U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended March 31, 2004
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to ________
SURGICARE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 58-1597246
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
12727 KIMBERLEY LANE, SUITE 200, HOUSTON, TEXAS 77024
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (713) 973-6675
Check whether the Registrant: (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 Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X ]
As of May 10, 2004, 28,948,685 shares of Common Stock, $0.005 par value per
share, were outstanding.
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
------------------------------
The information required hereunder is included in this report as set forth in
the "Index to Financial Statements."
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003
Consolidated Statements of Operations for the three months ending March 31, 2004
and 2003
Consolidated Statements of Cash Flows for the three months ending March 31, 2004
and 2003
Notes to Consolidated Financial Statements
2
SURGICARE, INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2003
2004
-------------------- ---------------------
ASSETS (unaudited)
Current Assets
Cash and cash equivalents $ 145,914 $ 141,553
Accounts Receivable:
Trade (less allowance for contractual adjustments and
doubtful
accounts of $3,840,142 and $3,768,846 at March 31, 2004
and December 31, 2003, respectively) 1,212,970 1,309,682
Other receivables 33,273 59,909
Income tax receivable 159,846
Inventory 349,450 338,470
Prepaid expenses 225,147 133,293
Other current assets 24,377 23,027
-------------------- ---------------------
Total Current Assets 1,991,131 2,165,780
Property and Equipment
Office furniture and equipment 399,912 399,912
Medical and surgical equipment 3,794,559 3,748,559
Leasehold improvements 946,890 946,890
Computer equipment 382,263 382,263
Transportation equipment 19,015 19,015
-------------------- ---------------------
5,542,639 5,496,639
Less: Accumulated depreciation and amortization 3,424,019 3,237,657
-------------------- ---------------------
Total Property and Equipment 2,118,620 2,258,982
Goodwill 8,119,235 8,105,735
Real Estate 4,000,000 4,000,000
Investment in Limited Partnerships 383,569 381,434
Advances to Limited Partners 440,423 440,423
Loan Fees (net of amortization of $207,860 at March 31, 2004 and
$198,249 at December 31, 2003 94,177 103,788
-------------------- ---------------------
TOTAL ASSETS $ 17,147,155 $ 17,456,142
==================== =====================
3
SURGICARE, INC.
CONSOLIDATED BALANCE SHEETS (continued)
March 31, December 31,
2004 2003
--------------------- ---------------------
LIABILITIES (unaudited)
Current Liabilities
Accounts payable $ 3,193,231 $ 2,864,199
Accrued expenses 1,786,919 1,274,340
Lines of credit 1,361,458 1,331,475
Current maturities of long-term debt 7,238,861 6,928,542
Current portion of capital leases 243,719 265,251
--------------------- ---------------------
Total Current Liabilities 13,824,188 12,663,807
Long-Term Capital Lease Obligations 100,841 103,341
--------------------- ---------------------
Total Liabilities 13,925,029 12,767,148
SHAREHOLDERS' EQUITY
Preferred Stock, Series A, par value $.001, 1,650,000 shares authorized,
1,137,700 issued and outstanding at December
31, 2003 (Redemption and liquidation value $5,688,500). 1,138
Preferred Stock, Series AA, par value $.001, 1,200,000 shares
authorized, 900,000 issued and outstanding at March 31, 2004 and
December 31, 2003 900 900
Common Stock, par value $.005, 50,000,000 shares authorized; 28,408,685 issued
and 28,317,285 outstanding at March 31, 2004; 27,082,843 issued and
26,991,443 outstanding at
December 31, 2003. 142,043 135,414
Additional Paid-In Capital 17,391,414 17,116,523
Retained Earnings (14,265,663) (12,518,413)
Less: Treasury Stock-at cost, 91,400 shares at March 31,
2004 and December 31, 2003 (38,318) (38,318)
Shareholder receivable (8,250) (8,250)
--------------------- ---------------------
Total Shareholders' Equity 3,222,126 4,688,994
--------------------- ---------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 17,147,155 $ 17,456,142
===================== =====================
See notes to consolidated financial statements.
4
SURGICARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
FOR THE THREE MONTHS ENDING
MARCH 31,
------------------------------------------
2004 2003
-------------------- -----------------
Revenues, net $ 1,690,524 $ 2,280,121
Direct Cost of Revenues:
Surgical costs 400,826 472,577
Clinical salaries & benefits 481,236 471,428
Other 194,890 292,325
------------------ -----------------
Total Direct Surgical Expenses 1,076,952 1,236,330
------------------ -----------------
General and Administrative Expenses:
Salaries and benefits 385,665 386,396
Management and affiliation fees 25,930 31,433
Rent 226,514 233,043
Depreciation and amortization 186,362 219,018
Professional fees 534,098 215,097
Provision for doubtful accounts 56,327 9,162
Other 315,604 303,055
------------------ -----------------
Total General and Administrative Expenses 1,730,500 1,397,204
------------------ -----------------
Other Operating Expenses (Income):
Loss on sale of assets 168
Forgiveness of debt (58,625)
------------------ -----------------
Total Other Operating Expenses (Income) (58,625) 168
------------------ -----------------
Total Operating Expenses 2,748,827 2,633,702
------------------ -----------------
Operating Loss (1,058,303) (353,581)
------------------ -----------------
Other Income (Expense):
Miscellaneous income 2,521 11,969
Equity in Earnings of Limited Partnerships 2,135 87,642
Interest Expense (693,603) (440,112)
------------------ -----------------
Total Other Income (Expense) (688,947) (340,501)
------------------ -----------------
Loss Before Minority Interest and Federal Income Tax Benefit (1,747,250) (694,082)
----------------- -----------------
Minority Interest in Losses of Partnerships 2,034
----------------- -----------------
Loss Before Federal Income Tax Benefit (1,747,250) (692,048)
Federal Income Tax Benefit (13,561)
----------------- -----------------
Net Loss $ (1,747,250) $ (678,487)
================= =================
Loss per share - Basic $ (.06) $ (.03)
================= =================
Loss per share - Diluted $ (.06) $ (.03)
================= =================
Weighted Average Shares Outstanding:
Basic 27,952,564 23,579,843
================= =================
Diluted 27,952,564 23,579,843
================= =================
See notes to consolidated financial statements.
