<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 JUNE 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.)
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
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 August 10, 2000, there were outstanding 28,710,217 shares of
Common Stock, $0.01 par value.
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<PAGE> 2
UNITED MEDICORP, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets at June 30, 2000 and December 31, 1999.......................... 1
Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2000 and 1999................................................................. 2
Consolidated Statements of Cash Flows for the Six Months Ended
June 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)
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................ $ 33,259 $ 121,702
Restricted cash .................................................. 937 --
Accounts receivable, net of allowance for doubtful accounts
of $3,047 and $8,219, respectively ............................ 98,366 141,201
Factor reserve ................................................... 56,030 39,744
Prepaid expenses and other current assets ........................ 12,479 51,844
------------ ------------
Total current assets ................................................... 201,071 354,491
Other non-current assets ............................................... 4,817 4,817
Property and equipment, net of accumulated depreciation of $871,379
and $845,005, respectively ....................................... 81,837 108,211
Assets under capital leases, net of accumulated amortization of
$105,969 and $74,961, respectively ............................... 100,414 131,422
------------ ------------
Total assets ........................................................... 388,139 598,941
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable ........................................... 86,388 82,942
Payable to clients ............................................... 171 --
Deferred revenue ................................................. 20,000 --
Accrued liabilities .............................................. 332,087 342,163
Current portion of capital lease obligations ..................... 81,929 78,588
Promissory note .................................................. 24,566 49,547
------------ ------------
Total current liabilities .............................................. 545,141 553,240
Long term capital lease obligations, excluding current portion ......... 68,379 110,070
------------ ------------
Total liabilities ...................................................... 613,520 663,310
------------ ------------
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 ................................................. (19,076,911) (18,915,899)
------------ ------------
Total stockholder's equity (deficit) .......................... (225,381) (64,369)
------------ ------------
Total liabilities and stockholder's equity (deficit) .......... $ 388,139 $ 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Billing and collection services ............. $ 625,938 $ 797,338 $ 1,132,225 $ 1,667,699
Other revenues .............................. -- -- 10,710 11,389
------------ ------------ ------------ ------------
Total revenues ........................... 625,938 797,338 1,142,935 1,679,088
Expenses:
Wages and benefits .......................... 439,632 607,172 883,338 1,117,842
Selling, general and administrative ......... 127,765 160,784 264,874 316,280
Depreciation and amortization ............... 30,585 25,350 57,382 50,750
Office, vehicle and equipment rental ........ 25,267 37,824 53,799 70,235
Professional fees ........................... 8,905 9,126 19,286 17,696
Interest, net ............................... 10,135 10,908 18,785 22,210
Provision for doubtful accounts ............. 8,044 (14,018) 6,483 23,756
Loss on capital lease rollover financing .... -- 7,883 -- 7,883
------------ ------------ ------------ ------------
Total expenses ........................... 650,333 845,029 1,303,947 1,626,652
------------ ------------ ------------ ------------
Net income (loss) from continuing operations ...... (24,395) (47,691) (161,012) 52,436
Loss from discontinued operations - AHO, net
of income taxes ..................... -- (1,748,738) -- (1,882,363)
------------ ------------ ------------ ------------
Net loss .................................... $ (24,395) $ (1,796,429) $ (161,012) $ (1,829,927)
============ ============ ============ ============
Basic earnings (loss) per common share:
Continuing operations ....................... $ (0.0008) $ (0.0016) $ (0.0056) $ 0.0018
Discontinued operations - AHO ............... -- (0.0605) -- (0.0658)
------------ ------------ ------------ ------------
Net loss .................................... $ (0.0008) $ (0.0621) $ (0.0056) $ (0.0640)
============ ============ ============ ============
Weighted average shares outstanding ............... 28,710,217 28,910,217 28,710,217 28,578,717
Diluted earnings (loss) per common share:
Continuing operations ....................... $ (0.0008) $ (0.0016) $ (0.0056) $ 0.0018
Discontinued operations - AHO ............... -- (0.0605) -- (0.0658)
------------ ------------ ------------ ------------
Net loss .................................... $ (0.0008) $ (0.0621) $ (0.0056) $ (0.0640)
============ ============ ============ ============
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>
SIX MONTHS ENDED
JUNE 30,
------------------------
2000 1999
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..................................................... $(161,012) $(1,829,927)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization of assets under capital leases .......... 31,008 16,583
Depreciation of fixed assets ......................... 26,374 34,167
Provision for doubtful accounts ...................... 6,483
Loss from discontinued operations - AHO .............. -- 1,882,363
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 ........................ (937) (2,689)
