<PAGE> 1
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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 MARCH 31, 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 May 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 MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 and December 31, 1999......................... 1
Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999................................................................ 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 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........................................................................... 10
ITEM 2. Changes in Securities....................................................................... 10
ITEM 3. Defaults Upon Senior Securities............................................................. 10
ITEM 4. Submission of Matters to a Vote of Security Holders......................................... 10
ITEM 5. Other Information........................................................................... 10
ITEM 6. Exhibits and Reports on Form 8-K............................................................ 11
Signatures ............................................................................................ 11
</TABLE>
<PAGE> 3
UNITED MEDICORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................... $ 22,670 $ 121,702
Restricted cash ................................................ 58,017 --
Accounts receivable, net of allowance for doubtful accounts
of $6,315 and $8,219, respectively .......................... 117,296 141,201
Factor reserve ................................................. 73,821 39,744
Prepaid expenses and other current assets ...................... 17,719 51,844
------------ ------------
Total current assets ................................................. 289,523 354,491
Other non-current assets ............................................. 4,817 4,817
Property and equipment, net of accumulated depreciation of $856,826
and $845,005, respectively ..................................... 96,390 108,211
Assets under capital leases, net of accumulated amortization of
$89,937 and $74,961, respectively .............................. 116,446 131,422
------------ ------------
Total assets ......................................................... 507,176 598,941
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable ......................................... 98,303 82,942
Payable to clients ............................................. 58,017 --
Accrued liabilities ............................................ 345,065 342,163
Current portion of capital lease obligations ................... 80,503 78,588
Promissory note ................................................ 37,066 49,547
------------ ------------
Total current liabilities ............................................ 618,954 553,240
Long term capital lease obligations, excluding current portion ....... 89,208 110,070
------------ ------------
Total liabilities .................................................... 708,162 663,310
------------ ------------
Stockholders' 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 ............................................... (19,052,516) (18,915,899)
------------ ------------
Total stockholders' equity (deficit) ........................ (200,986) (64,369)
------------ ------------
Total liabilities and stockholders' equity (deficit) ........ $ 507,176 $ 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
MARCH 31,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES:
Billing and collection services ........................... $ 506,011 $ 870,361
Other revenues ............................................ 10,986 11,389
------------ ------------
Total revenues ......................................... 516,997 881,750
EXPENSES:
Wages and benefits ........................................ 443,706 510,670
Selling, general and administrative ....................... 137,109 155,495
Office, vehicle and equipment rental ...................... 28,532 32,411
Depreciation and amortization ............................. 26,797 25,400
Professional fees ......................................... 10,381 8,570
Interest, net ............................................. 8,650 11,302
Provision for doubtful accounts and notes ................. (1,561) 37,774
------------ ------------
Total expenses ......................................... 653,614 781,622
------------ ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS .................... (136,617) 100,128
LOSS FROM DISCONTINUED OPERATIONS - AHO, NET OF INCOME TAXES .... -- (133,626)
------------ ------------
NET LOSS ........................................................ $ (136,617) $ (33,498)
============ ============
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations ..................................... $ (.0048) $ .0035
Discontinued operations - AHO ............................. -- (.0047)
------------ ------------
Net income (loss) ......................................... $ (.0048) $ (.0012)
============ ============
Weighted average shares outstanding ............................. 28,710,217 28,243,217
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations ..................................... $ (.0048) $ .0035
Discontinued operations - AHO ............................. -- (.0047)
------------ ------------
Net income (loss) ......................................... $ (.0048) $ (.0012)
============ ============
Weighted average shares outstanding ............................. 28,710,217 28,243,217
</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>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ................................................ $ (136,617) $ (33,498)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Amortization of assets under capital leases ....... 14,976 8,277
Depreciation of fixed assets ...................... 11,821 17,123
Provision for doubtful accounts ................... (1,561) 23,774
