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EXHIBIT 99.1
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), Congress encouraged public companies to make "forward-looking
statements" by creating a safe harbor to protect companies from securities law
liability in connection with forward-looking statements. United Medicorp, Inc.,
including its wholly owned subsidiaries United MoneyCorp, Inc., ("UMY") and
Allied Health Options, Inc. ("AHO"), hereinafter collectively referred to as
"UMC" or the "Company," intends to qualify both its written and oral
forward-looking statements for protection under the Reform Act and any other
similar safe harbor provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All forward
looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events, and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of UMC. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, UMC 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 provides the following risk factor disclosure in connection with
its continuing effort to qualify its written and oral forward-looking statements
for the safe harbor protection of the Reform Act and any other similar safe
harbor provisions. Important factors currently known to management that could
cause actual results to differ materially from those in forward-looking
statements include the disclosures contained in the Annual Report on Form 10-K
to which this statement is appended as an exhibit and also include, but are not
limited to:
CUSTOMER CONCENTRATION RISK
The percentage market mix of total revenue from continuing operations
was:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------
JUNE 30, 2000 1999 1998 1997
------------- ---- ---- ----
<S> <C> <C> <C> <C>
WHC (all contracts) .......... 47% 79% 66% 63%
Customer B ................... -- 4 23 23
Customer C ................... 18 6 -- --
Customer D ................... 8 -- -- --
Customer E ................... 5 -- -- --
Other customers .............. 22 11 11 14
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
A substantial portion of the Company's historical and current revenues
and cash flows were and are generated through hospital billing services provided
to the Washington Hospital Center ("WHC"). On May 8, 2000, the Company received
official notice of termination of its last contract with WHC. Claim
transmissions from this contract terminated effective June 30, 2000. Management
estimates that revenue from this contract will rapidly ramp down through the
remainder of the year. This contract accounted for
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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.
In addition to the aforementioned WHC contract, for the six-months
ended June 30, 2000, the Company relied upon revenues from a limited number of
customers. The Company continues to pursue new business in order to reduce any
remaining customer concentration risk, but there can be no assurance that the
Company will be successful in these efforts. Any failure with respect to
retaining existing significant customers could have a material adverse effect on
UMC.
KEY MANAGEMENT AND BOARD OF DIRECTORS
The Company's success in general and its ability to grow its operations
and increase its shareholder value is heavily dependent upon, among other
things, the continued contributions of the Company's senior management and
members of the Board of Directors. The loss of services of any single member of
senior management or of the Board of Directors could have a material adverse
effect on the Company's business.
ON-GOING MANAGEMENT INITIATIVES
The Company faces several challenges in order to continue to develop
on-going management initiatives to enhance shareholder value. These challenges
include, but are not limited to: (i) developing and implementing initiatives to
reduce costs and enhance efficiencies, (ii) executing service agreements with
new customers, (iii) exploring and exploiting fragmented market niches, and (iv)
recruiting, hiring and retaining key management employees. There can be no
assurance that the Company will successfully meet these or other operating
challenges. Any failure with respect to the foregoing could have a material
adverse effect on UMC.
FACTORING ARRANGEMENT, PERSONAL GUARANTEES AND CREDIT AVAILABILITY
The Company relies upon its ability to factor its invoices pursuant to
its recourse factoring agreement executed on December 28, 1999. This agreement
may be terminated by either party with ten days notice. This agreement is
personally guaranteed by two officers of the Company. The officers may withdraw
their personal guarantee related to future factored invoices by providing notice
to the factor and to the Company. There can be no assurances that the factor
agreement will not be terminated by the factor, nor can there be any assurances
as to the continuing aforementioned personal guarantees. The termination of the
factoring agreement and/or the withdrawal of one or both of the aforementioned
personal guarantees without satisfactory replacement could have a material
adverse effect on UMC.
The Company currently leases its AS/400 computer and certain other
office equipment under long-term lease agreements. Should the Company not be
able to secure lease financing or other similar forms of credit, if required,
upon terms and conditions that are acceptable to the Company, alternative
strategies to fund equipment may be required. There can be no assurance that any
of these strategies could be effected on satisfactory terms.
The Company has a bank promissory note which matures on January 4,
2001. The terms of the Credit Facility are such that the Company could be
deemed, from time to time, to be in default due to a number of factors
including, but not limited to: a.) a material adverse change in the Company's
financial condition or if the lender believes the prospect of payment or
performance of the Credit Facility is impaired and, b.) the lender in good faith
deems itself insecure based on a change in the financial position of the
Company. Upon default, the lender may declare the entire outstanding balance of
the Credit Facility, plus accrued and unpaid interest, to be immediately due and
payable. There can be no assurance that the Company will be able to
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prevent the aforementioned events of default from occurring. Any failure to
prevent default could have a material adverse effect on UMC.
TECHNOLOGICAL ADVANCES
Rapid technological change is inherent in the industry in which UMC
competes. UMC's success will depend in part upon its continued ability to
enhance its existing technology supporting billing, accounts receivable
management and collection agency services quickly and cost-effectively to meet
evolving customer needs and respond to emerging industry standards and other
technological changes. There can be no assurance that UMC will be able to
respond effectively to technological changes or new industry standards.
Moreover, there can be no assurance that competitors of UMC will not develop a
technological advantage, or that any such technological advantage will not have
a material adverse effect upon the operating results of UMC.
