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Securities and Exchange Commission
Washington, DC 20549
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FORM 10-QSB/A
X Quarterly Report Pursuant to Section 13 or 15(d) of the
---- Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
Commission File No. 0-28379
Healthcomp Evaluation Services Corporation
Nevada 88-0395372
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number)
2001 Siesta Drive, Suite 302
Sarasota, Florida 34239
(Address and zip code of principal executive offices)
941-925-2625
(Registrant's telephone number, including area code)
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.
x YES NO
--- ---
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common Stock 14,487,391 Shares Outstanding
$0.001 par value as of August 14, 2000
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Healthcomp Evaluation Services Corporation
and Subsidiaries
Report on Form 10-QSB/A
Quarter Ended June 30, 2000
Table of Contents
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This Form 10-QSB/A is filed for the sole purpose of amending the
information contained in Part I. Item 2: "Management's Discussion
and Analysis of Financial Condition and Results of Operations" of the
Company's Form 10-QSB, for the quarter ended June 30, 2000, originally
filed on August 18, 2000.
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
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Part I - Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Cautionary Statement Identifying Important Factors That Could Cause
the Company's Actual Results to Differ From Those Projected in Forward
Looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, readers of this document and
any document incorporated by reference herein, are advised that this
document and documents incorporated by reference into this document
contain both statements of historical facts and forward looking
statements. Forward looking statements are subject to certain risks
and uncertainties which could cause actual results to differ
materially from those indicated by the forward looking statements.
Examples of forward looking statements include, but are not limited to
(i) projections of revenues, income or loss, earnings or loss per
share, capital expenditures, dividends, capital structure and other
financial items, (ii) statements of the plans and objectives of the
company or its management or Board of Directors, including the
introduction of new products, or estimates or predictions of actions
by customers, suppliers, competitors or regulatory authorities, (iii)
statements of future economic performance and (iv) statements of
assumptions underlying other statements and statements about the
Company or its business.
This document and any documents incorporated by reference herein also
identify important factors which could cause actual results to differ
materially from those indicated by the forward looking statements.
These risks and uncertainties include our ability to obtain financing
in amounts sufficient to fund our working capital requirements and
sustain our operations, price competition, the decisions of customers,
the actions of competitors, the effects of government regulation,
possible delays in the introduction of new products, customers
acceptance of products and services, the possible effects of
acquisitions and related financings and other factors which are
described herein and/or in documents incorporated by reference herein.
The cautionary statements made pursuant to the Private Litigation
Securities Reform Act of 1995 above and elsewhere by the Company
should not be construed as exhaustive or as any admission regarding
the adequacy of disclosures made by the Company prior to the effective
date of such Act. Forward looking statements are beyond the ability
of the Company to control and in many cases the Company cannot predict
what factors would cause results to differ materially from those
indicated by the forward looking statements.
Introduction
The Company specializes in data management services for employers'
worker populations, and provides substance abuse, worksite medical
surveillance, and related employee health, wellness and screening and
compliance services. The Company provides these services at their
customers' place of business or through a network of clinics and other
fixed sites. Screening examinations are completed in accordance with
recognized protocols established by federal or state mandates, clients
or generally accepted medical screening procedures. While the Company
provides screening services, it does not provide diagnostic or
treatment services, if necessary, based on the test results. If
further action is required (e.g., treatment or further testing),
examination or testing results are provided to the employees' personal
physician (if requested by the employee) or to the Company's customer.
The Company operates in two reportable segments: Substance Abuse and
Mobile Medical Screening. Substance Abuse includes the collection of
urine samples and the administration of the testing, reporting and
compliance process for client companies. Mobile Medical Screening
entails the operation of a fleet of vehicles equipped with various
medical screening and testing equipment that perform a variety
services customers' places of business. The Company was formed in
1993, and through acquisitions and internal growth, delivers its
services throughout the United States.
Capital and Sources of Liquidity
The Company has invested heavily in infrastructure to service its
customers and in the development of information systems, data base
management software and customer reporting applications software. As
a result, the Company's cash flow from operations has historically
been negative and has required the Company to raise substantial
additional capital in the form of bank financing (as described below),
long-term debt provided by private investors and equity in order to
continue operations. The Company believes that it will begin
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realizing benefits, in the form of increased revenue, during the years
2000 and beyond through acquisition of new clients and sales of
information services to existing customers.
