<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-10418
UNITED MEDICORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2217002
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
200 N. CUYLER STREET
PAMPA, TEXAS 79065
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (806) 669-9223
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 November 10, 2000, there were outstanding 28,710,217 shares of
Common Stock, $0.01 par value.
================================================================================
<PAGE> 2
UNITED MEDICORP, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets at September 30, 2000 and December 31, 1999..................... 1
Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2000 and 1999............................................................ 2
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999........................................................... 3
Notes to the Consolidated Financial Statements.............................................. 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................................... 5
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings........................................................................... 12
ITEM 2. Changes in Securities....................................................................... 12
ITEM 3. Defaults Upon Senior Securities............................................................. 12
ITEM 4. Submission of Matters to a Vote of Security Holders......................................... 12
ITEM 5. Other Information........................................................................... 12
ITEM 6. Exhibits and Reports on Form 8-K............................................................ 13
Signatures ........................................................................................ 13
</TABLE>
<PAGE> 3
UNITED MEDICORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 26,224 $ 121,702
Restricted cash ............................................. 5,215 --
Accounts receivable, net of allowance for doubtful accounts
of $3,120 and $8,219, respectively ....................... 141,579 141,201
Factor reserve .............................................. 59,001 39,744
Prepaid expenses and other current assets ................... 9,279 51,844
------------ ------------
Total current assets .............................................. 241,298 354,491
Other non-current assets .......................................... 4,881 4,817
Property and equipment, net of accumulated depreciation of $883,757
and $845,005, respectively .................................. 264,558 108,211
Assets under capital leases, net of accumulated amortization of
$121,681 and $74,961, respectively .......................... 84,701 131,422
------------ ------------
Total assets ...................................................... 595,438 598,941
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable ...................................... 121,855 82,942
Payable to clients .......................................... 4,378 --
Accrued liabilities ......................................... 272,975 342,163
Current portion of capital lease obligations ................ 80,615 78,588
Current portion of mortgage note ............................ 3,048 --
Promissory note ............................................. 12,067 49,547
------------ ------------
Total current liabilities ......................................... 494,938 553,240
Deferred Revenue (PEDC) ........................................... 192,000 --
Long term capital lease obligations, excluding current portion .... 49,084 110,070
Long term mortgage on building, excluding current portion ......... 133,755 --
------------ ------------
Total liabilities ................................................. 869,777 663,310
------------ ------------
Stockholder's equity (deficit):
Common stock; $0.01 par value; 50,000,000 shares authorized;
29,015,764 shares outstanding ............................ 290,157 290,157
10% Cumulative convertible preferred stock; $0.01 par value;
5,000,000 shares authorized; none issued ................. -- --
Less treasury stock at cost, 305,547 and 105,547 shares,
respectively ............................................. (221,881) (221,881)
Additional paid-in capital .................................. 18,783,254 18,783,254
Retained deficit ............................................ (19,125,869) (18,915,899)
------------ ------------
Total stockholder's equity (deficit) ..................... (274,339) (64,369)
------------ ------------
Total liabilities and stockholder's equity (deficit) ..... $ 595,438 $ 598,941
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
1
<PAGE> 4
UNITED MEDICORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Billing and collection services............ $ 513,177 $ 780,757 $ 1,645,111 $ 2,448,456
Other revenues............................. 42,633 -- 53,635 11,389
------------- ------------- ------------- ------------
Total revenues.......................... 555,810 780,757 1,698,746 2,459,845
Expenses:
Wages and benefits......................... 386,262 474,395 1,269,600 1,592,237
Selling, general and administrative........ 141,437 108,556 406,612 424,836
Depreciation and amortization.............. 28,092 27,915 85,474 78,665
Office, vehicle and equipment rental....... 28,199 47,779 81,998 118,014
Professional fees.......................... 12,522 20,141 31,536 37,837
Interest, net ............................. 8,086 16,716 26,871 38,926
Provision for doubtful accounts............ 139 6,623 23,756
Other expenses............................. -- 15,743 -- 15,743
