U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 2001
Commission file number 000-29579
U.S. Medical Group, Inc.
(Name of Small Business Issuer in its charter)
Nevada 88-0320389
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(State of jurisdiction of incorporation) (IRS Employer I.D. Number)
1405 South Orange Avenue Suite 600, Orlando, FL 32806
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(Address of principal executive offices)
Registrant's telephone number (407) 849-2288
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Check whether the registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period as 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 ___
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Indicate the number of shares outstanding of each of the issuer's class of
common stock. The Registrant had 13,575,380 shares of its common stock
outstanding as of March 31, 2001.
U.S. Medical Group, Inc
Quarterly Report on Form 10-QSB for the
Quarterly Period Ending March 31, 2001
Table of Contents
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets:
March 31, 2001 and December 31, 2000
Consolidated Statement of Operations:
Three Months Ended March 31, 2001 and 2000
Consolidated Statement of Cash Flows:
Three Months Ended March 31, 2001 and 2000
Notes to Consolidated Financial Statements:
March 31, 2001
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
U.S. MEDICAL GROUP, INC.
CONSOLIDATED BALANCE SHEET
UNAUDITED
ASSETS
Unaudited
March 31, 2001 December 31, 2000
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Current assets:
Cash and equivalents $ 154,588 $ 337,050
Accounts receivable 596,710 361,833
Prepaid expenses 17,304 44,409
Prepaid Taxes, net 55,974 -
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Total current assets 824,576 743,292
Property and equipment - at cost:
Mobile unit and medical equipment 3,800,174 3,827,196
Furniture and fixtures 110,161 77,383
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3,910,335 3,904,579
Less accumulated depreciation 811,106 728,496
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3,099,229 3,176,083
Other assets:
Patents & Trademarks, net of amortization 35,417 39,168
Financing fees, less amortization of $11,866 and
$10,597 on March 31, 2001 and December 31, 2000,
respectively 5,891 7,160
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$ 3,965,113 $ 3,965,703
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 104,282 $ 87,145
Current maturities of long-term debt 788,086 641,828
Income tax payable - 156,036
Deferred tax liability 182,585 106,344
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1,074,953 991,353
Long-term debt less current maturities 1,055,765 1,196,905
Deferred tax liability 355,046 330,096
Stockholders' equity:
Preferred stock, par value, $ .001 per share,
20,000,000 authorized at March 31, 2001 and
December 31, 2000; none issued - -
Common stock, par value, $ .001 per share;
100,000,000 authorized, 13,575,380 issued at
March 31, 2001 and December 31, 2000 13,575 13,575
Additional paid-in-capital 80,925 80,925
Retained earnings 1,425,975 1,371,419
Treasury Stock (41,126) (18,570)
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1,479,349 1,447,349
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$ 3,965,113 $ 3,965,703
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See accompanying footnotes to the unaudited financial statements
U.S. MEDICAL GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
Three months ended March 31,
2001 2000
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Revenues:
Patient fees $ 844,840 $ 849,004
Hyperbaric Fees 9,000 -
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853,840 849,004
Operating expenses:
Selling, general and administrative 572,920 355,954
Interest expense 37,550 40,256
Depreciation expense 87,623 77,016
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Operating expense 698,093 473,226
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Net income before taxes 155,747 375,778
Income tax provision(benefit) 101,191 142,900
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Net income $ 54,556 $ 232,878
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Earnings per common share $ 0.00 $ 0.02
(basic and assuming dilution)
Weighted average shares outstanding
Basic 13,575,380 13,575,380
Diluted 13,655,380 13,595,380
See accompanying footnotes to the unaudited financial statements
U.S. MEDICAL GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
For the three months ended March 31,
2001 2000
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Cash flows from operating activities:
Net income from operating activities $ 54,556 $ 232,878
Adjustments to reconcile net income to net cash:
Depreciation and amortization 87,623 77,016
Change in: Receivables (234,877) 169,843
Prepaid expenses and other assets 27,108 (7,188)
Income Taxes Payable (156,036) -
Tax Refunds, net (55,974) -
Deferred income taxes and other 101,191 142,900
Accounts payable and accrued expenses 17,137 (61,852)
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Net cash from operating activities (159,272) 553,597
Cash flows used in investing activities:
Capital expenditures (5,749) (61,704)
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Net cash used in investing activities (5,749) (61,704)
Cash flows (used in)/provided by financing activities:
Proceeds from bank loans 140,000 -
Proceeds from loans from stockholders - 441,739
Repayments of bank loans (134,885) (264,421)
Repayment of loans from stockholders - (17,435)
Purchase of Treasury Stock (22,556) -
Dividend Payments - (441,739)
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Net cash used in financing activities (17,441) (281,856)
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Net increase in cash and cash equivalents (182,462) (210,037)
Cash and cash equivalents at January 1 337,050 22,763
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Cash and cash equivalents at March 31 $ 154,588 $ 232,800
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Supplemental Information:
Interest Paid 27,258 -
Income Tax Paid - -
See accompanying footnotes to the unaudited financial statements
U.S. MEDICAL GROUP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
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General
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The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB, and therefore, do not
include all the information necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated December 31, 2000 financial
statements and footnotes thereto included in the Company's SEC Form 10KSB, as
amended.
Basis of Presentation
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The consolidated financial statements include the accounts of the Company, and
its wholly-owned subsidiary, U.S. Medical Group (Florida), Inc., formerly
American Mobile Surgical Services, Inc. Significant intercompany transactions
have been eliminated in consolidation.