The Company has entered into a financing arrangement with Bank of
America to provide working capital to support the Company's operations
and growth. Under the terms of this facility, the Bank advances 70%
of the face value of the invoice upon presentation with the balance
being remitted to the Company upon payment of the amount due by the
Company's customer. Based on the funding available under the bank
facility and the increasing volume of business with existing
customers, the Company believes that it will have the resources to
meet its capital requirements for its current operations. To the
extent that the Company enters into significant new customer
contracts, additional cash may be required during the start up phases
of those contracts.
Subsequent to June 30, 2000, the Company received $500,000 in short-
term bridge financing from one of its customers, the proceeds of which
were to be applied to meet short-term working capital requirements of
the Company. That note is due on September 11, 2000 and bears
interest at 12.5 % per annum. The Company is currently exploring
alternative financing sources in order to provide funds to repay the
short term note and satisfy other working capital requirements. The
inability of the Company to enter into alternative financing
arrangements or to repay that note when it becomes due would have a
material adverse effect on the Company's liquidity and financial
condition and on its ability to finance its operations. There can be
no assurance that alternative sources of funding will be available to
the Company, or, if such sources are available, that they will be on
terms that are favorable or acceptable to the Company.
For the six months ended June 30, 2000, cash flow from operations used
$622,000 as operating losses and increases in accounts receivable
resulting from increased sales volumes more than offset increases in
accounts payable and other expense accruals. Cash flows from
investing activities used $326,000 during the first half of 2000 for
capital expenditures. In addition, for the six months ended June 30,
2000, the Company had net borrowings of notes payable of $611,000 and
received $305,000 from the issuance of common stock. As a result, the
Company had net cash provided from financing activities of $916,000
for the six months ended June 30, 2000.
For the six months ended June 30, 1999, cash flow from operations
declined $3.0 million as a result of a higher net loss and an increase
in other current assets as a result of (a) the deferred receipt (at
the Company's request) of a portion of capital raised by Afton, Inc.
before its reverse merger with the Company and (b) increases in
prepaid expenses, sundry receivables and other current items resulting
from acquisitions by the Company during 1999. Capital expenditures
during the first six months of 1999 aggregated $322,000.
Results of Operations
In evaluating financial performance, management focuses on a segment's
earnings before interest, taxes, depreciation and amortization
("EBITDA"). Net income, determined after corporate expenses, interest
and depreciation and amortization costs, is reviewed by management on
a consolidated basis only. The following paragraphs describe key
operating measurements for each segment and consolidated net income.
Substance Abuse
Substance Abuse revenues for the three months ended June 30, 2000
totaled $1.8 million compared with $1.5 million for the three months
ended June 30, 1999. The increase ($391,000 or 27%) was primarily
attributable to new customer contracts and increased volume from
acquisition of Medical Drug Testing, Inc. ("MDT") during fourth
quarter 1999 and expansion of services within the Company's existing
customer base. Revenues for the six months ended June 30, 2000
totaled $3.7 million, up 31% ($861,000) from the comparable period
during 1999. The increase resulted from higher volumes and the
acquisition of MDT described previously.
Gross profit for the three months ended June 30, 2000 aggregated
$701,000 compared with $553,000 for the three months ended June 30,
1999. This increase was attributable to the higher volume described
above and operating efficiencies from consolidation of TPA operations
offset partially by lower margins in the Company's collection services
associated with new contract start-ups. Gross profit for the six
months ended June 30, 2000 totaled $1.4 million, up 27% from $1.1
million for the same period during 1999. Increased volume and
consolidation efficiencies accounted for most of the increase.
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Selling, general and administrative expenses decreased 10.9% from
$443,000 for the three months ended June 30, 1999 to $394,000 during
the same period this year. This decrease was attributable principally
to lower compensation and benefit costs offset partially by higher
office expenses, principally telephone costs associated with acquired
operations and higher business volumes. For the six months ended June
30, 2000, selling, general and administrative expenses decreased
$61,000 from the six month period ended June 30, 1999, primarily as a
result of lower compensation and benefit costs offset in part by
higher office expenses.
