-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, O3m0VG8a2V0IrU8RwyAH3djmQlb8+fehfKCv1eAp9W7cuJ9e6dltzaPfD2PSDAhi cO4sCiXnOrdmxU53FGylcg== 0000849145-95-000004.txt : 19950517 0000849145-95-000004.hdr.sgml : 19950516 ACCESSION NUMBER: 0000849145-95-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDCROSS INC CENTRAL INDEX KEY: 0000849145 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 592291344 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17973 FILM NUMBER: 95537754 BUSINESS ADDRESS: STREET 1: 3227 BENNET ST NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33713 BUSINESS PHONE: 8135211793 MAIL ADDRESS: STREET 1: 3227 BENNET STREET NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33713 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-17973 MEDCROSS, INC. (Exact name of small business issuer as specified in its charter) FLORIDA 59-2291344 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3227 Bennet Street North, St. Petersburg, Florida 33713 (Address of principal executive offices) (813) 521-1793 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding at April 30, 1995 Common Stock, par value $0.007 1,749,163 Traditional Small Business Disclosure Format (Check One): Yes No X PART I - FINANCIAL INFORMATION Item 1 - Financial Statements MEDCROSS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (unaudited)
Assets March 31 1995 Current assets Cash and cash equivalents $ 320,051 Accounts receivable less allowance of $852,347 925,804 Inventory 839,907 Prepaid expenses 105,024 Total current assets 2,190,786 Property and equipment 3,393,896 Less accumulated depreciation 1,491,504 Net property and equipment 1,902,392 Investment in unconsolidated subsidiary 7,500 Intangible assets, net of amortization of $182,030 612,380 Other assets 73,692 Total assets $ 4,786,750 Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued expenses $ 517,283 Advance deposits received 153,541 Reserve for warranty liability 137,267 Note payable - related party 218,000 Note payable - other 450,000 Current portion of long-term debt 303,505 Current obligations under capital lease 252,473 Total current liabilities 2,032,069 Long-term debt 600,380 Obligations under capital leases 89,723 Minority interest equity in consolidated subsidiaries 412,296 Commitments and contingencies - Stockholders' equity Preferred stock 2,075,000 Common stock 12,244 Other stockholders' equity ( 434,962) Total stockholders' equity 1,652,282 Total liabilities and stockholders' equity $ 4,786,750 The accompanying notes are an integral part of these consolidated financial statements. MEDCROSS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended March 31 1995 1994 Net operating revenue $ 1,117,493 $ 932,370 Cost of goods sold - equipment sales and service 185,157 - Salaries and benefits 328,931 293,003 Repairs and maintenance 76,946 80,037 Provision for doubtful accounts 327,588 36,090 Depreciation and amortization 117,952 120,677 Other operating expenses 316,788 326,778 Operating profit (loss) ( 235,869) 75,785 Interest expense ( 39,128) ( 42,454) Other income 3,816 8,407 Equity in net income of unconsolidated subsidiary - 5,359 Income (loss) before minority interest in net income (loss) of consolidated subsidiaries and income tax provision ( 271,181) 47,097 Minority interest in net income (loss) of consolidated subsidiaries 12,779 23,154 Income (loss) before income tax provision ( 283,960) 23,943 Income tax provision - 2,487 Net income (loss) $( 283,960) $ 21,456 Earnings (loss) per common share $( .04) $ - Weighted average common and equivalent shares outstanding 6,884,481 6,954,860 The accompanying notes are an integral part of these consolidated financial statements. MEDCROSS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended March 31 1995 1994 Cash provided by operating activities $ 50,068 $ 64,359 Cash flows from investing activities Purchase of property and equipment ( 15,000) ( 6,633) Investment in unconsolidated subsidiary - ( 3,750) Net cash used by investing activities ( 15,000) ( 10,383) Cash flows from financing activities Proceeds of note payable - related party 218,000 - Proceeds (reduction) of note payable - other ( 101,000) 218,000 Reductions of long-term debt ( 97,286) ( 97,286) Reduction of capital lease obligations ( 59,400) ( 53,932) Minority interest contributions - 260,417 Minority interest distributions ( 36,500) ( 9,625) Net cash provided (used) by financing activities ( 76,186) 317,574 Effect of foreign currency translation on cash flows 12 ( 87,522) Increase (decrease) in cash and cash equivalents ( 41,106) 284,028 Cash and cash equivalents at beginning of period 361,157 1,176,757 Cash and cash equivalents at end of period $ 320,051 $ 1,460,785 Supplemental cash flow information In February 1995 a holder of Class B Preferred Stock converted 9,350 shares into 227,714 shares of Common Stock. The accompanying notes are an integral part of these consolidated financial statements. MEDCROSS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Financial Statements In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three-month periods ended March 31, 1995 and March 31, 1994, (b) the financial position at March 31, 1995, and (c) cash flows for the three-month periods ended March 31, 1995 and March 31, 1994, have been made. The unaudited consolidated financial statements and notes are presented as permitted by Form 10-QSB. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. The accompanying consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 1994. The results of operations for the three-month period ended March 31, 1995 are not necessarily indicative of those to be expected for the entire year. Note 2 -Earnings Per Common Share Earnings per common share are based upon the weighted average number of common shares outstanding and the dilutive effect of common stock equivalents consisting of stock options and convertible preferred stock. Fully diluted earnings per share are not presented because it approximates earnings per common share. Note 3 - Geographic Segment Information The Company's operations consist of providing diagnostic and clinical outpatient health care services domestically and the sale and service of used medical equipment in the People's Republic of China (PRC). The corporate office provides management and operational services for domestic outpatient health care services. The eliminations represent charges for these services to entities included in the consolidation. Financial information for the different geographic segments is as follows: Three Months Ended Corporate/ March 31, 1995 Domestic China Management Eliminations Consolidated Revenue $ 696,818 $ 337,889 $ 133,412 $( 50,626) $ 1,117,493 Operating Profit $ 146,185 $( 210,987) $( 120,441) $( 50,626) $( 235,869) Identifiable Assets $ 3,500,413 $ 1,031,660 $ 288,414 $( 33,737) $ 4,786,750 Three Months Ended Corporate/ March 31, 1994 Domestic China Management Eliminations Consolidated Revenue $ 782,561 $ - $ 178,382 $( 28,573) $ 932,370 Operating Profit $ 263,364 $( 41,530) $( 117,476) $( 28,573) $ 75,785 Identifiable Assets $ 3,993,181 $ 597,864 $ 1,357,051 $( 16,960) $ 5,931,136 Item 2 - Management's Discussion and Analysis The following discussion should be read in conjunction with the information contained in the financial statements of the Company and the notes thereto appearing elsewhere herein and in conjunction with the Management's Discussion and Analysis set forth in the Company's Form 10-KSB for the fiscal year ended December 31, 1994. Results of Operations The following Table represents the net operating revenue and operating profit (loss) of the Company for each category of service offered. The net operating revenue and operating profit (loss) shown are net of intercompany transactions that were eliminated in consolidation. Three Months Ended March 31 1995 1994 NET OPERATING REVENUE Diagnostic Imaging $ 696,818 $ 782,561 Sales and Services of Medical Equipment 337,889 - Management and Other 82,786 149,809 $ 1,117,493 $ 932,370 OPERATING PROFIT (LOSS) Diagnostic Imaging $ 146,185 $ 263,364 Sales and Services of Medical Equipment ( 210,987) ( 41,530) Management and Other ( 171,067) ( 146,049) $( 235,869) $ 75,785 Diagnostic Imaging Net operating revenue from diagnostic imaging services decreased by 11% in 1995 as compared to 1994. Tampa MRI accounted for $127,649 of the decrease. This decrease in revenue is the result of a 34% decrease in the number of MRI procedures performed and a 4% decrease in average revenue per procedure. Tampa MRI is actively pursuing managed care contracts. If successful in obtaining these contracts, management expects a decline in average revenue per case, which should be offset by an increase in the number of procedures performed. MRI revenue of Medcross Imaging, Ltd. decreased by $64,164 in 1995 as compared to 1994. This decrease was a result of a 14% decrease in the number of cases performed and 1% decrease in the average revenue per case. Urological Ultrasound Services of Tampa Bay (UUSTB) was acquired and included in the consolidated financial statements of the Company effective October 1, 1994. UUSTB had diagnostic imaging service revenue of $106,070 in the first quarter of 1995. The revenue of UUSTB increased 4% compared to revenue as an unconsolidated joint venture in the first quarter of 1994. This increase was the result of a 29% increase in the number of cases performed, offset by a 20% decline in the average net operating revenue per procedure. Approximately 80% of the patients treated by the Company's ultrasound operations are Medicare beneficiaries. Medicare issued final regulations, effective May 1, 1995, eliminating reimbursement to independent physiological laboratories for certain procedures, including the ultrasound procedures performed by UUSTB. Since UUSTB is classified as an independent physiological laboratory for Medicare purposes and Tampa MRI is not, the Company has transferred its ultrasound operations to Tampa MRI, effective May 1, 1995. Based upon discussions with representatives of the Medicare intermediary for the State of Florida, the Company should receive reimbursement for the ultrasound procedures performed through Tampa MRI. As of this date, the Company has not applied for or received reimbursement for ultrasound procedures performed through Tampa MRI. The operating profit from diagnostic imaging services decreased by $117,179 in 1995 as compared to 1994. This decrease was the result of a decline in operating profit from MRI services of $167,135, offset by the $49,956 operating profit from ultrasound