Loss on capital lease rollover financing. -- -- -- 7,883
------------- ------------- ------------ ------------
Total expenses.......................... 604,737 711,245 1,908,714 2,337,897
------------- ------------- ------------ ------------
Net income (loss) from continuing operations..... (48,927) 69,512 (209,968) 121,948
Loss from discontinued operations - AHO, net
of income taxes.................... -- (114,821) -- (1,997,184)
------------- ------------- ------------ ------------
Net loss ................................... $ (48,927) $ (45,309) $ (209,968) $ (1,875,236)
============= ============= ============ ============
Basic earnings (loss) per common share:
Continuing operations...................... $ (0.0017) $ 0.0024 $ (0.0073) $ 0.0042
Discontinued operations - AHO.............. -- (0.0039) -- (0.0695)
------------- ------------- ------------ ------------
Net loss................................... $ (0.0017) $ (0.0015) $ (0.0073) $ (0.0653)
============= ============= ============ ============
Weighted average shares outstanding.............. 28,710,217 28,910,217 28,710,217 28,578,717
Diluted earnings (loss) per common share:
Continuing operations...................... $ (0.0017) $ 0.0024 $ (0.0073) $ 0.0042
Discontinued operations - AHO.............. -- (0.0039) -- (0.0695)
------------- ------------- ------------ ------------
Net loss................................... $ (0.0017) $ (0.0015) $ (0.0073) $ (0.0653)
============= ============= ============ ============
Weighted average shares outstanding.............. 28,710,217 28,910,217 28,710,217 28,578,717
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
2
<PAGE> 5
UNITED MEDICORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
2000 1999
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................... $ (209,968) $(1,875,236)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization of assets under capital leases ......... 46,720 24,317
Depreciation of fixed assets ........................ 38,752 54,348
Provision for doubtful accounts ..................... 6,623
Loss from discontinued operations - AHO ............. -- 1,997,184
Provision for doubtful note receivable .............. -- 23,756
Loss on capital lease roll over financing ........... -- 7,883
Changes in assets and liabilities:
(Increase) in restricted cash ....................... (5,215) (8,393)
(Increase) decrease in accounts receivable, gross.... (7,001) 28,726
(Increase) in factor reserve ........................ (19,257) --
Decrease in prepaid expenses and other assets ....... 42,501 12,760
Increase in accounts payable ........................ 38,913 (49,018)
Increase in payable to clients ...................... 4,378 8,393
Increase in deferred revenue ........................ 192,000 --
Increase (decrease) in accrued liabilities .......... (69,188) 49,674
----------- -----------
Net cash provided by continuing operations ............... 59,258 274,394
Net cash used in discontinued operations - AHO .............. -- (310,088)
----------- -----------
Net cash provided by (used in) operating activities ............... 59,258 (35,694)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Pampa building ........................................ (153,006)
Purchase of furniture and equipment ............................... (42,093) (11,353)
----------- -----------
Net cash used in investing activities ............................. (195,099) (11,353)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations ...................... (58,960) (57,295)
Repayment of promissory note ................................ (37,481) (37,500)
Repayment of mortgage ....................................... (196)
Net borrowings from credit facility ......................... -- (20,000)
Proceeds from mortgage ...................................... 137,000
Proceeds from issuance of long term debt .................... -- 100,000
----------- -----------
Net cash provided by (used in) financing activities ............... 40,363 (14,795)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS ............................. (95,478) (61,842)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................. 121,702 88,693
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................ $ 26,224 $ 26,851
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest:
Continuing operations ....................................... $ 26,871 $ 44,366
Discontinued operations ..................................... -- 6,769
----------- -----------
26,871 51,135
Non-cash investing and financing activities:
Additions to capital lease obligations ...................... $ -- $ 150,720
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
3
<PAGE> 6
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of United
Medicorp, Inc. ("UMC" or the "Company") include its wholly owned
subsidiaries, United MoneyCorp. Inc. ("UMY"), and Allied Health Options,
Inc. ("AHO"). All material intercompany transactions and balances have been
eliminated. Certain prior year balances have been reclassified to conform
with current year presentation. The financial information presented should
be read in conjunction with the audited financial statements of the Company
for the year ended December 31, 1999 included in the Company's Form 10-K.
The unaudited consolidated financial information has been prepared in
accordance with the Company's customary accounting policies and practices.
In the opinion of management, all adjustments, consisting of normal
recurring adjustments necessary for a fair presentation of results for the
interim period, have been included.