5
SURGICARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE THREE MONTHS ENDING
MARCH 31,
---------------------------------------------------------
2004 2003
----------------------------- ---------------------
Cash Flows From Operating Activities:
Net loss $ (1,747,250) $ (678,487)
Adjustments to reconcile net earnings to net cash provided
by operations:
Equity in earnings of limited partnerships (2,135) (87,642)
Minority interest in losses of partnerships (2,034)
Depreciation and amortization 186,362 219,018
Amortization of debt discount 18,859 37,460
Amortization of loan fees 9,611
Interest expense recognized on beneficial conversion
features of convertible notes payable 206,693
Provision for doubtful accounts 56,327 9,162
Forgiveness of debt (58,625)
Change in:
Accounts receivable 67,021 153,194
Notes receivable (4,479)
Inventory (10,980) 17,557
Prepaid expenses (91,854) (13,658)
Other current assets (1,350) (43,794)
Federal income tax 159,846
Accounts payable 444,811 (262,385)
Accrued expenses 512,579 96,846
------------------------- -----------------
Net Cash Used in Operating Activities (250,085) (559,242)
------------------------- -----------------
Cash Flows From Investing Activities:
Capital expenditures (46,000) (6,318)
Buyout of limited partners (13,500)
------------------------- -----------------
Net Cash Used in Investing Activities (59,500) (6,318)
------------------------- -----------------
Cash Flows From Financing Activities:
Borrowings on lines of credit 115,958 1,430,351
Payments on lines of credit (85,975) (1,696,747)
Borrowings on debt 405,000
Payments on debt (113,540) (323,165)
Principal payments on capital lease (24,032) (32,843)
Proceeds from issuance of common stock 1,070,105
Proceeds from exercise of warrants 16,535 1,175
Purchase of treasury stock (6,068)
------------------------- -----------------
Net Cash Provided by Financing Activities 313,946 442,808
------------------------- -----------------
Net Increase (Decrease) in Cash and Cash Equivalents 4,361 (122,752)
Cash and Cash Equivalents - Beginning of Period 141,553 262,327
------------------------- -----------------
Cash and Cash Equivalents - End of Period $ 145,914 $ 139,575
========================= =================
6
SURGICARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited)
FOR THE THREE MONTHS ENDING
MARCH 31,
---------------------------------------------------------
2004 2003
----------------------------- ---------------------
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest $ 42,425 $ 355,948
Non-cash investing and financing activities:
Issuance of shares in payment of accounts payable $ 57,154 70,000
Beneficial conversion feature of convertible notes
payable $ 206,693
See notes to consolidated financial statements.
7
SURGICARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - General
SurgiCare, Inc. ("SurgiCare", the "Company", "we", "us", or "our"),
through its wholly owned subsidiaries, owns a majority interest in limited
partnerships or corporations that operate three surgery centers. The Company
also owns a minority interest as general partner in a limited partnership that
operates a surgery center. The consolidated statements include the accounts of
the Company and its subsidiaries and its majority owned limited partnerships.
These financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
reporting and in accordance with Securities and Exchange Commission ("SEC") Rule
310(b) of Regulation S-B. In the opinion of management, the accompanying
unaudited consolidated financial statements include all adjustments consisting
of only normal recurring adjustments necessary for a fair presentation of the
Company's financial position and the results of operations and cash flows for
the interim periods presented. The results of operations for any interim period
are not necessarily indicative of results for the full year.
The accompanying unaudited consolidated financial statements should be
read in conjunction with the financial statements and related notes included in
SurgiCare's 2003 Annual Report on Form 10-KSB.
Note 2 - Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could vary
from those estimates.
The determination of contractual allowances constitutes a significant
estimate. In determining the amount of contractual allowances, management
considers such factors as historical trends of billing and cash collections,
established fee schedules, accounts receivable agings and contractual
relationships with third-party payers. Contractual adjustments and accounts
deemed uncollectible are applied against the allowance account.
Note 3 - Revenue Recognition
Surgical revenue is recognized on the date the procedures are
performed, and accounts receivable are recorded at that time. Such revenues are
reported at the estimated net realizable amounts from patients and third-party
payers. If such third-party payers were to change their reimbursement policies,
the effect on revenue could be significant. Earnings are charged with a
provision for contractual adjustments and doubtful accounts based on such
factors as historical trends of billing and cash collections, established fee
schedules, accounts receivable agings and contractual relationships with
third-party payers. Contractual allowances are estimated primarily using each
surgery center's collection experience. Contractual rates and fee schedules are
also helpful in this process. On a rolling average basis, the Company tracks
collections as a percentage of related billed charges. This percentage, which is
adjusted on a quarterly basis, has proved to be the best indicator of expected
net realizable amounts from patients and third-party payers. Contractual
adjustments and accounts deemed uncollectible are applied against the allowance
account. The Company is not aware of any material claims, disputes or unsettled
matters with third-party payers.
8
Management fees are based on a percentage of customers' collected revenues and
are recognized during the period which services were performed.
Note 4 - Goodwill
Goodwill represents the excess of cost over the fair value of net
assets of companies acquired in business combinations accounted for using the
purchase method. Goodwill acquired in business combinations prior to June 30,
2001 had been amortized using the straight-line method over an estimated useful
life of 20 years. In July 2001, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. SFAS No. 142
requires that goodwill no longer be amortized but instead be reviewed
periodically for possible impairment. The Company has adopted SFAS No. 142
effective January 1, 2002 and is no longer amortizing goodwill.
Under SFAS No. 142, goodwill is required to be tested annually and more
frequently if an event occurs which indicates the goodwill may be impaired. Upon
adoption of SFAS 142, as well as on December 31, 2003 and 2002, the Company
performed an impairment test of its goodwill and determined that no impairment
of the recorded goodwill existed.