Loss from discontinued operations - AHO ........... -- 133,626
Provision for doubtful note receivable ............ -- 14,000
Changes in assets and liabilities:
(Increase) decrease in restricted cash ............ (58,017) 403
(Increase) decrease in accounts receivable, gross . 25,466 (89,200)
(Increase) in notes receivable, gross ............. -- (20,000)
(Increase) in factor reserve ...................... (34,077) --
Decrease in prepaid expenses and other assets ..... 34,125 20,152
Increase (decrease) in accounts payable ........... 15,361 (24,605)
Increase (decrease) in payable to clients ......... 58,017 (403)
Increase in accrued liabilities ................... 2,902 28,723
---------- ----------
Net cash provided by (used in) continuing operations ...... (67,604) 78,372
Net cash used in discontinued operations - AHO ............ -- (210,918)
---------- ----------
Net cash used in operating activities ........................... (67,604) (132,546)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment ....................... -- (4,459)
---------- ----------
Net cash used in investing activities ........................... -- (4,459)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations .................... (18,947) (18,678)
Repayment of promissory note .............................. (12,481) (12,500)
Net borrowings from credit facility ....................... -- 30,000
Proceeds from issuance of long term debt .................. -- 100,000
---------- ----------
Net cash provided by (used in) financing activities ............. (31,428) 98,822
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS ........................... (99,032) (38,183)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................ 121,702 88,693
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 22,670 $ 50,510
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest:
Continuing operations ..................................... $ 8,650 $ 11,302
Discontinued operations ................................... -- 5,267
---------- ----------
8,650 16,569
Non-cash investing and financing activities:
Additions to capital lease obligations .................... $ -- $ 32,465
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
3
<PAGE> 6
UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 the
Company's $75,000 office relocation accrual. 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
MARCH 31,
----------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Net patient services revenue ..................... $ -- $ 270,852
Loss from discontinued operations,
before income taxes ........................... -- (133,626)
Income tax benefit ............................... -- --
-------------- --------------
Loss from discontinued operations, net of tax .... $ -- $ (133,626)
============== ==============
</TABLE>
4
<PAGE> 7
UNITED MEDICORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 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.
LOSS OF SIGNIFICANT CUSTOMER
On May 8, 2000, the Company received official notice of termination of the
Washington Hospital Center ("WHC") Hospital Billing contract. Claim
transmissions from this contract will terminate effective June 30, 2000.
Management estimates that UMC will continue to generate revenue from this
contract through July 31, 2000 consistent with revenues generated on a monthly
basis through June 30, 2000, and thereafter, rapidly ramp down through the
remainder of the year. The WHC Hospital Billing contract accounted for
approximately 46%, 63%, 36% and 63% of total consolidated revenues during the
quarter ended March 31, 2000, and for the years ended December 31, 1999, 1998,
and 1997, respectively.
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.
5
<PAGE> 8
UNITED MEDICORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
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.
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.
<TABLE>
<CAPTION>
CLAIMS MANAGEMENT SERVICES - PROCESSING VOLUMES
2000 1999 1998 1997
------- ------------------------------- --------------------------------- -------------------------
QUARTER QUARTER QUARTER QUARTER
------- ------------------------------- --------------------------------- -------------------------
First Fourth Third Second First Fourth Third Second First Fourth Third Second
------ ------- ------- ------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UMC
- ----------------
Number of Claims
Accepted for
Processing:
Ongoing 44,311 40,118 53,655 47,525 45,265 48,722 48,162 49,742 89,317 72,803 76,672 42,833
Backlog 2,219 -- -- -- -- -- 1 72 8,518 23,739 28,361 --
------ ------- ------- ------- ------ ------- ------- -------- ------ ------- ------- --------
Total 46,530 40,118 53,655 47,525 45,265 48,722 48,163 49,814 97,835 96,542 105,033 42,833
Gross $ Amount
of Claims
Accepted for
Processing
(000's):
Ongoing 35,581 28,919 33,947 29,360 28,817 33,401 30,116 30,087 40,333 33,375 35,186 20,124
Backlog 4,789 -- -- -- -- -- -- 17 2,744 5,868 9,066 --
------ ------- ------- ------- ------ ------- ------- -------- ------ ------- ------- --------
Total 40,370 28,919 33,947 33,947 28,817 33,401 30,116 30,104 43,077 39,243 44,252 20,124
Collection $
(000's)
Ongoing 12,568 14,349 13,503 12,436 12,531 11,613 11,738 11,215 14,556 12,190 9,407 10,143
Backlog -- -- -- -- -- -- 9 156 128 626 -- --
------ ------- ------- ------- ------ ------- ------- -------- ------ ------- ------- --------
Total 12,568 14,349 13,503 12,436 12,531 11,613 11,747 11,371 14,684 12,816 9,407 10,143
Fees Earned
(000's)
Ongoing 411 637 721 675 771 631 681 729 922 733 480 428
Backlog -- -- -- -- -- -- 1 11 9 46 -- --
------ ------- ------- ------- ------ ------- ------- -------- ------ ------- ------- --------
Total 411 637 721 675 771 631 682 740 931 778 480 428
Average Fee %
Ongoing 3.3% 4.4% 5.3% 5.4% 6.2% 5.4% 5.8% 6.4% 6.3% 6.0% 5.1% 4.2%
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
6
<PAGE> 9
UNITED MEDICORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
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.