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, liabilities,
revenues and expenses. Significant estimates included in the accompanying
financial statements include the allowance for doubtful accounts and certain
accruals related to AHO in 1999. Actual results could differ from those
estimates. The results for interim periods are not necessarily indicative of
results to be expected for the year.
NOTE 2. DISCONTINUED OPERATIONS
Summarized financial information for discontinued operations of AHO is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- -----------------------------------
2000 1999 2000 1999
----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Net patient services revenue ........... $ -- $ 47,613 $ -- $ 420,188
Loss from discontinued operations,
before income taxes ........... -- (114,821) -- (1,997,184)
Income tax benefit ............... -- -- -- --
----------- -------------- ------------ ---------------
Loss from discontinued operations,
net of tax .................... $ -- $ (114,821) $ -- $ (1,997,184)
=========== ============== ============ ===============
</TABLE>
GENERAL CONSIDERATIONS
Except for the historical information contained herein, the matters
discussed may include forward-looking statements relating to such matters as
anticipated financial performance, legal issues, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that 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 are set forth in the safe
harbor compliance statement for forward-looking statements included as Exhibit
99.1 to this Form 10-Q and are hereby incorporated herein by
4
<PAGE> 7
reference. 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.
UMC and UMY derive their primary revenues from medical claims
processing and accounts receivable management services. A substantial portion of
UMC and UMY revenues are derived from recurring monthly charges to its customers
under service contracts that typically are cancelable with a 30 to 60 day
notice.
OPENING OF PAMPA OPERATIONS CENTER
On August 21, 2000, United Medicorp, Inc. completed the purchase of a
building that will serve as its new operations center in Pampa, Texas, and
simultaneously received payment of a relocation incentive totaling $192,000.
The purchase price of the building was $100,000. In addition, the first mortgage
includes an additional $37,000 allowance for transaction costs and building
improvements. The term of the first mortgage is 20 years, with monthly payments
of principal and interest at a floating rate of prime plus one half percent
(currently 9.0 percent per annum). Consistent with the terms of the previously
disclosed Economic Development and Incentive Agreement with the Pampa Economic
Development Corporation ("PEDC"), the full amount of the $137,000 mortgage is
guaranteed by the PEDC, and UMC received the initial incentive payment in the
amount of $192,000 at the closing on August 21, 2000.
FORGIVABLE LOAN AGREEMENT
During the first 60 days of operation in Pampa, UMC experienced
difficulties with its data communications from Pampa to Dallas. This resulted in
reduced productivity in Pampa, delays in revenue generation, and unexpected
costs in diagnosing and managing data communication. In addition UMC expended
$11,964 for moving expenses and $92,110.59 in capital expenditures to prepare
the Pampa building for operations. Due to the effect of these issues, UMC
developed a need for additional working capital. As a result, UMC executed a
Forgivable Loan Agreement with the PEDC on October 31, 2000 (included as Exhibit
10.40 to this Form 10Q, and incorporated herein by reference). Pursuant to the
agreement, the PEDC loaned UMC $50,000, as an advance against scheduled
incentive payments for 2000, and 2001. The principle amount of the loan will be
due and payable or forgivable based on the terms and conditions of the Economic
Development and Incentive Agreement executed with the PEDC on July 28, 2000. The
loan bears interest of 9.5% per annum, which is not forgivable. Interest on the
unpaid principle amount of the loan will be due and payable at the end of each
calendar quarter.
LOSS OF SIGNIFICANT CUSTOMER
On May 8, 2000, the Company received official notice of termination of
the Washington Hospital Center Hospital Billing ("WHCHBD") contract. Claim
transmissions from this contract terminated on June 30, 2000. This contract
accounted for approximately 45%, 63%, 36% and 63% of total consolidated revenues
during the six-month period ended June 30, 2000, and for the years
5
<PAGE> 8
ended December 31, 1999, 1998, and 1997, respectively. This contract provided
revenue of $64,000 during the month of July, 2000. Management estimates that
revenue from this contract will rapidly ramp down through the remainder of the
year.
Management continues to vigorously pursue new business while rigorously
managing expenses without negatively impacting service levels. However, there
can be no assurance that UMC will be successful in obtaining new business and
producing incremental profits and cash flow.
If management is unable to successfully develop and implement new
profitable customer contracts and new service lines or align expenses with
future cash requirements, it will be required to adopt alternative strategies,
which may include but are not limited to, actions such as reducing management
and line employee headcount and compensation, restructuring existing financial
obligations, seeking a strategic merger or acquisition, seeking the sale of the
Company or the Company's public shell, and/or seeking additional debt or equity
capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms.