Note 5 - Recent Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities," and subsequently revised the Interpretation in
December 2003 ("FIN 46R"). This Interpretation of Accounting Research Bulletin
No. 51, "Consolidated Financial Statements," addresses consolidation by business
enterprises of variable interest entities, which have certain characteristics.
As revised, FIN 46R is now generally effective for financial statements for
interim periods or annual periods ending on or after March 15, 2004. We have not
identified any variable interest entities and the requirements of FIN 46R have
not had a material impact on our consolidated financial statements.
Note 6 - Debt
Loan agreements relating to the majority of the Company's credit lines,
notes payable and capital leases contain requirements for maintenance of defined
minimum financial ratios. The Company is not in compliance with all such
provisions as of March 31, 2004. Further, the Company is delinquent in payments
on the majority of its outstanding debt. All notes and capital leases in default
have been shown as current in these financial statements. On August 25, 2003 the
Company's senior lender, DVI Business Credit Corp. and DVI Financial Services,
Inc. ("DVI") announced that it is seeking protection under Chapter 11 of the
United States Bankruptcy laws. The Company is currently negotiating a buyout of
its debt with DVI through the bankruptcy trustee and certain other debt holders.
The Company has financed its growth primarily though the issuance of
equity and secured and/or convertible debt. As of March 31, 2004, the Company
does not have any credit facilities available with financial institutions or
other third parties to provide for working capital shortages. Although the
Company believes it will generate cash flow from operations in future quarters,
due to its debt load, it is not able to fund its current operations solely from
its cash flow.
9
In November 2003, SurgiCare completed a $470,000 financing for working
capital through the issuance of one-year convertible unsecured promissory notes
bearing interest at 10% per annum. The notes are convertible into shares of
Company common stock, at any time, at the option of the note holders. The
conversion price for the notes was equal to (a) $.35 per share, if the notes had
been converted on or prior to January 31, 2004, or (b) if the notes are
converted after January 31, 2004, the lower of (i) $0.25 or (ii) seventy-five
percent (75%) of the average closing price for the 20 trading days immediately
prior to the conversion date. Based on the relative fair value of the beneficial
conversion feature of the notes, a charge of $123,566 was recorded to interest
expense in the fourth quarter of 2003 and $206,693 in the first quarter of 2004.
The notes were not converted prior to January 31, 2004, and the charge in the
first quarter of 2004 reflects the change in conversion price after January 31,
2004. The note holders also received five-year warrants to purchase an aggregate
of 335,713 shares of Company common stock. The warrants may be exercised at an
exercise price of $0.35 per share, and may be exercised on a cashless basis at
the option of the holder. Based on the relative fair value of the warrants, a
discount of $76,834 was recorded at the time of issuance and is being amortized
to interest expense over the one-year term of the notes. The notes will mature
on October 31, 2004.
The Company believes that additional sales of debt and/or equity
securities will be required to continue operations. See Note 11- Subsequent
Events for a description of a series of transactions recently announced by the
Company that, if consummated, will involve an equity investment and
recapitalization of the Company. Prior to the closing of such contemplated
transactions, any additional sales of debt and/or equity by the Company will be
subject to the prior approval of the counterparties to the applicable
transactions. The Company can provide no assurance that it will be successful in
any future financing effort to obtain the necessary working capital to support
its operations, or fund acquisitions for its anticipated growth. In the event
that any future financing efforts are not successful, the Company will be forced
to liquidate assets and/or curtail operations.
Note 7 - Earnings Per Share
Basic earnings per share are calculated on the basis of the weighted
average number of shares outstanding. Diluted earnings per share, in addition to
the weighted average number of shares determined for basic earnings per share,
include common stock equivalents, which would arise from the exercise of stock
options and warrants using the treasury stock method, and assumes the conversion
of the Company's preferred stock for the period outstanding, since their
issuance.
For the Three Months Ended March 31,
---------------------------------------------
2004 2003
-------------------- -------------------
Basic Earnings Per Share:
Net Loss $(1,747,250) $(678,487)
==================== ===================
Weighted average shares outstanding 27,952,564 23,579,843
Dilutive stock options and warrants (a) (a)
Conversion of preferred stock (b) (b)
Conversion of debt (c) (c)
-------------------- -------------------
Weighted average common shares 27,952,564 23,579,843
outstanding for diluted net loss per
share
==================== ===================
Net loss per share - Basic
$(.06) $(.03)
==================== ===================
Net loss per share - Diluted
$(.06) $(.03)
==================== ===================
10
The following potentially dilutive shares are not included because their effect
would be anti-dilutive due to the net loss for the periods:
(a) 9,239,847 and 11,014,474 options and warrants outstanding at March 31,
2004 and March 31, 2003, respectively.
(b) 900,000 shares of Preferred Stock Series AA were convertible into
$4,500,000 of common shares as of March 31, 2004 and 2003. 1,225,000
shares of Preferred Stock Series A were convertible into 1,225,000
common shares as of March 31, 2003.
(c) $1,000,000 of debentures were convertible into common stock at a price
equal to $1.50 per share as of March 31, 2004 and 2003. $470,000 of
notes payable were convertible into common stock at a price of $.25
per share as of March 31, 2004.
Note 8 - Litigation
In March 2003, SurgiCare Memorial Village, L.P. and Town & Country
SurgiCare, Inc. were named as defendants in a suit entitled MarCap Corporation
vs. Health First Surgery Center-Memorial, Ltd.; HFMC, L.C.; SurgiCare Memorial
Village, L.P.; and Town & Country SurgiCare, Inc. MarCap has sued the Company
for default under a promissory note and refusing to remit payment on a
promissory note in the amount of $215,329.36. SurgiCare paid $53,832.34 of this
balance prior to settlement. Settlement was reached in September, 2003 whereby
SurgiCare agreed to pay MarCap $150,000 over the next year with interest at 10%,
with an underlying settlement of approximately $200,000 in the event of a breach
in the payment plan. To date, SurgiCare has paid MarCap 73,336.26 under the
payment plan.