Certain prior period amounts have been reclassified for comparative purposes
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS of FINANCIAL CONDITION AND RESULTS
OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2001 AND 2000
Cautionary Statement Regarding Forward-Looking Information:
This document includes forward-looking statements. All statements other than
statements of historical fact included in this document, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Liquidity and Sources of
Capital" regarding the Company's strategies, plans, objectives, expectations,
and future operating results are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable at this time, it can give no assurance that such
expectations will prove to have been correct. Actual results could differ
materially based upon a number of factors including, but not limited to, the
state of the economy, competition, unanticipated business opportunities,
availability of financing, market acceptance, government regulation, dependence
on key personnel, limited public market and liquidity, shares eligible for
future sale, continuation and renewal of the Florida and North Carolina
contracts and other risks that may apply to the Company.
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere within
this Report.
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31,2000
REVENUE
The Company's total revenues were $853,840 for three months ended March 31, 2001
compared to $849,004 for the same period ended March 31, 2000, an increase of
0.57%. Almost all of the Company's revenues are attributable to patient fees
derived from the North Carolina State and Florida State Department of
Corrections contracts for mobile surgical facility and support services. In
addition to patient fees, $9,000 was generated from the lease of a mobile
hyperbaric chamber used for the treatment of wound care and neurological
disorders. The Company reported net income from continuing operations for the
period three months ended March 31, 2001 of $54,556, compared to net income of
$232,878 for the period three months ended March 31, 2000, a decrease of 77%.
The decrease in net income is attributed to an increase in recurring and
non-recurring expenses during the period.
COSTS AND EXPENSES
The Company's 48% increase in operating expenses from $473,226 for the period
ended March 31, 2000 to $698,093 for the three months period ended March 31,
2001 is due primarily to an increase in compensation for certain Company
officers , increases in employee compensation and benefits, liability insurance,
medical supplies, promotional expenditures and depreciation expense. Having
foregone compensation since the Company's inception through the period ended
December 31, 2000, the Company began compensating its Chairman and Chief
Executive Officer Tom Winters and President and Director Richard Langley during
the quarter ended March 31, 2001. The increase in promotional expenses is
attributed to the cost of developing and airing a nationally televised program
to raise awareness of the Company's products and services. Selling, general and
administrative expenses increased 61% from $355,954 for the period three months
ended March 31, 2000 to $572,920 for the same period ended March 31, 2001. Costs
directly associated with day-to-day operations such as medical equipment,
supplies, and staff wages for the North Carolina and Florida mobile surgery
units remained constant during the three months period ended March 31, 2001 when
compared to the three months period ended March 31, 2000. Legal and accounting
fees of $71,359 were a necessary component of the company's filing of its form
10-KSB, preparation for the annual meeting, proxy material and other public
company matters as a fully reporting company. Legal and accounting fees for
three months-ended 2000 were $16,662.
As the Company continues to expand, the Company believes it will incur
additional costs for personnel. In order for the Company to attract and retain
quality personnel, the Company anticipates it will continue to offer competitive
salaries and grant Company stock options to current and future employees.
Depreciation and amortization expense for the period three months ended March
31, 2001 was $87,623, an increase of $10,607, or 13.8%, from the same three
months period ended March 31, 2000. The increase is primarily attributable to
the addition of new surgical equipment in both the North Carolina and Florida
facilities.
Interest expense for the period ended March 31, 2001 was $37,550, a decrease of
$2,706, or 6.7%, from $40,256 for the same period ended March 31 2000. The
interest expense decrease is primarily due to the retirement of certain bank
loans that were needed to fund the construction of the Florida mobile surgical
unit and subsequent equipment.
For the period ended March 31, 2001, an income tax provision of $101,191 was
made compared to an income tax provision $142,900 for the three months period
ended March 31,2000.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, the Company had a working capital deficit of $250,377,
compared to a deficit of $248,061 at December 31, 2000, a deficit increase of
$2,316. In addition, the Company experienced a $234,877 increase in accounts
receivable and a $17,137 increase in accounts payable and accrued expenses.
While the Company has raised the funds necessary to meet its working capital and
facility financing needs, additional financing will be required in order to
acquire additional surgical equipment and facilities. The Company is seeking
debt financing in order to provide for these expansions and for working capital.
There are no assurances the Company will be successful in raising the funds
required.
The Company experienced a negative cash flow from operations of $159,272 for the
period three months ended March 31, 2001 compared to a positive cash flow from
operations of $553,597 for the period three months ended March 31, 2000. The
negative cash flow from operating activities for the period three months ended
March 31, 2001 is primarily attributed to the Company's $178,322 decrease in net
income compared to the period three months ended March 31, 2000, an increase in
accounts receivable of $234,877 and income taxes payments of $156,036.
Cash flows used in investing activities was $5,749 for the period three months
ended March 31, 2001 and $ 61,704 for the period three months ended March 31,
2000. Cash flows used in investing activities for the three months period ended
March 31, 2001 were primarily used to purchase surgical equipment for use on the
Company's mobile surgery units.
A cash outflow of $17,441 was used during the period three months ended March
31, 2001 compared to cash outflows of $281,856 used in financing activities
during the period three months ended March 31, 2000. The principal financing
activity in the period three months ended March 31, 2001 was $22,556 used for
the purchase of treasury stock. The principal use of cash for financing
activities for the period three months ended March 31, 2000 was the repayment of
loans from banks in the amount of $264,421.
The effect of inflation on the Company's revenue and operating results was not
significant. The Company's operations are in the southeastern United States and
there are no seasonal aspects that would have a material adverse effect on the
Company's financial condition or results of operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2 - Changes in Securities and Use of Proceeds
(a) None
(b) None
(c) None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
U.S. MEDICAL GROUP, INC.
Registrant
May 15, 2001 By: /s/ Thomas Winters
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Date Thomas Winters
Chairman of the Board and
Chief Executive Officer