MANAGEMENT CHANGES
R. Kenyon Culver, Vice President and Chief Financial Officer, and Mary
E. Rogers, Vice President of Management Information Systems have resigned to
pursue other business opportunities, effective August 14, 2000 and October 10,
2000 respectively. On August 28, 2000 UMC hired Nathan Bailey as Corporate
Controller to lead UMC's Finance and Administration Department, which will be
based in Pampa. A new network administrator has been hired in Pampa, and a
Dallas based MIS consulting firm has been hired to perform certain AS400
programming duties.
6
<PAGE> 9
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 accounts receivable management services.
CLAIMS MANAGEMENT SERVICES - PROCESSING VOLUMES
<TABLE>
<CAPTION>
2000 1999 1998 1997
------------------------ -------------------------------- --------------------------------- -------
QUARTER QUARTER QUARTER QUARTER
------------------------ -------------------------------- --------------------------------- -------
Third Second First Fourth Third Second First Fourth Third Second First Fourth
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UMC
Number of Claims
Accepted for
Processing:
Ongoing 12,774 38,702 44,311 40,118 53,655 47,525 45,265 48,722 48,162 49,742 89,317 72,803
Backlog 9,135 10,928 2,219 -- -- -- -- -- 1 72 8,518 23,739
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 21,909 49,630 46,530 40,118 53,655 47,525 45,265 48,722 48,163 49,814 97,835 96,542
Gross $ Amount
of Claims
Accepted for
Processing
(000's):
Ongoing 10,186 28,801 35,581 28,919 33,947 29,360 28,217 33,401 30,116 30,087 40,333 33,375
Backlog 6,216 2,987 4,789 -- -- -- -- -- -- 17 2,744 5,868
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 16,402 31,788 40,370 28,919 33,947 29,360 28,817 33,401 30,116 30,104 43,077 39,243
Collection $
(000's)
Ongoing 7,092 12,343 12,568 14,349 13,503 12,436 12,531 11,613 11,738 11,215 14,556 12,190
Backlog 1,561 1,112 -- -- -- -- -- -- 9 156 128 626
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 8,653 13,455 12,568 14,349 13,503 12,436 12,531 11,613 11,747 11,371 14,684 12,816
Fees Earned
(000's)
Ongoing 239 370 412 637 721 651 709 631 681 729 922 733
Backlog 155 137 -- -- -- -- -- -- 1 11 9 46
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 394 507 412 637 721 651 709 631 682 740 931 778
Average Fee %
Ongoing 3.3% 3.0% 3.3% 4.4% 5.3% 5.2% 5.7% 5.4% 5.8% 6.4% 6.3% 6.0%
Backlog 9.9% 12.3% -- -- -- -- -- -- 11.0% 7.1% 7.0% 13.7%
</TABLE>
For Ongoing claims, there is typically a time lag of approximately 5 to
90 days from contract execution to complete development of system interfaces and
definition of procedural responsibilities with customer personnel. During this
period, Company personnel survey the customer's existing operations and prepare
for installation. Once the customer begins transmitting claims to the Company,
there is usually a time lag of 30 to 90 days between transmission of claims to
third party payors and collection of those claims from payors.
7
<PAGE> 10
The following table sets forth for each period indicated the volume and
gross dollar amount of customer service and collection accounts received and
fees recognized for UMY.
COLLECTION AGENCY SERVICES - PROCESSING VOLUME
<TABLE>
<CAPTION>
2000 1999 1998 1997
------------------------ ------------------------------- --------------------------------- -------
QUARTER QUARTER QUARTER QUARTER
------------------------ ------------------------------- --------------------------------- -------
Third Second First Fourth Third Second First Fourth Third Second First Fourth
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UMY
Number of
Accounts Accepted
for Collection: 44,968 12,194 15,642 6,937 3,315 10,987 14,626 26,024 31,861 22,130 27,399 27,177
Gross $ Amount
of Accounts
Accepted for
Collection
(000's) 26,289 9,826 9,090 2,598 1,465 4,513 7,281 12,282 11,66 12,370 14,294 14,543
Collection $
(000's) 780 682 401 186 264 917 930 1,321 2,282 2,653 2,305 1,994
Fees Earned
(000's) 111 107 71 39 45 109 139 150 232 263 270 196
Average Fee % 14.2% 15.7% 17.7% 21.0% 17.0% 11.9% 14.9% 11.4% 10.2% 9.9% 11.8% 9.8%
</TABLE>
For placements of collection accounts, there is typically a time lag of
approximately 15 to 45 days from contract execution to electronic transfer of
accounts from the customer. In many cases, collection accounts are transferred
to UMY via hard copy media, which requires UMY employees to manually enter
collection account data into the UMY system. Collection fee percentages charged
to the customer vary depending on the service provided, the age and average
balance of accounts.