On February 10, 2003, SurgiCare, Inc. was named as a defendant in a
suit entitled S.E. Altman v. SurgiCare. S.E. Altman had sued for breach of
contract, alleging that SurgiCare did not pay monies owed under a "Finders Fee
Contract." Plaintiff asserted damages in the amount of $217,000, plus interest
and attorneys' fees. International Diversified Corporation, Limited has
indemnified SurgiCare with respect to any fees owed to Altman under the Finders
Fee Contract. The case has been dismissed in favor of arbitration. In March
2004, the parties executed a Settlement Agreement and Release of Claims to
resolve the dispute in which SurgiCare agreed to issue Mr. Altman 540,000 shares
of common stock, which were registered with the Securities and Exchange
Commission on Form S-8 in April 2004.
On April 14, 2003, SurgiCare, Inc. was named as a defendant in a suit
entitled A.I. International Corporate Holdings, Ltd. v. SurgiCare, Inc. in the
U.S. District Court for the Southern District of New York. Subsequently,
SurgiCare filed suit against A.I. International Corporate Holdings, Ltd. and
First National Bank, S.A.L. of Lebanon in the 215th Judicial District Court of
Harris County, Texas. The New York case involves allegations that SurgiCare
defaulted on its loan agreement. The plaintiffs in the New York case are suing
SurgiCare for $834,252 representing the loan amount and interest, plus $219,000,
representing damages for "No-filing Charges" and "Non-Effective Charges" under
the contract. SurgiCare's lawsuit in Texas asserts that the loan agreement is
usurious. The defendants in the Texas case have moved for sanctions against
SurgiCare in that forum. The New York case has been ordered to mediation, which
has not yet been scheduled. In conjunction with the mediation order, the parties
agreed to stay the litigation in both states until completion of the mediation.
On November 24, 2003, SurgiCare, Inc. was named as a defendant in a
suit entitled Vincent A. Giammalva, Trustee v. SurgiCare, Inc., Keith G.
LeBlanc, and Phillip C. Scott; in the 344th Judicial District Court of Chambers
County, Texas. This case involves allegations that SurgiCare defaulted on a
contract to sell a parcel of real estate to plaintiff. Plaintiff also claims
that LeBlanc and Scott committed fraud. SurgiCare states that it could not sell
the parcel of land because of a lien on the property. The plaintiff seeks
specific performance, forcing SurgiCare to sell the property, as well as actual
damages. SurgiCare is negotiating with the plaintiff in an effort to settle this
matter.
11
In addition, we are involved in various other legal proceedings and
claims arising in the ordinary course of business. Our management believes that
the disposition of these additional matters, individually or in the aggregate,
is not expected to have a materially adverse effect on our financial condition.
However, depending on the amount and timing of such disposition, an unfavorable
resolution of some or all of these matters could materially affect our future
results of operations or cash flows in a particular period.
Note 9 - Employee Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, encourages, but
does not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. In December 2002, the FASB issued SFAS No.
148, Accounting for Stock-Based Compensation--Transition and Disclosure--an
amendment of FASB Statement No. 123, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. The statement also amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
compensation and the effect of the method used on reported results.
The Company has chosen to continue to account for stock-based
compensation issued to employees using the intrinsic value method prescribed in
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee must pay to
acquire the stock. The Company grants options at or above the market price of
its common stock at the date of each grant.
The fair value of options is calculated using the Black-Scholes option-pricing
model. Had the Company adopted the fair value method of accounting for stock
based compensation, compensation expense would have been higher, and net loss
and net loss attributable to common shareholders would have increased for the
periods presented. No change in cash flows would occur. The effects of applying
SFAS No. 123 in this pro forma disclosure are not indicative of future amounts.
Three Months Ended
---------------------------------
March 31, March 31,
2004 2003
--------------- --------------
Net loss - as reported $ (1,747,250) $ (678,487)
Deduct: Total stock-based employee compensation (Expense determined
under the fair value based method for all awards), net of tax effect (52,725) (52,725)
------------- ------------
Pro forma net loss $ (1,799,975) $ (731,212)
============= ============
Loss per share:
Basic net loss per share - as reported $(.06) $(.03)
Basic net loss per share - pro forma $(.06) $(.03)
Diluted net loss per share - as reported $(.06) $(.03)
Diluted net loss per share - pro forma $(.06) $(.03)
The above pro forma effects on net loss and net loss per share are not likely to
be representative of the effects on reported net income (loss) for future years
because options vest over several years and additional awards could be made each
year.
12
Note 10 - Guarantee
The Company is guarantor on a working capital line of credit for San
Jacinto Surgery Center, L.P. ("San Jacinto"), in which the Company owns a 10%
general partnership interest through a wholly-owned subsidiary. As of March 31,
2003, the line of credit facility had a balance of $337,000 and is recorded on
San Jacinto's balance sheet, which is not consolidated with the Company's
financial statements. As of the date of this filing, the line has matured and
management is currently working on an extension.
Note 11 - Subsequent Events
We have negotiated a series of transactions that will restructure
SurgiCare and result in a change of control. The transactions include the
acquisition of three new businesses and issuance of new equity securities for
cash and debt forgiveness. We also intend to complete a reverse stock split and
change our name to Orion HealthCorp, Inc. Our board of directors has approved
all of these actions and a special meeting of stockholders in lieu of an annual
meeting will be held to approve them. The highlights of the financial
transactions include:
o Effecting a one-for-ten reverse stock split and re-designating our
outstanding common stock as Class A common stock.
o Issuing a new class of common stock (Class B common stock) to Brantley
Partners IV, L.P., a private investor ("Brantley IV"). Brantley IV
will forgive indebtedness owed by SurgiCare and Integrated Physician
Solutions, Inc. ("IPS") to its subsidiary in the aggregate principal
amount of $1.28 million and will contribute up to $6 million in cash
(as reduced for additional debt owing by SurgiCare and IPS to Brantley
IV's subsidiary at the time of the closing of the transactions, which
will also be forgiven) in exchange for shares of Class B common stock.
o Acquiring IPS in a merger in which we will issue Class A common stock
to the IPS stockholders and certain IPS creditors. IPS is a provider
of business management services for pediatric practices and also
provides software and technology solutions for physicians.
o Acquiring Medical Billing Services, Inc. ("MBS"), and Dennis Cain
Physician Solutions, Ltd. ("DCPS"), two providers of physician
management, billing, consulting and collection services in a merger in
which we will pay between $2.9 million and $3.5 million cash and issue
promissory notes in the aggregate principal amount of $500,000 and
Class C common stock to the current equity holders of MBS and DCPS.