services. The decline in operating profit from MRI services was related to a decline in revenue, which was partially offset by $24,678 reduction in operating expenses. During the past several years, there has been increasing pressure from federal and state regulatory and legislative bodies to prevent physicians from referring patients to diagnostic imaging facilities in which they have an ownership interest. Legislation passed in the State of Florida, where all of the Company's diagnostic imaging services operate, placed a fee cap on diagnostic imaging services. An injunction has been obtained preventing the State of Florida from enforcing the fee cap. See "Item 3. Legal Proceedings" in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994. Sales and Service of Medical Equipment The Company sells and services used and refurbished computerized tomography (CT) scanners in the People's Republic of China through its own office in Beijing and a joint venture company, Shenyang Medcross Huamei Medical Equipment Company, Ltd. (SMHME), of which it owns 51%. During the last four months of 1994, the Beijing office completed the installation of two CT scanners and SMHME completed the installation of one CT scanner. In the first quarter 1995, the Company's Beijing office completed the installation of two additional CT scanners. To date, the Beijing office has not received any payments on the four CT scanners installed, other than the initial deposits. Various issues have been raised by the purchasers in China regarding maintenance of the scanners, parts depot, etc. The Company's President, Henry Toh, personally traveled to China to resolve these issues and obtain payment. Mr. Toh is confident that the issues will be resolved and payment received by the end of the second quarter of 1995. However, since no payments have been received other than the initial deposits, the Company has elected to fully reserve for all amounts due to the Beijing office for the four scanners installed. This resulted in an expense of $281,438 in the first quarter of 1995 and $188,842 in the fourth quarter of 1994 and an allowance for doubtful accounts of $470,280 as of March 31, 1995. Management and Other Net operating revenue from management and other activities decreased by $67,023 in the first quarter of 1995 as compared to 1994. The decrease was primarily related to the management contracts with Bay Area Renal Stone Center (BARSC) and UUSTB. The BARSC contract accounted for $48,961 in management fees in the first quarter of 1994 and $11,775 in management fees in the first quarter of 1995. The UUSTB contract accounted for $26,496 in the first quarter of 1994. Since UUSTB is now wholly owned by the Company, the management and billing fees were eliminated in consolidation in 1995. The net operating loss from management and other activities increased $25,018 in the first quarter of 1995 to $171,067. This increased loss was related to the reduced revenue described above offset by a decrease in corporate overhead expenses of $42,005, primarily travel expenses. Consolidated Operating Results Net operating revenue of the Company increased by 20% in the first quarter of 1995 as compared to the same quarter of 1994. This increase was the result of new sources of revenue from the sale and service of medical equipment in China and the acquisition of UUSTB. The increase in revenue from these new sources was offset by the decline in management fee revenue and revenue from MRI services. The cost of goods sold was entirely related to the sale and service of CT equipment in China. While the cost of the two CT scanners sold in 1994 was greater than revenue, there is a significant gross margin on the two scanners installed in the first quarter of 1995. This increase in the gross margin was due to efficiencies gained through the Company's prior experience in purchasing, refurbishing, shipping, and installing the equipment in China. The increase in salaries and benefits was primarily related to the inclusion of UUSTB in the consolidation. The large increase in the provision for doubtful accounts was a result of recording reserve for receivables from China clients, as previously discussed. The reductions of other operating expenses in the corporate office and Tampa MRI were offset by increases in other operating expenses in the China operations and UUSTB. The overall decline in operating profit was the culmination of the decline in operating profit from diagnostic imaging services, foreign operations, and the corporate office. However, $281,438 of the operating loss was related to the reserve for China receivables. Excluding this reserve, the Company would have had an operating profit of $45,569. Liquidity and Capital Resources Working capital provided by operations during the first quarter of 1995 was $222,402, compared to $198,505 in 1994. The working capital provided by operating activities increased $23,897 even though net income declined $305,416 during the first quarter of 1995 as compared to the first quarter of 1994. This disparity was primarily the result of the provision for doubtful accounts for receivables from China recorded in the first quarter of 1995. The working capital position of the Company declined by $303,915 during the first quarter of 1995. The working capital position