(Increase) decrease in accounts receivable, gross .... 36,352 (78,909)
(Increase) in notes receivable, gross ................ -- (168,000)
(Increase) in factor reserve ......................... (16,286) --
Decrease in prepaid expenses and other assets ........ 39,365 14,394
Increase in accounts payable ......................... 3,446 22,625
Increase in payable to clients ....................... 171 1,084
Increase in deferred revenue ......................... 20,000 --
Increase (decrease) in accrued liabilities ........... (10,076) 19,392
Increase in deferred credits ......................... -- 168,000
--------- -----------
Net cash provided by (used in) continuing operations ......... (25,112) 110,722
Net cash used in discontinued operations - AHO ............... -- (280,542)
--------- -----------
Net cash used in operating activities .............................. (25,112) (169,820)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment .......................... -- (7,880)
--------- -----------
Net cash used in investing activities .............................. -- (7,880)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations ....................... (38,350) (38,792)
Repayment of promissory note ................................. (24,981) (25,000)
Net borrowings from credit facility .......................... -- 95,000
Proceeds from issuance of long term debt ..................... -- 100,000
--------- -----------
Net cash provided by (used in) financing activities ................ (63,331) 131,208
--------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS .............................. (88,443) (46,492)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................... 121,702 88,693
--------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......................... $ 33,259 $ 42,201
========= ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest:
Continuing operations ........................................ $ 18,785 $ 20,261
Discontinued operations ...................................... -- 6,769
--------- -----------
18,785 27,030
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, the Company's $75,000
office relocation accrual, and certain accruals related to AHO. 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net patient services revenue ................. $ -- $ 101,723 $ -- $ 372,575
Loss from discontinued operations,
before income taxes ................. -- (1,748,738) -- (1,882,363)
Income tax benefit ..................... -- -- -- --
------------ ----------- ------------ -----------
Loss from discontinued operations,
net of tax .......................... $ -- $(1,748,738) $ -- $(1,882,363)
============ =========== ============ ===========
</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.
INCENTIVE FINANCING RELATIVE TO RELOCATION OF OPERATIONS CENTER
UMC has experienced increasing difficulty in recruiting and hiring
experienced medical billing and collection staff in the Dallas area. This
situation is the result of low unemployment and strong competition from nearby
major hospitals and physician groups for experienced staff. Low unemployment and
escalating competition for qualified staff has resulted in an overall increase
in hourly wage rates and turnover.
Effective July 28, 2000, UMC executed an Economic Development and
Incentive Agreement (the "Agreement"), with the Pampa Economic Development
Corporation ("PEDC"), included as Exhibit 10.39 to this Form 10-Q and hereby
incorporated herein by reference. Management entered into this Agreement in
order to: (a) create a new expense paradigm which includes reduced hourly wages
expense, (b) access a pool of applicants who are believed to be capable of
rapidly assimilating training in the job skills related to UMC's business, and
(c) put into place a facility with 20,000 square feet of space at a cost far
below that which would be incurred in the Dallas area.
In exchange for providing jobs within the city limits of Pampa, Texas,
at a lower hourly rate than is possible in the Dallas area, the Agreement calls
for the PEDC to provide the following incentives to UMC:
(a) an incentive payment of $192,000 to be made upon the closing of the
purchase of an operations center facility in Pampa. The Agreement includes a
claw back provision whereby if UMC does not maintain a minimum of 30 full time
equivalent employees ("FTEE") employed in its Pampa operations center during any
given year of the eight years of the Agreement beginning with the year ended
December 31, 2001, UMC will be required to remit $24,000 back to PEDC for each
such year.
(b) an incentive payment of $40,000 per calendar year (for a maximum of
$320,000) so long as UMC provides a minimum average of 40 FTEE employed in its
Pampa operations center during each of the eight calendar years of the Agreement
commencing with the year ending December 31, 2001, and
(c) an incentive payment of $1,000 per job per calendar year (for a
maximum of $80,000) for each FTEE from the 41st up to and including the 50th
FTEE employed in its Pampa operations center during each of the eight calendar
years of the Agreement commencing with the year ending December 31, 2001, and
(d) an incentive payment of $500 per calendar year (with no cap or
limit) for each FTEE from the 51st and over employed in its Pampa operations
center during each of the eight calendar years of the Agreement commencing with
the year ending December 31, 2001, and
(e) an incentive payment of $10,000 so long as UMC has 40 persons
employed in its Pampa operations center at December 31, 2000, and
(f) PEDC will guarantee up to $137,000 for the benefit of UMC's lender
(the "Lender"), relative to the purchase of an operations center facility in
Pampa. In addition, PEDC will pay to UMC $27,400 per year during each of the
first five years of the Agreement (for a maximum of $137,000) commencing with
the year ending December 31, 2001. After offsetting the total monthly payments
made to Lender during the preceding
5
<PAGE> 8
12 months from this annual payment, UMC will remit the balance to the Lender.