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's
Consolidated Statements of Operations expressed as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2000 1999 2000 1999
--------- --------- -------- -------
Revenue 100% 100% 100% 100%
--------- --------- -------- -------
<S> <C> <C> <C> <C>
Wages and benefits............................. 69 61 75 65
Selling, general and administrative............ 25 14 24 17
Depreciation and amortization.................. 5 3 5 3
Office, vehicle and equipment rental........... 5 7 5 4
Professional fees.............................. 2 2 2 2
Interest, net, and other (income) expense...... 1 4 2 3
Provision for doubtful accounts................ -- -- -- 1
---- ---- ---- ----
Total expenses................................. 109 91 112 95
---- ---- ---- ----
Net income (loss) from continuing operations... (9) (9) (12) 5
Loss from discontinued operations - AHO........ -- (15) -- (81)
---- ---- ---- ----
Net loss....................................... (9%) (6%) (12%) (76%)
==== ==== ==== ====
</TABLE>
8
<PAGE> 11
COMPARISON OF THE QUARTER ENDED SEPTEMBER 30, 2000 TO THE QUARTER ENDED
SEPTEMBER 30, 1999
REVENUES decreased $224,947, or 29% primarily due to the following:
o Ongoing Accounts Receivable Management Services revenue of $239,000 in the
current quarter decreased by $480,000 compared to the same quarter of 1999.
During the current quarter, WHCHBD claims provided revenue of $116,000
compared to $518,000 during the same quarter of 1999. This decrease is due
to the previously announced fifty percent fee reduction effective for
WHCHBD claims with dates of service on and after October 1, 1999. On May 8,
2000, the Company received official notice of termination of the WHCHBD
contract. Claim transmissions from this contract terminated effective June
30, 2000. This contract accounted for approximately 37%, 63%, 36% and 63%
of total consolidated revenues during the nine-month period ended September
30, 2000, and for the years ended December 31, 1999, 1998, and 1997,
respectively. This contract provided revenue of $5,000 during the month of
October, 2000. Management estimates that revenue from this contract will
rapidly ramp down through the remainder of the year. WHC Physician Billing
Department ("WHCPBD") claims provided revenue of $000 compared to $139,000
during the same quarter of 1999. This decrease is due to the previously
announced termination of claim transmissions from the WHC Department of
Emergency Medicine contract effective November 1, 1999 and from the WHC
Department of Women's Services contract effective October 1, 1999. Other
customer claims provided revenue of $123,000 compared to $62,000 during the
same quarter of 1999. Of this current quarter revenue, $84,000 was
generated from one customer.
o Backlog Accounts Receivable Management Services revenue of $155,000 in the
current quarter increased $155,000 compared to the same quarter of 1999 all
of which was due to the medical claims management contract executed on
March 22, 2000, with a major hospital system located in New Mexico.
o Collection Agency Services revenue of $111,000 in the current quarter
increased by $66,000 compared to the same quarter of 1999. Six customers
provided $101,000 or 91% of the current quarter revenue. Twenty-five
customers provided the balance of the current quarter revenue.
o UMClaimPros revenue of $9,000 in the current quarter decreased by $9,000
compared to the same quarter of 1999 primarily due to decreased utilization
at two of three UMClaimPros customers.
WAGES AND BENEFITS expense decreased $88,000 or 19% primarily due to
reduced headcount as a result of the aforementioned decrease in revenues. During
the current quarter, total monthly employee headcount averaged 42 compared to 47
during the same quarter of 1999.
SELLING, GENERAL AND ADMINISTRATIVE expense increased $33,000 or 30%
primarily due to travel and lodging expense for Pampa employees traveling to
Dallas for training, and rebillable contract labor costs related to programming
and consulting services for new customers.