The amount of consideration received depends upon the fair market
value of our common stock at the time of the closing of the
transactions, and the consideration is also subject to retroactive
increase or decrease, including the issuance of additional shares of
Class A common stock. We will also issue shares of Class A common
stock as directed by the DCPS and MBS equity holders, and may be
required to make additional payments in certain circumstances.
These transactions are contingent upon refinancing SurgiCare's, IPS's
and MBS's debt. The transactions and the refinancing will provide SurgiCare with
increased revenues and earnings, an improved balance sheet and the opportunity
to grow the business. Please review our proxy statement for our special meeting
of stockholders in lieu of an annual meeting, filed with the SEC for the full
details of the proposed restructuring.
13
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Forward-Looking Statements
The information contained herein contains certain forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended,
which are intended to be covered by the safe harbors created thereby. Investors
are cautioned that all forward looking statements involve risks and uncertainty,
including, without limitation, our ability to continue our expansion strategy,
changes in federal or state healthcare laws and regulations or third party payor
practices, our historical and current compliance with existing or future
healthcare laws and regulations and third party payor requirements, changes in
costs of supplies, labor and employee benefits, as well as general market
conditions, competition and pricing. Although we believe that the assumptions
underlying the forward looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and therefore, there can be no assurance
that the forward looking statements included in this Form 10-QSB will prove to
be accurate. In view of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by management or any other person
that our objectives and plans will be achieved. We undertake 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.
Critical Accounting Policies
In December 2001, the SEC requested that reporting companies discuss
their most "critical accounting policies" in management's discussion and
analysis of financial condition and results of operations. The SEC indicated
that a "critical accounting policy" is one that is important to the portrayal of
a company's financial condition and operating results and requires management's
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain.
We have identified the policies below as critical to our business
operations and the understanding of our results of operations. The impact and
any associated risks related to these policies on our business operations is
discussed throughout Management's Discussion and Analysis of Financial Condition
and Results of Operations where such policies affect our reported and expected
financial results. For a detailed discussion on the application of this and
other accounting policies, see Notes 1 and 2 in the Notes to the Consolidated
Financial Statements of our Annual Report on Form 10-KSB. Our preparation of
this Form 10-QSB and our Annual Report on Form 10-KSB requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities as of the date
of our financial statements. Therefore, actual results may differ from those
estimates.
Revenue Recognition - Revenue is recognized on the date the procedures are
performed, and accounts receivable are recorded at that time. Revenues are
reported at the estimated net realizable amounts from patients and third-party
payers. If such third-party payers were to change their reimbursement policies,
the effect on revenue could be significant. Earnings are charged with a
provision for contractual adjustments and doubtful accounts based on such
factors as historical trends of billing and cash collections, established fee
schedules, accounts receivable agings and contractual relationships with
third-party payers. Contractual allowances are estimated primarily using each
surgery center's collection experience. Contractual rates and fee schedules are
also helpful in this process. On a rolling average basis, the Company tracks
collections as a percentage of related billed charges. This percentage, which is
adjusted on a quarterly basis, has proved to be the best indicator of expected
net realizable amounts from patients and third-party payers. Contractual
adjustments and accounts deemed uncollectible are applied against the allowance
account. The Company is not aware of any material claims, disputes or unsettled
matters with third-party payers.
14
Investment in Limited Partnerships - The investments in limited
partnerships are accounted for by the equity method. Under the equity method,
the investment is initially recorded at cost and is subsequently increased to
reflect the Company's share of the income of the investee and reduced to reflect
the share of the losses of the investee or distributions from the investee.
These general partnership interests were accounted for as investment in
limited partnerships due to the interpretation of FAS 94/ARB 51 and the
interpretations of such by Issue 96-16 and SOP 78-9. Under those
interpretations, SurgiCare could not consolidate its interest in those
facilities in which it held a minority general interest partnership interest due
to management restrictions, shared operating decision- making, capital
expenditure and debt approval by limited partners and the general form versus
substance analysis. Therefore, SurgiCare recorded these general partnership
interests as investments in limited partnerships.
Goodwill - Goodwill represents the excess of cost over the fair value of net
assets of companies acquired in business combinations accounted for using the
purchase method. Goodwill acquired in business combinations prior to June 30,
2001 had been amortized using the straight-line method over an estimated useful
life of 20 years. In July 2001, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. SFAS No. 142
requires that goodwill no longer be amortized but instead be reviewed
periodically for possible impairment. The Company has adopted SFAS No. 142
effective January 1, 2002 and is no longer amortizing goodwill.
Upon adoption of SFAS 142, as well as December 31, 2003 and 2002, the Company
performed an impairment test of its goodwill and determined that no impairment
of the recorded goodwill existed. Under SFAS No. 142, goodwill is tested
annually and more frequently if an event occurs which indicates the goodwill may
be impaired.
Overview
SurgiCare's principal business strategies are to (a) increase physician
utilization of existing facilities, (b) increase both the revenue and profits
from current cases and procedures being performed in existing facilities (c)
achieve growth and expand revenues by pursuing strategic acquisitions of
existing, and the development of new, physician owned ambulatory surgical
centers, and (d) expand into related healthcare facilities, including imaging
and practice management.