PEDC will be released from paying any and all unpaid annual payments if UMC
defaults on its obligations to its Lender or if UMC discontinues its operations
in Pampa within five years of July 28, 2000.
To date, UMC has hired 12 employees from Pampa to be located in its
Pampa operations center. UMC has identified and is currently in the process of
purchasing for $100,000, its operations center facility in Pampa. Throughout the
remainder of 2000, many of the jobs which in the past have been performed by
operations, MIS and administrative employees will be transitioned to the Pampa
operations center.
There can be no assurance that UMC will be successful in: (a) meeting
the aforementioned initial minimum employment requirements to trigger incentive
payments, (b) maintaining the minimum employment requirements to prevent
triggering the aforementioned claw back provision, (c) purchasing a facility in
Pampa, or (d) averting a default to its Lender or discontinuing its operations
in Pama within five years to prevent PEDC from being released from paying any
and all unpaid annual payments to UMC relative to the aforementioned guarantee
related payments.
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 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.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculation causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send and
receive electronic data, or engage in similar normal business activities. The
Company has experienced no adverse effect from the Year 2000 issue.
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
---------------- ------------------------------------
QUARTER QUARTER
---------------- ------------------------------------
Second First Fourth Third Second First
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
UMC
----------------
Number of Claims
Accepted for
Processing:
Ongoing 38,702 44,311 40,118 53,655 47,525 45,265
Backlog 10,928 2,219 -- -- -- --
------ ------ ------ ------ ------ ------
Total 49,630 46,530 40,118 53,655 47,525 45,265
Gross $ Amount
of Claims
Accepted for
Processing
(000's):
Ongoing 28,801 35,581 28,919 33,947 29,360 28,817
Backlog 2,987 4,789 -- -- -- --
------ ------ ------ ------ ------ ------
Total 31,788 40,370 28,919 33,947 33,947 28,817
Collection $
(000's)
Ongoing 12,343 12,568 14,349 13,503 12,436 12,531
Backlog 1,112 -- -- -- -- --
------ ------ ------ ------ ------ ------
Total 13,455 12,568 14,349 13,503 12,436 12,531
Fees Earned
(000's)
Ongoing 370 412 637 721 651 709
Backlog 137 -- -- -- -- --
------ ------ ------ ------ ------ ------
Total 507 412 637 721 651 709
Average Fee %
Ongoing 3.0% 3.3% 4.4% 5.3% 5.2% 5.7%
Backlog 12.3% -- -- -- -- --
<CAPTION>
1998 1997
------------------------------------ -----------------
QUARTER QUARTER
------------------------------------ -----------------
Fourth Third Second First Fourth Third
------ ------ ------ ------ ------ -------
Number of Claims
Accepted for
Processing:
Ongoing 48,722 48,162 49,742 89,317 72,803 76,672
Backlog -- 1 72 8,518 23,739 28,361
------ ------ ------ ------ ------ -------
Total 48,722 48,163 49,814 97,835 96,542 105,033
Gross $ Amount
of Claims
Accepted for
Processing
(000's):
Ongoing 33,401 30,116 30,087 40,333 33,375 35,186
Backlog -- -- 17 2,744 5,868 9,066
------ ------ ------ ------ ------ -------
Total 33,401 30,116 30,104 43,077 39,243 44,252
Collection $
(000's)
Ongoing 11,613 11,738 11,215 14,556 12,190 9,407
Backlog -- 9 156 128 626 --
------ ------ ------ ------ ------ -------
Total 11,613 11,747 11,371 14,684 12,816 9,407
Fees Earned
(000's)
Ongoing 631 681 729 922 733 480
Backlog -- 1 11 9 46 --
------ ------ ------ ------ ------ -------
Total 631 682 740 931 778 480
Average Fee %
Ongoing 5.4% 5.8% 6.4% 6.3% 6.0% 5.1%
Backlog -- 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
---------------- -------------------------------------
QUARTER QUARTER
---------------- -------------------------------------
Second First Fourth Third Second First
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
UMY
-----------------
Number of
Accounts Accepted
for Collection: 12,194 15,642 6,937 3,315 10,987 14,626
Gross $ Amount
of Accounts
Accepted for
Collection
(000's) 9,826 9,090 2,598 1,465 4,513 7,281
Collection $
(000's) 682 401 186 264 917 930
Fees Earned
(000's) 107 71 39 45 109 139
Average Fee % 15.7% 17.7% 21.0% 17.0% 11.9% 14.9%
<CAPTION>
1998 1997
------------------------------------ -----------------