OFFICE, VEHICLE AND EQUIPMENT RENTAL expense decreased $20,000 or 41%
primarily due to the corporate office space reduction whereby 3,300 square feet
of office space was vacated on September 2, 1999 resulting in a monthly expense
reduction of approximately $3,500. UMC will move from its current Dallas
Location in November. This move will result in a decrease in monthly rent
expense of approximately $6,700.
9
<PAGE> 12
OTHER EXPENSES decreased $16,000 or 100% due to a one-time accrual in 1999
of $26,000 related to certain AHO obligations partially offset by one-time
income related to a note receivable and corresponding deferred income as
reported on the June 30, 1999 balance sheet.
LOSS FROM DISCONTINUED OPERATIONS - AHO decreased $115,000 or 100% due to
the deconsolidation of AHO on October 14, 1999 in conjunction with AHO's filing
of a voluntary petition in the United States Bankruptcy Court for the Northern
District of Texas to liquidate pursuant to Chapter 7 of Title 11 of the United
States Bankruptcy Code.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUES decreased $761,000 or 31% primarily due to the following:
o Ongoing Accounts Receivable Management Services revenue of $1,021,000 in
the current nine-month period decreased by $1,060,000 compared to the same
period of 1999. During the current nine-month period, WHCHBD claims
provided revenue of $625,000 compared to $1,589,000 during the same period
of 1999. This decrease is due to the previously announced fifty percent fee
reduction effective for WHCHBD claims with dates of service on and after
October 1, 1999. WHCPBD claims provided revenue of $24,000 compared to
$402,000 during the same nine-month period of 1999. This decrease is due to
the previously announced termination of claim transmissions from the WHC
Department of Emergency Medicine contract effective November 1, 1999 and
from the WHC Department of Women's Services contract effective October 1,
1999. Other customer claims provided revenue of $370,000 compared to
$88,000 during the same nine-month period of 1999. Of this current
nine-month period revenue, $285,000 was generated from one customer.
o Backlog Accounts Receivable Management Services revenue of $293,000 in the
current nine-month period increased $293,000 compared to the same
nine-month period of 1999 of which $248,000 was due to the medical claims
management contract executed on March 22, 2000, with a major hospital
system located in New Mexico, and $45,000 was due to the credit balance
resolution services agreement executed on April 14, 2000, with an
orthopedic clinic located in North Carolina. As of the date of this filing,
the credit balance resolution project has been completed.
o Collection Agency Services revenue of $289,000 in the current nine-month
period decreased by $2,000 compared to the same nine-month period of 1999.
During the current nine-month period, Presbyterian Healthcare System
("PHS") accounts provided no revenue compared to $170,000 during the same
nine-month period of 1999 due to the previously announced termination of
account placements. $243,000 or 84% of the current nine-month period
revenue was provided by six customers. The balance of the current
nine-month period revenue was provided by thirty-two customers.
o UMClaimPros revenue of $44,000 in the current nine-month period decreased
by $34,000 compared to the same nine-month period of 1999 primarily due to
decreased utilization at two of three UMClaimPros customers.
WAGES AND BENEFITS expense decreased $323,000 or 20% primarily due to
reduced headcount as a result of the aforementioned decrease in revenues. During
the current nine-month period, total monthly employee headcount averaged 43
compared to 55 during the same period of 1999.
SELLING, GENERAL AND ADMINISTRATIVE expense decreased $18,000 or 4%
primarily due to decreased telephone, postage and print expense as a result of
the aforementioned decrease in revenues.
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<PAGE> 13
DEPRECIATION AND AMORTIZATION expense increased $7,000 or 9% primarily due
to the full current nine-month period effect of amortization expense related to
assets recorded on June 2, 1999 under a capital lease.
OFFICE, VEHICLE AND EQUIPMENT RENTAL expense decreased $36,000 or 30%
primarily due to the aforementioned corporate office space reduction.
INTEREST, NET decreased $12,000 or 32% due to the balance of net cash
employed under the Company's factoring agreement being less then funds borrowed
under the Company's previous credit facility, partially offset by increased
interest rates.