of the Company was $158,717 at March 31, 1995 and $462,632 at December 31, 1994. Cash flow provided by operating activities was $50,068 in the first quarter of 1995 compared to $64,359 for the same period in 1994. Investing activities expenditures during the first quarter of 1995 related to the purchase of additional equipment for the Tampa MRI unit. During the first quarter of 1995, the Company reduced its long term debt and capital lease obligations by $156,686 and the outstanding balance of its line of credit by $101,000. The Company was in violation of loan covenants regarding cash balances, consolidated equity, debt to equity ratios, and past days sales in accounts receivable under the line of credit at March 31, 1995. The bank has waived those covenant violations. During the first quarter of 1995, the Company received advances totaling $218,000 from Mortgage Network International, payable on demand. The Company's Chairman and Vice Chairman/President have an ownership interest and management control over Mortgage Network International. The Board of Directors has been requested to approve delivery of a demand promissory note bearing interest at one percent over the prime rate of Southwest Bank of Texas, N.A. concerning such advances. The $260,417 minority interest contribution during the first quarter of 1994 represents a contribution made by the Company's joint venture partner in SMHME. The joint venture agreement requires that capital contributions and distributions of capital are exchanged at a rate of 5.76 Renminbi per U.S. Dollar. The actual exchange rate at the time the contributions were made was in excess of 8.5 Renminbi per U.S. Dollar. The effects of foreign currencies on cash flows in 1994 is almost entirely related to the difference between the stipulated exchange rate in the joint venture agreement and the actual exchange rate at the time the contributions were made. Capital requirements of the Company for 1995 consist primarily of funding ongoing operations and the reduction of the outstanding balance of the Company's line of credit with First Union National Bank of Florida. The Company invested approximately $112,000 in additional funds in its China operations during the first quarter of 1995. The Company has no material commitments for capital expenditures other than for ordinary expenses incurred during the usual course of business. To the extent that the Company is unable to collect the receivables from China operations, the Company will need to reduce future expenses or raise additional capital to meet its operating cash flow requirements. Additional investment in the Company's China or domestic operations will require that the Company raise additional capital through public or private debt or equity financing. The availability of these capital sources will depend upon prevailing market conditions, interest rates and the then existing financial position and results of operations of the Company. Therefore, no assurances can be made by the Company that such additional capital will be available. PART II - OTHER INFORMATION Item 6(a) - Exhibits 11 Statement regarding computation of earnings per common share. Item 6(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 thereunder duly authorized. MEDCROSS, INC. (Registrant) Date: May 12, 1995 By: /s/ HENRY TOH Henry Toh President Date: May 12, 1995 By: /s/ TIMOTHY R. BARNES Timothy R. Barnes Senior Vice President & Chief Financial Officer (Principal Financial Officer & Principal Accounting Officer)
EX-11 2
EXHIBIT 11 COMPUTATION OF EARNINGS PER COMMON SHARE For the Period Ended March 31 1995 1994 Earnings per common and common equivalent share Net income (loss) available to common and equivalent shares $( 283,960) $ 21,456 Weighted average common shares outstanding 1,632,776 1,503,305 Adjustments Assumed issuance of shares purchased under stock option and stock purchase plans 7,313 114,780 Assumed exercise of warrants 50,000 14,046 Assumed conversion of: Class A Variable Rate Cumulative Convertible Preferred Stock 4,894,463 4,894,463 Class B Variable Rate Cumulative Convertible Preferred Stock 299,929 428,266 Total common and equivalent shares 6,884,481 6,954,860 Earnings (loss) per common and equivalent share $( .04) $ - Fully diluted earnings per common and common equivalent share Net income (loss) available to common and equivalent share $( 283,960) $ 21,456 Weighted average common shares outstanding 1,632,776 1,503,305 Adjustments Assumed issuance of shares purchased under stock option and stock purchase plans 7,313 114,780 Assumed exercise of warrants 50,000 14,046 Assumed conversion of: Class A Variable Rate Cumulative Convertible Preferred Stock 4,894,463 4,894,463 Class B Variable Rate Cumulative Convertible Preferred Stock 299,929 428,266 Total common and equivalent shares 6,884,481 6,954,860 Earnings (loss) per common and equivalent share $( .04) $ -
EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MEDCROSS, INC AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 3-MOS DEC-31-1995 MAR-31-1995 320051 0 1778151 852347 839907 2190786 3393896 1491504 4786750 2032069 690103 12244 0 2075000 (434962) 4786750 337889 1117493 185157 185157 840617 327588 39128 (271181) 0 (283960) 0 0 0 (283960) (.04) (.04)
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