COMPETITION
The business of medical insurance claims processing, accounts
receivable management and collection agency services is highly competitive. UMC
competes with certain national and regional electronic claims processing
companies, claims collection companies, claims management companies, factoring
and financing firms, software vendors and traditional in-house claims processing
and collections departments of hospitals and other healthcare providers. Many
competitors of UMC are several times larger than the Company and could, if they
chose to enter the market for the Company's line of services, devote resources
and capital to the market that are much greater than those which the Company
currently has available or may have available in the future. There can be no
assurance that competition from current or future competitors will not have a
material adverse effect upon the Company.
INDUSTRY AND MARKET CHANGES
Potential industry and market changes that could adversely affect the
billing and collection aspects of UMC include (i) a significant increase in
managed care providers relative to conventional fee-for-service providers,
potentially resulting in substantial changes in the medical reimbursement
process, or the Company's failure to respond to such changes, (ii) new alliances
between healthcare providers and reduction of central business offices, and
(iii) continued cost containment measures employed by healthcare providers as
healthcare expenditures have grown as a percentage of the U.S. Gross National
Product. There can be no assurance that potential industry and market changes
will not have a material adverse effect on UMC.
GOVERNMENTAL INVESTIGATIVE RESOURCES AND HEALTHCARE REFORM
The federal government in recent years has placed increased scrutiny on
the billing and collection practices of healthcare providers and related
entities, and particularly on possible fraudulent billing practices. This
heightened scrutiny has resulted in a number of high profile civil and criminal
investigations, lawsuits and settlements.
In 1996, Congress enacted the Health Insurance Portability and
Accounting Act of 1996, which includes an expansion of provisions relating to
fraud and abuse, creates additional criminal offenses relating to healthcare
benefit programs, provides for forfeitures and asset-freezing orders in
connection with such healthcare offenses and contains provisions for instituting
greater coordination of federal, state and local enforcement agency resources
and actions.
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In recent years, the focus of healthcare legislation has been on
budgetary and related funding mechanism issues. Both the Congress and the
Clinton Administration have made proposals to reduce the rate of increase in
projected Medicare and Medicaid expenditures and to change the funding
mechanisms and other aspects of both programs. In late 1995 and 1997, Congress
passed legislation that would substantially reduce projected expenditure
increases and would make significant changes to Medicare and Medicaid programs.
The Clinton Administration has proposed alternate measures to reduce, to a
lesser extent, projected increases in Medicare and Medicaid expenditures. There
can be no assurance that these changes will not have a material adverse effect
on UMC.
EXISTING GOVERNMENT REGULATION
Existing government regulations can adversely affect UMC's business
through, among other things, its potential to reduce the amount of reimbursement
received by UMC's customers upon which UMC's billing and collection fees are
based. UMC's billing and collections activities are also governed by numerous
federal and state civil and criminal laws. In general, these laws provide for
various fines, penalties, multiple damages, assessments and sanctions for
violations, including possible exclusion from Medicare, Medicaid and certain
other federal and state healthcare programs.
Submission of claims for services that were not provided as claimed, or
which violate the regulations, may lead to civil monetary penalties, criminal
fines, imprisonment and/or exclusion from participation in Medicare, Medicaid
and other federally funded healthcare programs. Specifically, the Federal False
Claims Act allows a private person to bring suit alleging false or fraudulent
Medicare or Medicaid claims or other violations of the statute. Such actions
have increased significantly in recent years and has increased the risk that a
company engaged in the healthcare industry, such as UMC and its customers, may
become the subject of a federal or state investigation, may ultimately be
required to defend a false claim action, may be subjected to government
investigation and possible criminal fines, may be sued by private payors and may
be excluded from Medicare, Medicaid and/or other federally funded healthcare
programs as a result of such an action. Any such proceedings or investigation
could have a material adverse effect on UMC.
Credit collection practices and activities are regulated by both
federal and state law. The Federal Fair Debt Collection Practices Act sets forth
various provisions designed to eliminate abusive, deceptive and unfair debt
collection practices by collection agencies. Various states have also
promulgated laws and regulations that govern credit collection practices.
There can be no assurance that current or future government regulations
or current or future healthcare reform measures will not have a material adverse
effect on UMC.
ASCENDING LIABILITY TO UMC AS A PARENT CORPORATION FOR THE OBLIGATIONS OF AHO,
ITS WHOLLY OWNED SUBSIDIARY
On October 14, 1999, AHO filed 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. The filing was
made primarily due to the insolvency of AHO. At October 14, 1999, the net
liabilities of AHO totaled approximately $2.7 million of which approximately
$1,059,000 represents unsecured intercompany loans and other forms of working
capital provided by UMC. AHO's accounts were deconsolidated on October 14, 1999.
It is the opinion of UMC's management, supported by the opinion of
legal counsel, that the liabilities of AHO, including the Medicare settlement
reserve, do not ascend to UMC as the sole shareholder of AHO. This
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opinion is based on management's assertion that it has maintained appropriate
organizational and operational segregation and control in order to preserve the
corporate integrity and separateness of UMC and AHO. It is management's' opinion
that the corporate veil of AHO is intact and will provide adequate protection to
UMC as the sole shareholder of AHO. Any failure with respect to preserving or
defending the corporate veil of AHO could have a material adverse effect on UMC.
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