Surgical supply costs are the single largest cost component of any
ambulatory surgical center. Therefore, SurgiCare's goal is to minimize the cost
of surgical supplies. Through participation in national buying groups, SurgiCare
has been able to negotiate discounts on most of the commonly used surgical
supplies. SurgiCare has also implemented a "Just in Time" approach to inventory.
This allows the center to minimize the amount of supplies that it is required to
keep in inventory.
SurgiCare is in the process of identifying ambulatory surgical centers,
imaging centers and practice management companies as potential acquisition
targets and has, in some cases, conducted preliminary discussions with
representatives of these organizations. No commitments were made for new
acquisitions in the first quarter of 2004. Although there are no commitments,
understandings, or agreements with any other potential acquisition targets,
talks are ongoing for the acquisition of additional entities. All of such
discussions have been tentative in nature and there can be no assurance that we
will acquire any entity with whom discussions have been conducted.
15
Financial Condition and Results of Operations
The following table sets forth for the periods indicated the
percentages of revenues represented by income statement items.
Three Months Ended March 31,
----------------------------
2004 2003
---- ----
Revenues, net 100.0% 100.00%
Expenses:
Direct Cost of Services 63.7% 54.2%
General & Administrative Expenses 102.4% 61.3%
Other Operating Expenses (Income) (3.5%) 0.0%
Total Operating Expenses 162.6% 115.5%
Operating Loss (62.6%) (15.5%)
Other Loss (40.8%) (14.9%)
Loss Before Federal Income Tax Expense (103.4%) (30.4%)
Federal Income Tax Benefit 0.0% (0.6%)
Net Loss (103.4%) (29.8%)
Results of Operations
THREE MONTHS ENDED MARCH 31, 2004 AS COMPARED TO THREE MONTHS ENDED
MARCH 31, 2003
Net Revenue. On a consolidated basis, case volume decreased 17.3% to
1,477 in the three months ended March 31, 2004 from 1,786 in the 2003 comparable
period. Revenue declined $589,597, or 25.9% to $1,690,524 in the three months
ended March 31, 2004, from $2,280,121 in the comparable 2003 period. On a
per-case basis, revenue decreased to $1,145 in the three months ended March 31,
2003 from $1,277 in the 2003 comparable period. The average contractual
allowance from gross revenues was 76.6% in the three months ended March 31, 2004
compared to 67.0% in the comparable 2003 period. Of the total dollar decrease in
revenue, approximately $400,000 was attributable to the decrease in case volume.
The remaining decrease was due to the shift in types of cases performed, where
the Company experienced decreases in cases with higher reimbursement, including
pain management, podiatry and urology, while cases with lower reimbursement,
such as ophthalmology, remained stable.
Direct Cost of Revenues. Direct Cost of Revenues decreased $159,378, or
12.9% to $1,076,952 in the three months ended March 31, 2004 from $1,236,330 in
the comparable 2003 period. Surgical costs decreased $71,751, or 15.2% to
$400,826 in the three months ended March 31, 2004 from $472,577 in the
comparable 2003 period primarily due to the 17.3% decrease in case volume
discussed above. Direct clinical salaries and benefits remained relatively flat
at $481,236 in the three months ended March 31, 2004 compared to $471,428 in the
three months ended March 31, 2003. These costs are predominantly fixed and the
centers were already at base staffing levels in the first quarter of 2003. Other
direct costs decreased $97,435, or 33.3% to $194,890 in the three months ended
March 31, 2004 from $292,325 in the comparable 2003 period. The decrease is
primarily due to the following: a reduction in contracted services (primarily
nursing) of $20,000; reduction in equipment rental and maintenance of $55,000;
and a reduction in patient transportation costs of $15,000.
16
General and Administrative Expenses. General and administrative costs
increased $333,296, or 23.9% to $1,730,500 in the three months ended March 31,
2004 from $1,397,204 in the 2003 comparable period, primarily due to an increase
in professional fees. Professional fees increased $319,001, or 148.3% to
$534,098 in the first three months of 2004 from $215,097 in the comparable 2003
period. In March 2004, the Company recorded a charge of $202,000 to professional
fees related a settlement with S.E. Altman on a "Finders Fee Contract." See
further discussion in Part II - Other Information, Item 1, "Legal Proceedings"
of this filing. The remaining increase is due to legal, professional and
accounting fees related to the series of pending transactions that will
restructure SurgiCare and result in a change of control. The transactions
include the acquisition of three new businesses and issuance of new equity
securities for cash and debt forgiveness (see Note 11 to the accompanying
consolidated financial statements).
Other Operating Expenses (Income). In the three months ended March 31,
2004, the Company recorded a total gain of $58,625 on settlements of accounts
payable with several vendors.
Total Operating Expenses. Total Operating Expenses increased $115,125,
or 4.4% to $2,748,827 in the three months ended March 31, 2004 from $2,633,702
in the comparable 2003 period. As a percent of revenue, total expenses increased
to 162.6% of revenue in the three months ended March 31, 2004 from 115.5% in the
2003 comparable period. The increased costs, expressed both in dollars and as a
percentage of revenue, are related to the factors discussed above.
Other Income (Expense). Total Other Expense increased $348,446, or
102.3% to $688,947 in the three months ended March 31, 2004 from $340,501 in the
2003 comparable period. The increase was primarily due to an increase in
interest expense of $253,491, or 57.6% between the two comparable three-month
periods. In the three months ended March 31, 2004, the Company recorded a
$206,693 charge to interest expense, based on the change in relative fair value
of its convertible unsecured promissory notes (see Note 6 to the accompanying
consolidated financial statements). Since the notes were not converted by
January 31, 2004, the conversion price changed from $.35 per share to $.25 per
share. The remaining increase of $46,798 was due to additional borrowings for
working capital purposes.
Additionally, the Company's equity in earnings from limited
partnerships decreased $85,507, or 97.6% to $2,135 in the three months ended
March 31, 2004 from $87,642 in the comparable 2003 period. The decrease is
primarily attributable to the Company's sale of its interest in Physicians
Endoscopy Center in June 2003, where in the first quarter of 2003, the Company's
equity in that center's earnings was $63,328. Secondarily, the Company's equity
in the earnings of San Jacinto Surgery Center decreased by $22,179.