QUARTER QUARTER
------------------------------------ -----------------
Fourth Third Second First Second First
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Number of
Accounts Accepted
for Collection: 26,024 31,861 22,130 27,399 27,177 27,801
Gross $ Amount
of Accounts
Accepted for
Collection
(000's) 12,282 11,664 12,370 14,294 14,543 14,965
Collection $
(000's) 1,321 2,282 2,653 2,305 1,994 784
Fees Earned
(000's) 150 232 263 270 196 182
Average Fee % 11.4% 10.2% 9.9% 11.8% 9.8% 23.2%
</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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2000 1999 2000 1999
------ ------- ------ -------
<S> <C> <C> <C> <C>
Revenue ......................................... 100% 100% 100% 100%
---- ---- ---- ----
Wages and benefits .............................. 70 76 77 67
Selling, general and administrative ............. 20 20 23 19
Depreciation and amortization ................... 5 3 5 3
Office, vehicle and equipment rental ............ 4 5 5 4
Professional fees ............................... 1 1 2 1
Interest, net, and other (income) expense ....... 2 2 2 2
Provision for doubtful accounts ................. 1 (2) -- 1
---- ---- ---- ----
Total expenses .................................. 104 105 114 97
---- ---- ---- ----
Net income (loss) from continuing operations .... (4) (5) (14) 3
Loss from discontinued operations - AHO ......... -- (219) -- (112)
---- ---- ---- ----
Net loss ........................................ (4%) (224%) (14%) (109%)
==== ==== ==== ====
</TABLE>
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<PAGE> 11
COMPARISON OF THE QUARTER ENDED JUNE 30, 2000 TO THE QUARTER ENDED JUNE 30, 1999
REVENUES decreased $171,000, or 21% primarily due to the following:
o Ongoing Accounts Receivable Management Services revenue of $370,000 in the
current quarter decreased by $281,000 compared to the same quarter of 1999.
During the current quarter, WHCHBD claims provided revenue of $267,000
compared to $526,000 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 45%, 63%, 36% and 63%
of total consolidated revenues during the six-month period ended June 30,
2000, and for the years 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. WHC Physician Billing
Department ("WHCPBD") claims provided revenue of $3,000 compared to
$124,000 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 $100,000 compared to $1,000
during the same quarter of 1999. Of this current quarter revenue, $95,000
was generated from one customer.
o Backlog Accounts Receivable Management Services revenue of $137,000 in the
current quarter increased $137,000 compared to the same quarter of 1999 of
which $92,000 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 a 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 $107,000 in the current quarter
decreased by $2,000 compared to the same quarter of 1999. During the
current quarter, Presbyterian Healthcare System ("PHS") accounts provided
no revenue compared to $58,000 during the same quarter of 1999 due to the
previously announced termination of account placements. $94,000 or 88% of
the current quarter revenue was provided by six customers. The balance of
the current quarter revenue was provided by twenty six customers.
o UMClaimPros revenue of $12,000 in the current quarter decreased by $25,000
compared to the same quarter of 1999 primarily due to decreased utilization
at two of three UMClaimPros customers.
WAGES AND BENEFITS expense decreased $167,000 or 28% primarily due to
reduced headcount as a result of the aforementioned decrease in revenues. During
the current quarter, total monthly employee headcount averaged 45 compared to 56
during the same quarter of 1999.
SELLING, GENERAL AND ADMINISTRATIVE expense decreased $33,000 or 21%
primarily due to decreased postage and print expense as a result of the
aforementioned decrease in revenues.
DEPRECIATION AND AMORTIZATION expense increased $5,000 or 21% primarily
due to the full current quarter effect of amortization expense related to assets
recorded on June 2, 1999 under a capital lease.
OFFICE, VEHICLE AND EQUIPMENT RENTAL expense decreased $12,000 or 32%
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. Under the current arrangement, monthly office
rent
9
<PAGE> 12
through January 31, 2001 will be $7,400. Monthly vehicle and other rental
expenses will total approximately $1,000 and $500, respectively.
