,000. At December 31, 1997, accounts receivable
totaling $335,723 were pledged as collateral for the Vendor Note.
For the period ended December 31, 1996, the tentative settlements due to
Medicare from BHM and CCBH for prospective reimbursement in excess of
reimbursable costs totaled $217,808 and $95,232, respectively (the "1996
Medicare Overpayment"). On August 6, 1997, AHO executed a thirty month
extended repayment plan with Medicare for the principal balance of $313,040.
The extended repayment plan is structured so that Medicare collects its
monthly payments directly from submitted patient claims. The unpaid principal
balance is de facto secured by unpaid Medicare claims at December 31, 1997
and future Medicare claims.
E. PROPERTY AND EQUIPMENT
Property and equipment at December 31, consists of:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Office equipment. . . . . . . . . . $31,989 $24,860
Leasehold improvements. . . . . . . 5,361 5,361
Furniture and fixtures. . . . . . . 4,483 2,212
------- -------
41,833 32,433
Less accumulated depreciation and
amortization. . . . . . . . . . . 10,027 1,903
------- -------
Net property and equipment. . . . . $31,806 $30,530
------- -------
------- -------
</TABLE>
F. ACCRUED LIABILITIES
Accrued liabilities at December 31, consists of:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Staffing and billing fees . . . . . - - 82,542
Professional fees . . . . . . . . . - - 76,612
Payroll . . . . . . . . . . . . . . 40,393 24,897
------- -------
$40,393 $184,051
------- --------
------- --------
</TABLE>
13
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
G. NOTES PAYABLE
Long-term debt at December 31, consists of:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Vendor Note, bearing interest at 7.75% per annum,
monthly installments of $9,347, secured (Note D) . . . . $335,723 $ - -
1996 Medicare Overpayment, bearing interest at
13.5% per annum, monthly installments of
$12,500, secured (Note D). . . . . . . . . . . . . . . . 251,798 313,040
-------- --------
Total long-term debt . . . . . . . . . . . . . . . . . . 587,521 313,040
Less current installments . . . . . . . . . . . . . . . . . 212,724 61,242
-------- --------
Long-term debt, excluding current installments. . . . . . . $374,797 $251,798
-------- --------
-------- --------
</TABLE>
The aggregate maturities of long-term debt at December 31, 1997, are as
follows:
<TABLE>
<S> <C>
Year ending December 31:
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . $212,724
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,776
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,181
2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,840
--------
$587,521
--------
--------
</TABLE>
H. LEASES
AHO has entered into operating leases of facilities and office equipment
with third parties with terms ranging from 12 to 60 months. The future
minimum lease payments under noncancelable operating leases at December 31,
are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . $91,684
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,337
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,403
2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,176
2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,132
--------
$148,732
--------
--------
</TABLE>
I. COMMITMENTS AND CONTINGENCIES
On September 29, 1998, The Department of Health and Human Services
("HHS") announced new actions to ensure that Medicare beneficiaries with
acute mental illness obtain quality treatment in CMHCs and that Medicare pay
appropriately for such services. As part of a comprehensive action plan,
HHS' HCFA has initiated termination actions against centers that appear
unable to provide Medicare's legally required core services, and will require
others to come into compliance. HCFA will demand repayment of money paid
inappropriately for non-covered services or ineligible beneficiaries. Twenty
non-compliance
14
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
notices have been issued, with an estimated 80 notices to be sent by early
1999. Management is not aware of any material non-compliance issue nor have
they received any indication from HCFA regarding the possible termination of
any of AHO's CMHCs.
In addition, HCFA plans a number of long-term reforms. These efforts
include a new payment system for partial hospitalization that encourages
efficiency and eliminates financial incentives for abuse and a joint review
of the partial hospitalization benefit with the HHS Inspector General. HCFA
also will increase its review of partial hospitalization claims from CMHCs to
ensure Medicare pays only for appropriate services to qualified
beneficiaries. The financial impact of these long-term reforms cannot
currently be estimated. There can be no assurance that long-term reforms made
by HCFA to the partial hospitalization program will not have a material
adverse effect on AHO.
As stated in Note A, AHO's Medicare cost reports have not yet been
audited by the Medicare fiscal intermediary for the years ended December 31,
1997 and 1996. These cost reports were filed with the fiscal intermediary
using unaudited financial information. Management has accrued estimated
reserves for known differences between the unaudited financial information
used to complete the cost reports as compared to the audited financial
information in the accompanying financial statements. However, additional
differences that are not currently known or reserved may arise due to
differences in interpretation of Medicare reimbursement regulations. The
financial impact related to reimbursement interpretation differences cannot
currently be estimated. There can be no assurance that reimbursement
interpretation differences will not have a material adverse effect on AHO.