Federal Income Tax Benefit. For the three months ended March 31, 2004,
the Company did not record a tax benefit on its pre-tax loss of $1,747,250 due
to a valuation allowance recorded against the Company's deferred tax assets. The
valuation allowance was necessary due to the uncertainty of recovery of the
deferred tax assets.
Net Loss. Due to the factors discussed above, net loss in the three
months ended March 31, 2004 increased $1,068,763, or 157.5% to $1,747,250 in the
three months ended March 31, 2004 from $678,487 in the 2003 comparable period.
The Company was negatively impacted by: the decrease in gross margin of $430,219
(revenue minus direct cost of revenues); the increase in professional fees of
$319,001 due to the Altman settlement and expenses related to the pending series
of transactions; and the increase in interest expense of $ 253,491 due to charge
related to beneficial conversion factor of the convertible notes and additional
borrowings for working capital purposes.
17
Liquidity and Capital Resources
Net cash used in operating activities was $250,085 and $559,242 for the
three months ended March 31, 2004 and 2003, respectively. The primary reason for
the usage of cash is due to continued operating losses in both periods.
Net cash used in investing activities was $59,500 and $6,318 for the
three months ended March 31, 2004 and 2003, respectively. In the three months
ended March 31, 2004, the Company purchased $46,000 in arthroscopy equipment in
one of its surgery centers.
Net cash provided by financing activities decreased to $313,946 for the
three months ended March 31, 2004 from $442,808 in the 2003 comparable period.
The Company has financed its working capital needs primarily through the
issuance of equity, secured and/or convertible debt. As of March 31, 2004,
SurgiCare does not have any credit facilities available with financial
institutions to provide for working capital shortages. In the three months ended
March 31, 2004, the Company borrowed funds from a participant in the proposed
restructuring transactions (See Note 11 to the accompanying unaudited financial
statements) to make necessary payments on debt and to fund operations.
In the first quarter of 2003, the Company raised cash of $1,070,105
through the sale of common stock offset by net pay downs of credit lines and
other outstanding debt of approximately $600,000.
In the first quarter of 2004, the Company did not raise any substantial
funds through the sale of equity securities, though $16,535 was recorded on the
exercise of outstanding warrants. Although the Company believes it will generate
cash from operations in the future, due to its debt load, it is not able to fund
its current operations solely from its cash flow.
The Company believes that additional sales of debt and/or equity
securities will be required to continue operations. See Note 11 to the
accompanying unaudited financial statements for a description of a series of
transactions recently announced by the Company that, if consummated, will
involve an equity investment and recapitalization of the Company. Prior to the
closing of such contemplated transactions, any additional sales of debt and/or
equity by the Company will be subject to the prior approval of the
counterparties to the applicable transaction documents. The Company can provide
no assurance that it will be successful in any future financing effort to obtain
the necessary working capital to support its operations, or fund acquisitions
for its anticipated growth. In the event that any future financing efforts are
not successful, the Company will be forced to liquidate assets and/or curtail
operations.
As of March 31, 2004, the Company had cash and cash equivalents of
$145,914 and negative working capital of $11,833,057. SurgiCare has a total of
$7,238,861 in long-term debt and an additional $1,361,458 in revolving lines of
credit currently in default. SurgiCare has defaulted on certain provisions of
its Loan and Security Agreement with its senior lender, DVI Business Credit
Corporation and DVI Financial Services, Inc. ("DVI"). One August 25, 2003, DVI
filed for protection under Chapter 11 of the U.S. Bankruptcy laws. The Company
is currently pursuing a buyout of their debt with DVI (through its bankruptcy
trustee) and certain other debt holders.
18
Item 3. Controls and Procedures
--------------------------------
Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures that are
designed to ensure that information required to be disclosed by us in the
reports filed by us under the Securities and Exchange Act of 1934, as amended
("Exchange Act"), is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms. As of the end of the period
covered by this report, we evaluated, under the supervision and with the
participation of our management, including our President and Chief Executive
Officer and our Secretary and Chief Financial Officer, the effectiveness of our
disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act.
Based on that evaluation, our President and Chief Executive Officer and our
Secretary and Chief Financial Officer concluded that our disclosure controls and
procedures are effective.
Changes in Internal Controls
During the most recent fiscal quarter, there have been no changes in
our internal controls over financial reporting that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings.
---------------------------
In March 2003, SurgiCare Memorial Village, L.P. and Town & Country
SurgiCare, Inc. were named as defendants in a suit entitled MarCap Corporation
vs. Health First Surgery Center-Memorial, Ltd.; HFMC, L.C.; SurgiCare Memorial
Village, L.P.; and Town & Country SurgiCare, Inc. MarCap has sued the Company
for default under a promissory note and refusing to remit payment on a
promissory note in the amount of $215,329.36. SurgiCare paid $53,832.34 of this
balance prior to settlement. Settlement was reached in September, 2003 whereby
SurgiCare agreed to pay MarCap $150,000 over the next year with interest at 10%,
with an underlying settlement of approximately $200,000 in the event of a breach
in the payment plan. To date, SurgiCare has paid MarCap 73,336.26 under the
payment plan.
On February 10, 2003, SurgiCare, Inc. was named as a defendant in a
suit entitled S.E. Altman v. SurgiCare. S.E. Altman has sued for breach of
contract, alleging that SurgiCare did not pay monies owed under a "Finders Fee
Contract." Plaintiff asserts damages in the amount of $217,000, plus interest
and attorneys' fees. International Diversified Corporation, Limited has
indemnified SurgiCare with respect to any fees owed to Altman under the Finders
Fee Contract. The case has been dismissed in favor of arbitration. In March
2004, the parties executed a Settlement Agreement and Release of Claims to
resolve the dispute in which SurgiCare agreed to issue Mr. Altman 540,000 shares
of common stock, which were registered with the Securities and Exchange
Commission on Form S-8 in April 2004.