PROVISION FOR DOUBTFUL ACCOUNTS expense increased $22,000 primarily due
to the reversal of note receivable reserves during the same quarter of 1999
totaling $14,000 in addition to current quarter reserves required relative 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 quarter of 1999.
LOSS FROM DISCONTINUED OPERATIONS - AHO decreased $1,749,000 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 SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS ENDED JUNE
30, 1999
REVENUES decreased $536,000 or 32% primarily due to the following:
o Ongoing Accounts Receivable Management Services revenue of $782,000 in the
current six-month period decreased by $578,000 compared to the same period
of 1999. During the current six-month period, WHCHBD claims provided
revenue of $509,000 compared to $1,071,000 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
$262,000 during the same six-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 $249,000 compared to
$27,000 during the same six-month period of 1999. Of this current six-month
period revenue, $201,000 was generated from one customer.
o Backlog Accounts Receivable Management Services revenue of $137,000 in the
current six-month period increased $137,000 compared to the same six-month
period of 1999 of which $92,000 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 $178,000 in the current six-month
period decreased by $70,000 compared to the same six-month period of 1999.
During the current six-month period, Presbyterian Healthcare System ("PHS")
accounts provided no revenue compared to $148,000 during the same six-month
period of 1999 due to the previously announced termination of account
placements. $154,000 or 87% of the current six-month period revenue was
provided by six customers. The balance of the current six-month period
revenue was provided by twenty eight customers.
o UMClaimPros revenue of $35,000 in the current six-month period decreased by
$25,000 compared to the same six-month period of 1999 primarily due to
decreased utilization at two of three UMClaimPros customers.
10
<PAGE> 13
WAGES AND BENEFITS expense decreased $235,000 or 21% primarily due to
reduced headcount as a result of the aforementioned decrease in revenues. During
the current six-month period, total monthly employee headcount averaged 44
compared to 59 during the same period of 1999.
SELLING, GENERAL AND ADMINISTRATIVE expense decreased $51,000 or 16%
primarily due to decreased telephone, postage and print expense as a result of
the aforementioned decrease in revenues.
DEPRECIATION AND AMORTIZATION expense increased $7,000 or 13% primarily
due to the full current six-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 $16,000 or 23%
primarily due to the aforementioned corporate office space reduction.
INTEREST, NET decreased $3,000 or 15% 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 73%
primarily due to reserves totaling $21,000 required during the same six-month
period of 1999 for an insolvent and subsequently terminated customer partially
offset by smaller reserves required during the current six-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 six-month period of 1999.
LOSS FROM DISCONTINUED OPERATIONS - AHO decreased $1,882,363 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 June 30, 2000, the Company's liquid assets, consisting of cash, totaled
$33,000 compared to $122,000 at December 31, 1999. For continuing operations,
the working capital deficit was $344,000 and $199,000 at June 30, 2000 and
December 31, 1999, respectively.
Operating activities from continuing operations during the current
six-month period used cash of $25,000, compared to cash of $111,000 provided by
operating activities during the same period of 1999. This decline in the current
six-month period is primarily due to increased losses as a result of the 32%
decline in revenues (from the previously disclosed termination and restructuring
of significant customer contracts) only partially offset by a 21% 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 six-month period.
No cash was expended on operating activities from the discontinued
operations of AHO during the current six-month period compared to cash of
$281,000 used for the discontinued operations of AHO during the same six-month
period of 1999.
No cash was expended on investing activities during the current
six-month period compared to $8,000 used during the same period of 1999 for the
purchase of equipment.
11
<PAGE> 14
Financing activities during the current six-month period used cash of
$63,000 and consisted of monthly promissory note installment payments totaling
$25,000 and principal payments on capital lease obligations totaling $38,000.
Cash of $63,000 used in financing activities in the current six-month period
compares unfavorably to the cash of $131,000 provided in the same six-month
period of 1999 which consisted primarily of net borrowing of $195,000 partially
offset by principal payments on borrowings and capital lease obligations.
During the current six-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
------ ----------------------
10.39 Economic Development and Incentive 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 June 30, 2000:
Item Reported: Announcement of the loss of the Washington Hospital
Center Contract
Date of report: May 9, 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/ R. Kenyon Culver Date: August 10, 2000
-------------------------------------- ----------------
R. Kenyon Culver
Vice President and Chief
Financial Officer
(Principal Accounting Officer)
13
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.39 Economic Development and Incentive 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>