AHO practitioners are insured with respect to professional liability on
a claims-made basis. The annual limits of liability are $1 million for each
claim with a total limit for all claims of $3 million. There are no known
claims and incidents that may result in the assertion of additional claims,
as well as claims from unknown incidents that may be asserted. Management is
not aware of any claims against AHO which might have a material adverse
effect on AHO.
K. RELATED PARTY TRANSACTIONS
On November 19, 1997, AHO executed an eight month equipment lease with
its stockholder requiring total lease payments of $29,000. For the two
months ended December 31, 1997, lease payments totaling $5,000 had been made.
L. SUBSEQUENT EVENTS
On August 7, 1998, UMC acquired 100% of the common stock of AHO for $1.
Prior to and after the date of acquisition, UMC provided to AHO ongoing
accounts receivable management services, funding and consulting services
generating revenues of approximately $121,000 and $125,000 in 1997 and
year-to-date 1998, respectively. In connection with the acquisition, the
former president and founder of AHO will continue to provide his services to
AHO for $4,950 per month under a two year consulting agreement, and he has
also entered into a three-year covenant not to compete agreement.
15
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
M. GOING CONCERN
On October 16, 1998, the Company received notice from the Florida
Medicare fiscal intermediary (the "Florida FI") indicating that a tentative
settlement of $186,512 was due from PCBH for prospective reimbursement in
excess of reimbursable costs for the nine months ended September 30, 1998.
To avoid suspension of interim payments, the Florida FI required that this
amount be repaid in full by October 31, 1998. As of the date of this filing,
no payments had been made to the Florida FI due to insufficient cash and
other working capital resources. Management has been informed that effective
November 12, 1998, all interim payments to PCBH had been suspended until the
overpayment is recovered through the submission of future Medicare claims.
On October 27, 1998, the Company received notice from the Alabama
Medicare fiscal intermediary (the "Alabama FI") indicating that BHM had been
placed on one hundred percent medical review of its medical records based on
certain deficiencies identified by the Alabama FI in the medical records.
This review will affect all future Medicare claims submitted by BHM until
such time that deficiencies are corrected. Management estimates that BHM will
be required to demonstrate improved quality of medical records for a period
of at least three months in order to be removed from one hundred percent
medical review status. During this period of time, management will vigorously
pursue quality improvements in the medical records and will seek a
progressively declining review percentage. Because of the medical review, it
is anticipated that Medicare payments made on those claims that pass future
medical review will be delayed by thirty to sixty days. Claims that do not
pass medical review by the Alabama FI will be submitted for reconsideration
and appeal as necessary.
These events, in conjunction with the AHO's recurring losses from
operations and net capital deficiency raise substantial doubt about the
ability of AHO to continue as a going concern.
Management's plans in regards to these matters are described below:
a) Employee headcount and other expenses at PCBH and BHM have been
reduced
b) On December 3, 1998, management submitted its application to the
Florida FI for an extended repayment plan. This plan if approved will
allow for repayment over a period from twelve to thirty six months.
There can be no assurance that the application will be approved ,or if
approved, whereto cash flow generated from PCBH will be sufficient for
debt service and ongoing working capital requirements. Management will
assess the feasibility of continuing operations at PCBH upon
determination of the application and the terms of the repayment plan
if approved.
c) Management has engaged specialized clinical oversight and quality
assurance consulting services to review, render an opinion on, and
where applicable, pursue reconsideration and appeal of denied claims.
Ongoing medical record quality assurance and clinical oversight
services will also be provided. As of the date of this report,
specialized in-service CMHC training has been completed at PCBH and
BHM.
d) Management has entered into various discussions with parties
potentially interested in buying one or more of the Medicare provider
numbers.
e) Management has entered into discussion with certain creditors
regarding the possibility of converting debt to equity of the parent
company of AHO.
16
<PAGE>
ALLIED HEALTH OPTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
There can be no assurance that any of these strategies can be effected
on satisfactory terms. Any failure with respect to the foregoing plan will
more likely than not have a material adverse effect on the Company. Should
management determine that the existing plan is inadequate and/or that
additional working capital cannot be raised, additional steps may be required
which may include the sale of one or more of the Medicare provider numbers or
termination of operations and/or certain services provided at one or more of
the CMHCs.
17
<PAGE>
UNITED MEDICORP, INC.
(b) Pro Forma Information.
The required pro forma financial information is set forth below.
The following pro forma unaudited combined balance sheets are presented
using the audited consolidated balance sheet of United Medicorp, Inc. ("UMC")
at December 31, 1997 combined with the audited balance sheet of Allied Health
Options, Inc. ("AHO") at December 31, 1997. Pro forma adjustments related to
the unaudited combined balance sheets have been computed assuming the
acquisition was consummated on December 31, 1997.