On April 14, 2003, SurgiCare, Inc. was named as a defendant in a suit
entitled A.I. International Corporate Holdings, Ltd. v. SurgiCare, Inc. in the
U.S. District Court for the Southern District of New York. Subsequently,
SurgiCare filed suit against A.I. International Corporate Holdings, Ltd. and
First National Bank, S.A.L. of Lebanon in the 215th Judicial District Court of
Harris County, Texas. The New York case involves allegations that SurgiCare
defaulted on its loan agreement. The plaintiffs in the New York case are suing
SurgiCare for $834,252 representing the loan amount and interest, plus $219,000,
representing damages for "No-filing Charges" and "Non-Effective Charges" under
the contract. SurgiCare's lawsuit in Texas asserts that the loan agreement is
usurious. The defendants in the Texas case have moved for sanctions against
SurgiCare in that forum. The New York case has been ordered to mediation, which
has not yet been scheduled. In conjunction with the mediation order, the parties
agreed to stay the litigation in both states until completion of the mediation.
19
On November 24, 2003, SurgiCare, Inc. was named as a defendant in a
suit entitled Vincent A. Giammalva, Trustee v. SurgiCare, Inc., Keith G.
LeBlanc, and Phillip C. Scott; in the 344th Judicial District Court of Chambers
County, Texas. This case involves allegations that SurgiCare defaulted on a
contract to sell a parcel of real estate to plaintiff. Plaintiff also claims
that LeBlanc and Scott committed fraud. SurgiCare states that it could not sell
the parcel of land because of a lien on the property. The plaintiff seeks
specific performance, forcing SurgiCare to sell the property, as well as actual
damages. SurgiCare is negotiating with the plaintiff in an effort to settle this
matter.
In addition, we are involved in various other legal proceedings and
claims arising in the ordinary course of business. Our management believes that
the disposition of these additional matters, individually or in the aggregate,
is not expected to have a materially adverse effect on our financial condition.
However, depending on the amount and timing of such disposition, an unfavorable
resolution of some or all of these matters could materially affect our future
results of operations or cash flows in a particular period.
ITEM 2. Change in Securities.
------------------------------
On January 29, 2004, the Company converted all of its Preferred Stock
Series A with the rights and preferences set forth in the Certificate of
Designation, Powers, Preferences, and Rights filed with the Secretary of State
of Delaware on September 12, 2001 (the "Preferred Stock") to common stock of the
Company. This conversion was approved by the majority vote of the Preferred
Stock shareholders in a written consent effective as of October 20, 2003, which
granted the Company the right to convert the Preferred Stock and in which the
shareholders disclaimed any past or possible future rights regarding the
Preferred Stock, including but not limited to the liquidation preference upon
the liquidation, dissolution or winding upon of the Company, pursuant to the
aforementioned Certificate of Designation.
On February 12, 2004, the Company issued 136,000 shares of common stock
to Brewer & Pritchard, P.C. and Jerry Sokol, each of whom are accredited
investors for services rendered by each of them. The stock was issued in
reliance on the exemption provided by Section 4(2) of the Securities Act.
In the first quarter of 2004, two warrant holders exercised warrants
for 52,142 shares at an exercise price of $.35 per share. The stock was issued
in reliance on the exemption provided by Section 4(2) of the Securities Act.
No underwriters were involved in any of the foregoing sales or issuance
of securities. Such sales or issuance were made in reliance upon an exemption
from the registration provisions of the Securities Act set forth in Section 4(2)
thereof relative to sales by an issuer not involving any public offering, or the
rules and regulations there under. Each recipient either received adequate
information about SurgiCare or had access, through employment or other
relationships, to such information, and SurgiCare determined that each recipient
had such knowledge and experience in financial and business matters that they
were able to evaluate the merits and risks of an investment in SurgiCare. All of
the foregoing securities are deemed restricted securities for the purposes of
the Securities Act.
20
ITEM 3. Default Upon Senior Securities.
----------------------------------------
SurgiCare has defaulted on certain provisions of its Loan and
Security Agreement with DVI Business Credit Corporation and DVI Financial
Services, Inc. ("DVI"). The Company had obtained a letter of forbearance from
DVI through August 29, 2003. However, in August 2003, DVI, Inc. announced that
it is seeking protection under the United States Bankruptcy laws. The Company is
currently negotiating a buyout of their debt with DVI (through the bankruptcy
trustee) and certain other debt holders.
SurgiCare has defaulted on its convertible Debenture Agreement for
failure to file a registration statement for the resale of certain securities
pursuant to the agreement and has been sued by the primary debenture holder.
SurgiCare is currently negotiating a settlement of this debt.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
------------------------------------------
(a) Exhibits
Exhibit No. Description
----------- -----------
31.1 Rule 13a-14(a)/15d-14(a) Certification
31.2 Rule 13a-14(a)/15d-14(a) Certification
32.1 18 U.S.C.ss.1350 Certification
32.2 18 U.S.C.ss.1350 Certification
(b) Reports on Form 8-K
During the quarter ended March 31, 2004, we filed the following reports
on Form 8-K:
Dated January 29, 2004 to report the conversion of all of our Series A
Redeemable Preferred Stock to Common Stock.
Dated February 17, 2004 to report the issuance of a press release
announcing that it has executed a definitive agreement to acquire
Dennis Cain Physician Solutions, Ltd and Medical Billing Systems, Inc.
In addition, SurgiCare announced that it had filed preliminary proxy
materials with the Securities and Exchange Commission relating to a
meeting of stockholders to be held to approve various matters relating
to the aforementioned acquisitions as well as the previously announced
recapitalization, equity investment and acquisition of Integrated
Physician Solutions, Inc.
21
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.
Date: May 14, 2004 REGISTRANT:
SurgiCare, Inc.
By: /s/ Keith G. LeBlanc
----------------------------
Keith G. LeBlanc
Chief Executive Officer
By: /s/ Phillip S. Scott
----------------------------
Phillip C. Scott
Chief Financial Officer
22