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
------- ---------------------------------- ---------------------------------- ------------------------
First Fourth Third Second First Fourth Third Second First Fourth Third Second
------- ------ ----- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UMY
- ------------------
Number of
Accounts Accepted
for Collection: 15,642 6,937 3,315 10,987 14,626 26,024 31,861 22,130 27,399 27,177 27,801 22,209
Gross $ Amount
of Accounts
Accepted for
Collection
(000's) 9,090 2,598 1,465 4,513 7,281 12,282 11,664 12,370 14,294 14,543 14,965 19,037
Collection $
(000's) 401 186 264 917 930 1,321 2,282 2,653 2,305 1,994 784 632
Fees Earned
(000's) 72 39 45 110 137 150 232 263 270 196 182 79
Average Fee % 18% 21.0% 17.0% 12.0% 14.7% 11.4% 10.2% 9.9% 11.8% 9.8% 23.2% 12.5%
</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.
7
<PAGE> 10
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 March 31,
------------------
2000 1999
----- -----
<S> <C> <C>
Revenue .......................................... 100.0% 100.0%
----- -----
Wages and benefits ............................. 85.8 57.9
Selling, general and administrative ............ 26.5 17.6
Office, vehicle and equipment rental ........... 5.5 3.7
Depreciation and amortization .................. 5.2 2.9
Professional fees .............................. 2.0 1.0
Interest, net, ................................. 1.7 1.3
Provision for doubtful accounts ................ 0.3 4.3
----- -----
Total expenses ................................. 127.0 88.7
----- -----
Net income (loss) from continuing operations ... (27.0) 11.3
Loss from discontinued operations-AHO .......... -- (15.1)
----- -----
Net income (loss) .............................. (27.0%) (3.8%)
===== =====
</TABLE>
COMPARISON OF THE QUARTER ENDED MARCH 31, 2000 TO THE QUARTER ENDED MARCH 31,
1999
REVENUES decreased $365,000, or 41% primarily due to the following:
o Ongoing Accounts Receivable Management Services revenue of $410,000 in the
current quarter decreased by $310,000 compared to the same quarter of 1999.
During the current quarter, WHC Hospital Billing Department ("WHCHBD") claims
provided revenue of $242,000 compared to $546,000 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. WHC Physician Billing Department ("WHCPBD") claims provided
revenue of $22,000 compared to $137,000 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
$146,000 during the current quarter compared to $25,000 during the same
quarter of 1999 primarily due to the medical claims management contract for
ongoing claims executed on June 17, 1999 with a hospital system located in
Virginia. This contract provided revenue of $104,000 during the current
quarter.
On May 8, 2000, the Company received official notice of termination of the
WHCHBD contract. Claim transmissions from this contract will terminate effective
June 30, 2000. Management estimates that UMC will continue to generate revenue
from this contract through July 31, 2000 consistent with revenues generated on a
monthly basis through June 30, 2000, and thereafter, rapidly ramp down through
the remainder of the year. The WHC Hospital Billing contract accounted for
approximately 46%, 63%, 36% and 63% of total consolidated revenues during the
quarter ended March 31, 2000, and for the years ended December 31, 1999, 1998,
and 1997, respectively.
8
<PAGE> 11
o Collection Agency Services revenue of $72,000 in the current quarter
decreased by $67,000 compared to the same quarter of 1999. During the current
quarter, PHS accounts provided no revenue compared to $98,000 during the same
quarter of 1999 due to the previously announced termination of account
placements.
WAGES AND BENEFITS expense decreased $67,000 or 13% primarily due to
reduced headcount. During the current quarter, total monthly employee headcount
averaged 43 compared to 62 during the same quarter of 1999. In addition, during
the same quarter of 1999, salary expense totaling $68,000 was allocated to AHO
as AHO home office costs. Taking this allocation into account, salary and
benefits expense decreased by $135,000 or 26%.
SELLING, GENERAL AND ADMINISTRATIVE expense decreased $18,000 or 12%
primarily due to decreased headcount, decreased postage, print, contract labor,
sales commissions and telephone expense as a result of the decline in customer
accounts and claims.
OFFICE, VEHICLE AND EQUIPMENT RENTAL expense decreased $4,000 or 12%
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 through January 31, 2001 will be $7,400. Monthly vehicle and other rental
expenses will total approximately $1,000 and $500, respectively.
INTEREST expense decreased $3,000 or 23% due to the balance of net cash
employed under the Company's factoring agreement being less then the funds
borrowed under the Company's previous credit facility.