PROVISION FOR DOUBTFUL ACCOUNTS expense decreased $17,000 or 72% primarily
due to reserves totaling $21,000 required during the same nine-month period of
1999 for an insolvent and subsequently terminated customer partially offset by
smaller reserves required during the current nine-month period due largely to a
previously disclosed termination of a customer contract.
LOSS ON CAPITAL LEASE ROLLOVER FINANCING decreased $8,000 or 100% due to
the one-time nature of the loss during the same nine-month period of 1999.
LOSS FROM DISCONTINUED OPERATIONS - AHO decreased $1,997,000 or 100% due to
the deconsolidation of AHO on October 14, 1999 in conjunction with AHO's filing
of a voluntary petition in the United States Bankruptcy Court for the Northern
District of Texas to liquidate pursuant to Chapter 7 of Title 11 of the United
States Bankruptcy Code.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company's liquid assets, consisting of cash,
totaled $26,000 compared to $122,000 at December 31, 1999. For continuing
operations, the working capital deficit was $254,000 and $199,000 at September
30, 2000 and December 31, 1999, respectively.
Operating activities from continuing operations during the current
nine-month period provided cash of $59,000, compared to cash of $274,000
provided by operating activities during the same period of 1999. This decline in
the current nine-month period is primarily due to increased losses as a result
of the 31% decline in revenues (from the previously disclosed termination and
restructuring of significant customer contracts) only partially offset by a 20%
decline in wages and benefits expense. Wage expense was not reduced in
proportion to the decline in revenues in anticipation of the requirement for
experienced employees relative for new customer contracts in various stages of
implementation throughout the current nine-month period.
No cash was expended on operating activities from the discontinued
operations of AHO during the current nine-month period compared to cash of
$310,000 used for the discontinued operations of AHO during the same nine-month
period of 1999.
Cash expenditures of $153,000 and 42,000 was expended for the Pampa
building and improvements, and for computer and other equipment purchased for
the Pampa office respectively during the current nine-month period compared to
$11,000 used during the same period of 1999 for the purchase of equipment.
Financing activities during the current nine-month period provided cash of
$40,000 and consisted of monthly promissory note installment payments totaling
$38,000, principal payments on capital lease obligations totaling $59,000, and a
mortgage note on the Pampa building in the amount of $137,000. Cash of $40,000
provided by financing activities in the current nine-month period compares
favorably to the cash of $15,000 used in the same nine-month period of 1999
which consisted primarily of net borrowing of $80,000 offset by principal
payments on borrowings and capital lease obligations of $95,000.
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<PAGE> 14
During the current nine-month period, cash flow from operations was not
adequate to cover all working capital and liquidity requirements. The Company
was dependent on its cash reserves existing at December 31, 1999. Not
withstanding the aforementioned PEDC incentive agreement, as a result of the
aforementioned loss of the WHCHBD contract, management continues to anticipate
the possibility that cash requirements could exceed cash on hand and cash to be
generated from operating activities, if any. These possible periods of liquid
deficiency are attributed to the current cash shortage due to the prior use of
cash to support AHO up to its discontinuance of operations as well as the
reduction of revenues from significant customers as previously disclosed.
If UMC is unable to service its financial obligations as they become due,
it will be required to adopt alternative strategies, which may include but are
not limited to, actions such as reducing management and line employee headcount
and compensation, attempting to restructure existing financial obligations,
seeking a strategic merger or acquisition, seeking the sale of the company,
and/or seeking additional debt or equity capital. There can be no assurance that
any of these strategies could be effected on satisfactory terms.
PART 11. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
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<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
10.40 Forgivable Loan Agreement by and between the Registrant and
the Pampa Economic Development Corporation
27 Financial Data Schedule
99.1 Safe Harbor Compliance Statement for Forward-Looking
Statements
(B) Reports on Form 8-K:
The Company filed the following reports on Form 8-K during the quarter
ended September 30, 2000:
Item Reported: Announcement of the purchase of Pampa Operations Center
Date of report: September 5, 2000
Financial statements filed: None
SIGNATURES
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/ Nathan Bailey Date: November 10, 2000
------------------------------ -----------------
Nathan Bailey
Corporate Controller
(Principal Accounting Officer)
13
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.40 Forgivable Loan Agreement by and between the Registrant and the
Pampa Economic Development Corporation
27 Financial Data Schedule
99.1 Safe Harbor Compliance Statement for Forward-Looking Statements
</TABLE>