The following pro forma unaudited combined statements of operations are
presented using the audited consolidated statement of operations of UMC for
the year ended December 31, 1997 combined with the audited statement of
operations of AHO for the year ended December 31, 1997. Pro forma adjustments
related to the unaudited combined statements of operations have been computed
assuming the acquisition was consummated on January 1, 1997.
The acquisition of AHO has been accounted for as a purchase. The
carrying values of assets and liabilities have been estimated to approximate
fair market value. Accordingly, no pro forma adjustments to these amounts
were made to reflect the allocation and amount of the ultimate purchase price
with the exception of the allocation made with respect to the Medicare
provider numbers. Final allocations, if any, will be made on the basis of
valuations giving effect to various market factors. Purchase price
adjustments, if any, will be made within one year from the acquisition date.
These adjustments may be material to the pro forma financial information
taken as a whole.
The pro forma combined financial statements should be read in
conjunction with the audited financial statements and notes thereto of UMC
for the year ended December 31, 1997 included in UMC's Form 10-K and with the
audited financial statements and notes thereto of AHO for the year ended
December 31, 1997 included in Item 7(a) of this Form 8-K/A1.
The pro forma unaudited financial information is not necessarily
indicative of the results of operations or the financial position which would
have been attained had the acquisition been consummated at either of the
foregoing dates or which may be attained in the future. The pro forma
unaudited results are not intended to be a projection of future results.
18
<PAGE>
UNITED MEDICORP, INC.
PRO FORMA BALANCE SHEETS (UNAUDITED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL
STATEMENTS
------------------------------
ALLIED
UNITED HEALTH PRO FORMA
MEDICORP, OPTIONS, PRO FORMA FINANCIAL
ASSETS INC. INC. ADJUSTMENTS STATEMENTS
--------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ 275,948 $ 116,894 $ $ 392,842
Restricted cash . . . . . . . . . . . . . . . . . 154,096 - - 154,096
Accounts receivable . . . . . . . . . . . . . . . 441,743 654,628 (13,500)(b) 1,082,871
Allowance for doubtful accounts . . . . . . . . . (11,674) (280,520) (292,194)
Notes receivable. . . . . . . . . . . . . . . . . 4,000 - - 4,000
Prepaid expenses and other current assets . . . . 20,201 3,551 23,752
----------- ----------- ------------
Total current assets . . . . . . . . . . . . 884,314 494,553 1,365,367
Property and equipment, net. . . . . . . . . . . . . . 188,248 31,806 220,054
Other non-current assets . . . . . . . . . . . . . . . 11,999 3,395 15,394
Goodwill . . . . . . . . . . . . . . . . . . . . . . - - - - 384,591 (d) 384,591
Accumulated amortization . . . . . . . . . . . . . . . - - - - (19,230)(d) (19,230)
Medicare provider numbers. . . . . . . . . . . . . . . - - - - 650,000 (d) 650,000
Accumulated amortization . . . . . . . . . . . . . . . - - - - (32,500)(d) (32,500)
----------- ----------- ---------- ------------
Total assets . . . . . . . . . . . . . . . . $1,084,561 $ 529,754 $ 969,361 $ 2,583,676
----------- ----------- ---------- ------------
----------- ----------- ---------- ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable. . . . . . . . . . . . . . $ 68,270 $ 103,008 $ (13,500)(b) $ 157,778
Payable to clients. . . . . . . . . . . . . . . . 75,135 - - 75,135
Accrued liabilities . . . . . . . . . . . . . . . 268,423 40,210 308,633
Deferred credit . . . . . . . . . . . . . . . . . 8,802 - - 8,802
Payable to funding source . . . . . . . . . . . . 78,961 - - 78,961
Current installments on
capital lease obligations . . . . . . . . . . . 53,171 - - 53,171
Current installments on
long-term notes payable . . . . . . . . . . . . - - 212,724 212,724
----------- ----------- ------------
Total current liabilities. . . . . . . . . . 552,762 355,942 895,204
Medicare settlement reserve. . . . . . . . . . . . . . - - 833,605 (42,210)(c) 791,395
Long-term capital lease obligation,
excluding current installment. . . . . . . . 84,368 - - 84,368
Long-term notes payable,
excluding current installments . . . . . . . - - 374,797 374,797
----------- ----------- ------------
Total liabilities. . . . . . . . . . . . . . $ 637,130 $ 1,564,344 $ 2,145,764
----------- ----------- ------------
Stockholder's equity:
Common stock. . . . . . . . . . . . . . . . . . . $ 280,157 $ 1,000 $ (1,000)(d) $ 280,157
Treasury stock. . . . . . . . . . . . . . . . . . (221,881) - - (221,881)
Additional paid-in capital. . . . . . . . . . . . 18,695,829 - - 18,695,829
Retained deficit. . . . . . . . . . . . . . . . . (18,306,674) (1,035,590) 1,026,071 (d) (18,316,193)
----------- ----------- ---------- ------------
Total stockholder's equity . . . . . . . . . 447,431 (1,034,590) 437,912
----------- ----------- ---------- ------------
Total liabilities and stockholder's equity . $ 1,084,561 $ 529,754 $ 969,361 $ 2,583,676
----------- ----------- ---------- ------------
----------- ----------- ---------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
19
<PAGE>
UNITED MEDICORP, INC.
PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL
STATEMENTS
----------------------------
ALLIED
UNITED HEALTH PRO FORMA
MEDICORP, OPTIONS, PRO FORMA FINANCIAL
INC. INC. ADJUSTMENTS STATEMENTS
--------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Revenues:
Billing and collection services . . . . $2,767,943 - - (93,072)(b) 2,674,871
Net patient services. . . . . . . . . . - - 1,983,608 42,210 (c) 2,025,818
Other revenues. . . . . . . . . . . . . 35,058 - - (27,659)(b) 7,399
---------- ---------- ----------
Total revenues. . . . . . . . . . . . . 2,803,001 1,983,608 4,708,088
Expenses:
Wages and benefits. . . . . . . . . . . 1,900,182 1,684,357 3,584,539
General and administrative. . . . . . . 488,754 365,344 854,098
Office, vehicle and equipment rental. . 88,672 142,563 231,235
Provision for doubtful accounts . . . . - - 193,632 193,632
Depreciation and amortization . . . . . 106,783 8,124 51,730 (d) 166,637
Professional fees . . . . . . . . . . . 54,188 165,392 (120,732)(b) 98,848
Interest, net . . . . . . . . . . . . . 4,959 52,557 57,516
Other income, net . . . . . . . . . . . (1,286) - - (1,286)
---------- ---------- ----------
Total expenses. . . . . . . . . . . . . 2,642,252 2,611,969 5,185,219
---------- ---------- ----------
Net Income (loss). . . . . . . . . . . . . . $ 160,749 $ (628,361) $ (477,131)
---------- ---------- ----------
---------- ---------- ----------
Basic earnings (loss) per share. . . . . . . $ 0.0059 $ (0.0174)
Diluted earnings (loss) per share. . . . . . $ 0.0059 $ (0.0174)
Weighted average common shares outstanding . 27,381,839 27,381,839
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
20
<PAGE>
UNITED MEDICORP, INC.
NOTES TO UNAUDITED PROFORMA FINANCIAL STATEMENTS
(a) On August 7, 1998, United Medicorp, Inc., ("UMC") completed the acquisition
of 100% of the common stock of Allied Health Options, Inc. ("AHO") in
exchange for one dollar.
(b) Represents the elimination of billing and collection fees, consulting fees
and advance funding fees charged by UMC to AHO and the elimination of trade
accounts receivable and accounts payable between UMC and AHO.
(c) Represents the reduction of the Alabama Medicare interim settlement
overpayment for the year ended December 31, 1997 and the increase in the
Florida Medicare interim settlement underpayment for the year ended
December 31, 1997, as a result of increased home office allocation expense
from UMC to AHO.
(d) Represents the excess of the purchase price over the net assets acquired
(goodwill) and purchase price allocation to identifiable assets computed
as:
<TABLE>
<S> <C>
Total cash purchase price . . . . . . . . . . . . . . . $ 1
Net assets acquired at December 31, 1997. . . . . . . . (1,034,590)
-----------
Excess of purchase price over the net assets acquired
before allocation to identifiable assets . . . . . . 1,034,591
Excess of purchase price allocated to Medicare
provider numbers . . . . . . . . . . . . . . . . . . 650,000
-----------
Excess of purchase price over the net assets acquired . $ 384,591
-----------
-----------
</TABLE>
The excess of the purchase price over the net assets acquired (goodwill) is
amortized over the estimated life of 20 years. The pro forma amortization
expense for the year ended December 31, 1997 was $19,230.
The Medicare provider numbers acquired are amortized over the estimated
life of 20 years. The pro forma amortization expense for the year ended
December 31, 1997 was $32,500.
21
<PAGE>
UNITED MEDICORP, INC.
Pursuant to the requirements 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.
(REGISTRANT)
By: /s/ R. Kenyon Culver Date: January 11, 1999
------------------------------------------- ------------------
R. Kenyon Culver
Vice President and Chief Financial Officer
(Principal Accounting Officer)
22