EBITDA for the three months ended June 30, 2000 totaled $307,000
compared with $110,000 (179%) during the same period in 1999 as a
result of higher volumes and cost reductions. For the six months
ended June 30, 2000, EBITDA increased $364,000 (up 170%) compared with
the six months ended June 30, 1999. The increase resulted from higher
sales volumes and consolidation benefits, offset partially by start-up
costs in the Company's collection operations.
Mobile Screening
Mobile Screening revenues for the three months ended June 30, 2000
totaled $1.6 million compared with $1.0 million for the three months
ended June 30, 1999. This increase (56%) was attributable to new
contracts and higher volume associated with businesses acquired during
second and fourth quarters of 1999. During the six months ended June
30, 2000, revenues increased $1.4 million, from $1.8 million during
the first half of 1999 to $3.2 million during the same period of 2000.
Higher volumes from the existing customer base and new contracts
resulted in the higher revenue level.
Gross profits increased 36% during the three months ended June 30,
2000, from $562,000 in 1999 to $765,000 for the same period during
2000. This increase resulted from higher sales volumes described
above and operating efficiencies associated with improved utilization
of the Company's mobile vehicle fleet, offset partially by higher
direct labor costs for the Company's technicians. For the six months
ended June 30, 2000, gross profits totaled $1.5 million compared with
$973,000 during the same period of 1999, an increase of 57%. The
increase resulted from higher sales volumes and new customer contracts
as described above.
Selling, general and administrative expenses for the three months
ended June 30, 2000 totaled $637,000 compared with $314,000 for the
same period in 1999, primarily as a result of operating costs
associated with companies acquired during second and fourth quarters
of 1999. Selling, general and administrative expenses for the six
months ended June 30, 2000 increased $416,000 from $719,000 during
1999 to $1.1 million during 2000 as a result of the acquisitions
described above.
EBITDA for the period ended June 30, 2000 aggregated $128,000 compared
with $248,000 for the same period in 1999. The decrease ($120,000) is
attributable to the costs associated with consolidating operations
offset, in part, by higher sales volumes. For the six months ended
June 30, 2000, EBITDA totaled $391,000, up $136,000 (53%) compared
with the comparable period during 1999. The year-to-date increase was
principally attributable to strong sales performance during the first
quarter of 2000 and sales associated with the Company's new call
center.
Corporate Items and Net Loss
Corporate selling, general and administrative expenses, including
costs associated with the Company's executive offices, corporate sales
and marketing, accounting and information and data management
operations, totaled $656,000 for the period ended June 30, 2000
compared to $417,000 for the same period in 1999. The increase
resulted principally from higher travel costs related to corporate
sales activities, insurance expense, facility costs related to the
Company's new corporate offices and addition of headquarters marketing
personnel. For the six months ended June 30, 2000, corporate selling,
general and administrative expenses totaled $1.0 million compared with
$562,000 for the six months ended June 30, 1999, an increase of
$460,000 resulting primarily from higher compensation costs, travel
and insurance costs during 2000.
Interest expenses ($157,000) increased $14,000 during second quarter
2000 compared with the same period last year. The increase was
attributable principally to financing (a) the higher level of
operating activity associated with sales volume growth and (b) prior
period acquisitions. For the six month period ending June 30, 2000,
interest expense totaled $309,000, an increase of $56,000, as a result
of higher working capital needs.
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Net loss increased $105,000, from $689,000 during the three months
ended June 30,1999 to $794,000 for the comparable period this year,
primarily as a result of lower operating earnings in the Company's
mobile health screening business. Net loss for the first half of 2000
totaled $939,000 compared with $1.4 million during the same period
last year. The improvement ($462,000) was attributable to higher
operating profits in both business segments, offset, in part, by
higher corporate expenses and interest costs.
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.
Healthcomp Evaluation Services Corporation
(Registrant)
Date: September 7, 2000
/s/ John F. Thomas
John F. Thomas, Chairman and CEO
Date: September 7, 2000
/s/ Thomas M. Hartnett
Thomas M. Hartnett, Senior Vice President