SEC Company Response from MED-EMERG INTERNATIONAL INC (CIK 0001030179) — Jun 30, 2005
MED-EMERG INTERNATIONAL INC (CIK 0001030179)
Date: June 30, 2005 · CIK: 0001030179 · Accession: 0001279569-05-000518
AI Filing Summary & Sentiment
Letter
Ms. Keira Ino United States Securities and Exchange Commission Fifth Street, NW Washington, DC 20549
Dear Ms. Ino:
In response to the questions posed in the correspondence from Mr. Jim Rosenberg, Senior Assistant Chief Accountant, in his letter of May 4, 2005, we are pleased to provide our responses herein. For ease of reference our responses are in sequence consistent with Mr. Rosenberg’s questions.
If you have questions please contact the writer at your earliest convenience at (905) 288-1003 or bdanis@med-emerg.com.
NOTE: CERTAIN INFORMATION CONTAINED HEREIN IS CONFIDENTIAL AND MAY NOT BE MADE PUBLIC.
Sincerely
yours,
/s/William
J. Danis
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Med-Emerg International Inc.
6711
MISSISSAUGA ROAD, SUITE 404
MISSISSAUGA,
ONTARIO, CANADA L5N 2W3
PHONE:
(905) 858-1368
FAX:
(905) 858-1399
www.med-emerg.com
June
28, 2005
Ms.
Keira Ino
United
States Securities and Exchange Commission
450
Fifth Street, NW
Washington,
DC 20549
Dear
Ms. Ino:
In
response to the questions posed in the correspondence from Mr. Jim Rosenberg,
Senior Assistant Chief Accountant, in his letter of May 4, 2005, we are pleased
to provide our responses herein. For ease of reference our responses are in
sequence consistent with Mr. Rosenberg’s questions.
If
you have questions please contact the writer at your earliest convenience at
(905) 288-1003 or bdanis@med-emerg.com.
NOTE:
CERTAIN INFORMATION CONTAINED HEREIN IS CONFIDENTIAL AND MAY NOT BE MADE
PUBLIC.
Sincerely
yours,
/s/William
J. Danis
Chief
Financial Officer
Med-Emerg
International Inc.
Response
to SEC questions
June
28, 2005
Question
1. Item 6- revised table as requested.
US$
YEAR
ENDED DECEMBER 31,
2004
2003
2002
2001
2000
Statement
of Operations Data:
Revenue
48,447,687
54,335,558
37,428,043
15,813,250
15,532,767
Physician
fees and other direct costs
43,693,380
49,217,416
34,382,752
13,223,282
10,011,764
Gross
Profit
4,754,307
5,118,142
3,045,291
2,589,968
5,521,003
Operating
expenses before undernoted items
4,810,341
4,678,665
2,704,529
2,439,373
6,103,860
Depreciation
and amortization
182,399
120,924
102,345
92,575
1,590,006
Other
expenses
1,102,772
1,730,587
827,336
2,078,753
1,291,150
6,095,512
6,530,176
3,634,210
4,610,701
8,985,016
Loss
before income taxes
(1,341,205
)
(1,412,034
)
(588,919
)
(2,020,733
)
(3,464,013
)
Income
taxes (recovery)
-
(2,458
)
-
1,248,016
(978,189
)
Minority
interest
-
(2,095
)
(2,211
)
1,926
(318,223
)
Discontinued
operations
-
(167,169
)
(16,956
)
(3,470,892
)
-
Net
loss - Canadian GAAP
(1,341,205
)
(1,574,650
)
(603,664
)
(6,741,567
)
(2,167,601
)
Net
loss - US GAAP
(1,176,578
)
(1,983,291
)
(619,214
)
(6,964,095
)
(3,689,914
)
Preferred
share dividends
(34,173
)
(135,006
)
(134,983
)
(134,870
)
(131,240
)
Forgiveness
of Preferred share dividends
579,582
-
-
-
Net
loss attributable to common shareholders - Canadian GAAP
(795,796
)
(1,709,656
)
(738,647
)
(6,876,437
)
(2,298,841
)
Net
loss attributable to common shareholders - US GAAP
(631,169
)
(2,118,297
)
(754,197
)
(7,098,965
)
(3,821,154
)
Basic
loss per common share
Continuing
operations
(0.02
)
(0.16
)
(0.08
)
(0.41
)
(0.40
)
Discontinued
operations
(0.00
)
(0.02
)
(0.00
)
(0.42
)
(0.00
)
Balance
Sheet Data:
Working
Capital Surplus (deficit)
1,224,127
(3,169,692
)
(2,276,540
)
(1,931,980
)
(2,471,958
)
Total
Assets
7,322,027
4,044,225
3,641,207
3,421,080
9,268,922
Long-Term
debt
599,991
599,991
590,536
590,536
11,537
Shareholders'
equity (deficit) - Canadian GAAP
559,249
(3,448,142
)
(1,698,340
)
(1,253,814
)
4,142,345
Shareholders'
equity (deficit) - US GAAP
1,647,121
(2,360,270
)
(1,267,357
)
(769,846
)
3,777,466
Year
end US$ exchange rate (equivalent to 1Cdn$)
0.83
0.77
0.63
0.63
0.67
Average
US$ exchange rate (equivalent to 1Cdn$)
0.77
0.71
0.64
0.65
0.66
2
of 12
Med-Emerg
International Inc.
Response
to SEC questions
June
28, 2005
Question
2 - Item 6 - additional information as requested.