PROVISION FOR DOUBTFUL ACCOUNTS expense decreased $39,000 or 104% due to
reserves required for an insolvent and subsequently terminated customer during
the first quarter of 1999.
LOSS FROM DISCONTINUED OPERATIONS - AHO decreased $134,000 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 March 31, 2000, the Company's liquid assets, consisting of cash, totaled
$23,000 compared to $122,000 at December 31, 1999. For continuing operations,
the working capital deficit was $329,000 and $199,000 at March 31, 2000 and
December 31, 1999, respectively.
Operating activities from continuing operations during the current quarter
used cash of $68,000, compared to cash of $78,000 provided by operating
activities during the same period of 1999. This decline in the current quarter
is primarily due to increased losses as a result of the aforementioned loss of
significant customers as compared to the same quarter of 1999.
No cash was expended on the operating activities from the discontinued
operations of AHO during the current quarter compared to cash of $211,000 used
on the discontinued operations of AHO during the same quarter of 1999.
No cash was expended on investing activities during the current quarter
compared to $4,000 used during the same period of 1999 for the purchase of
equipment.
9
<PAGE> 12
Financing activities during the current quarter used cash of $31,000 and
consisted of monthly installment payments totaling $12,000 for the bank
promissory note and principal payments on capital lease obligations totaling
$19,000. Cash of $31,000 used in financing activities in the current quarter
compares unfavorably to the cash of $99,000 provided in the same quarter of 1999
which consisted primarily of borrowing of $130,000 partially offset by principal
payments on borrowings as well as capital lease obligations.
During the current quarter, 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. 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. Due to the Company's current
financial position and in consideration of the loss of the WHCHBD contract,
management considers the likelihood of securing additional third party financing
to be unlikely. These possible periods of liquid deficiency are attributed to
the current cash shortage due to the use of cash to support AHO prior to its
discontinuance of operations as well as the reduction of revenues from current
customers as previously explained.
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 limited to, actions such as reducing management and line employee
headcount and compensation, attempting to restructuring 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 II. 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
10
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
27 Financial Data Schedule
99.1 Safe Harbor Compliance Statement for Forward-Looking Statements
</TABLE>
(B) Reports on Form 8-K
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: May 10, 2000
------------------------------- -------------
R. Kenyon Culver
Vice President and Chief Financial Officer
(Principal Accounting Officer)
11
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
27 Financial Data Schedule
99.1 Safe Harbor Compliance Statement for Forward-Looking Statements
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 22,670
<SECURITIES> 0
<RECEIVABLES> 123,611
<ALLOWANCES> (6,315)
<INVENTORY> 0
<CURRENT-ASSETS> 289,523
<PP&E> 1,159,599
<DEPRECIATION> (946,763)
<TOTAL-ASSETS> 507,176
<CURRENT-LIABILITIES> 618,954
<BONDS> 0
0
0
<COMMON> 290,157
<OTHER-SE> (491,143)
<TOTAL-LIABILITY-AND-EQUITY> 507,176
<SALES> 0
<TOTAL-REVENUES> 516,997
<CGS> 0
<TOTAL-COSTS> 646,525
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (1,561)
<INTEREST-EXPENSE> 8,650
<INCOME-PRETAX> (136,617)
<INCOME-TAX> 0
<INCOME-CONTINUING> (136,617)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (136,617)
<EPS-BASIC> (.005)
<EPS-DILUTED> (.005)
</TABLE>
<PAGE> 1
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
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 the WHC hospital billing contract. Claim
transmissions from this contract will terminate effective June 30, 2000.
Management estimates that UMC will continue to generate revenue from this
contract through July 31, 2000 consistent with revenues generated on a monthly
basis through June 30, 2000, and thereafter, rapidly ramp down through the
remainder of the year. The WHC Hospital Billing contract accounted for
approximately 46%, 63%, 36% and 63% of total consolidated revenues during the
quarter ended March 31, 2000, and for the years ended December 31, 1999, 1998,
and 1997, respectively.
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.
ASCENDING LIABILITY TO 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.
1
<PAGE> 2
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD LOOKING STATEMENTS
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 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 in tact 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.
KEY MANAGEMENT AND BOARD OF DIRECTORS
The Company's success in general and its continued 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.
CREDIT AVAILABILITY
The Company currently leases its AS/400 computer and certain other office
equipment under long-term lease agreements. Management anticipates that
additional lease financing may be required to meet the future needs of the
Company. Should the Company not be able to secure lease financing or other
similar forms of credit 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 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
2
<PAGE> 3
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD LOOKING STATEMENTS
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.
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
3
<PAGE> 4
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD LOOKING STATEMENTS
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, as well as received directly CMHC services. 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.
4