SUPPLEMENTARY
FINANCIAL INFORMATION
QUARTERLY
FINANCIAL DATA (UNAUDITED)
4TH
QUARTER
3rd
QUARTER
2nd
QUARTER
1ST
QUARTER
2004
2003
2004
2003
2004
2003
2004
2003
Revenue
13,619,890
12,421,081
11,704,989
14,297,671
10,569,207
16,348,865
12,553,601
11,267,941
Gross
Profit
1,252,482
1,220,583
1,148,196
1,417,336
1,169,895
1,504,929
1,183,734
975,294
Income(loss)
before undernoted items
520,908
174,425
-35,286
221,059
-620,637
-32,359
78,981
76,352
Gain
(loss) from discontinued operations
3,449
-898,848
0
862,814
7
-71,179
-3,456
-59,956
Net
profit (loss) for the period
-253,018
-147,634
-234,864
114,715
-160,350
-753,635
-147,564
-923,102
Basic
loss per common share
Continuing
operations
0.01
0.09
0.00
-0.08
-0.01
-0.08
-0.02
-0.09
Discontinued
operations
0
-0.09
0.00
0.09
0.00
-0.01
0.00
-0.01
3
of 12
Med-Emerg
International Inc.
Response
to SEC questions
June
28, 2005
Question
3 - ITEM 7- proposed changes to MD&A in accordance with Rule 303(a) of Reg.
S-K
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-looking
statements of MEII, included herein or incorporated by reference including,
but
not limited to, those regarding future business prospects, the adequacy of
capital resources and other statements regarding trends relating to various
revenue and expense items, could be affected by a number of uncertainties and
other factors beyond management's control.
FINANCIAL
OVERVIEW
The
Company reported a net loss of approximately $1.3 million for the year ended
December 31, 2004 compared to a net loss of $1.6 million for the year ended
December 31, 2003 and $600 thousand for the year ended December 31, 2002. The
loss amounted to $ 0.02 per share for continuing operations and a $0.00 loss
for
discontinued operations for the year ended December 31, 2004 compared with
a
loss of $ 0.16 per share for continuing operations and a $0.02 loss for
discontinued operations for the year ended December 31, 2003 and a loss of
$0.08
per share for continuing operations and a loss $0.00 per share for discontinued
operation for the year ended December 31, 2002. The main reason for the decrease
in the net loss during 2004 is the result of the non-cash stock compensation
expenses that the Company recorded in 2003 as a result of re-pricing the
outstanding warrants and the issuance of stock options. The Interest and
financing expenses are also lower in the current year. These cost reductions
were largely offset by reduced gross margins of about $360 thousand and closing
costs associated with an equity financing of about $609 thousand. The results
for 2002 were favorably affected by a $228 thousand gain associated with the
forgiveness of debt. In 2004 the Company implemented their strategic plan of
realigning the business units and the consolidation and closure of
non-performing medical clinics. MEII continues to pursue profitable contracts
that are consistent with the current operating strategy.
The
net
loss attributable to common shareholders is approximately $796 thousand for
the
year ended December 31, 2004 compared to a net loss of $1.7 million for the
year
ended December 31, 2003 and $740 thousand for the year ended December 31, 2002.
The improvement over 2003 is due to the forgiveness of preferred share dividends
of $579,582, during the year. The loss in 2003 was greater than the loss in
2002
largely because of stock compensation expenses of $1.16 million. These were
largely attributable to the re-pricing of certain common share purchase
warrants.
REVENUE
The
Company's revenue for the year ended December 31, 2004 was $48.5 million,
compared to $ 54.3 million for the year ended December 31, 2003, and $37.4
million for the year ended December 31, 2002.
The
decrease of revenue in 2004, of approximately 11% was mainly attributable to
the
non-recurrence of the SARS crisis which caused a one-time increase in 2003
revenues. The increase in 2003 revenues of 45% over 2002 was driven by the
SARS
crisis and increased revenues associated with the DND contract.
Revenue
from the DND contract amounted to approximately $39 million during the year
ended December 31, 2004 compared to $ 40.3 million for the year ended December
31, 2003 and $31.3 for the year ended December 31, 2002. Revenues for this
division are driven by requests by the Canadian Armed Forces for additional
healthcare staff.
Revenue
from the Staffing Solutions division were $7.5 million during the year ended
December 31, 2004 compared to $13 million for the year ended December 31, 2003
and $5.7 million for the year ended December 31, 2002. The spike in revenues
in
2003 was due to the one-time revenue generated in 2003 due to the SARS
outbreak.
Revenue
from the Medical Services division amounted to $1.2 million for the 2004 fiscal
year compared to $900 thousand and $400 thousand for fiscal years’ ended
December 31, 2003 and 2002 respectively. The 33% increase in revenues in 2004
was driven by the increase in the number of infusions provided by the division
during the year and reflects the continued growth of the division, which began
in 2002.
Revenue
from Healthcare Consulting division amounted to approximately $790 thousand
during the year ended December 31, 2004 compared to $155 thousand for the prior
year, an increase of 410%. This is mainly due to revenue generated by the
Atlantic Health and Human resources project.
4
of 12
Med-Emerg
International Inc.
Response
to SEC questions
June
28, 2005
GROSS
MARGIN
Gross
Margin (revenue less physician and other direct costs) reduced to $4.8 million
for the year ended December 31, 2004 compared to approximately $5.1 million
for
the year ended December 31, 2003 and $3.0 million for the year ended December
31, 2002.
Physician
fees and other direct costs, primarily fees paid to contract physicians, as
a
percentage of total revenues declined to about 90.1% in 2004 versus 90.6% in
2003 and 91.9% in 2002. Gross margin percentages increased in the Staffing
Solutions and Government Health Services divisions, the divisions that generate
our greatest revenue.
OPERATING
EXPENSES
Operating
expenses totaled $4.8 million for the year e