UNITED MEDICORP INC - 10-K Annual Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE YEAR ENDED DECEMBER 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-10418

UNITED MEDICORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 75-2217002
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

200 N. CUYLER STREET
PAMPA, TEXAS 79065
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 926-4950

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
NONE NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

TITLE OF EACH CLASS
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COMMON STOCK, $0.01 PAR VALUE

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. YES X NO
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K .
-----

As of March 15, 2002, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $188,990 based on the last sales price
of $0.01 per share of such stock on March 16, 2002. As of March 31, 2002 there
were 29,210,217 shares of Common Stock, $0.01 par value outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part I, Item 7 of this Form 10-K incorporates by reference information in the
Private Securities Litigation Reform Act of 1995 Safe Harbor Compliance
Statement for Forward Looking Statements

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UNITED MEDICORP, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

GENERAL

United Medicorp Texas, Inc., was incorporated in the State of Texas on
March 13, 1989 ("UMC-Texas"). On July 10, 1989, in an exchange of stock,
UMC-Texas was acquired by Gamma Resources, Inc., a publicly-owned Delaware shell
corporation, which simultaneously changed its name to United Medicorp, Inc. (the
"Company", "UMC" or the "Registrant"). On November 18, 1996, the Company filed
"Articles of Amendment to the Articles of Incorporation of Sterling Hospital
Systems, Inc." whereby this wholly owned subsidiary of UMC was renamed United
MoneyCorp, Inc. ("UMY"). UMY has been designated as the legal entity under which
UMC operates a collection agency. On August 7, 1998, UMC acquired 100% of the
common stock of Allied Health Options, Inc. ("AHO"), an Alabama corporation.
Effective June 30, 1999, the Company discontinued the operations of AHO. On
October 14, 1999, AHO filed a voluntary petition in the United States Bankruptcy
Court for the Northern District of Texas to liquidate pursuant to Chapter 7 of
Title 11 of the United States Bankruptcy code. On November 16, 1999, the Chapter
7 bankruptcy 341 creditors' meeting was held. Unless the context indicates
otherwise, references herein to the Company include UMC and its operating
subsidiary UMY, and exclude AHO.

The Company provides medical insurance claims processing and accounts
receivable management services to healthcare providers. The Company employs
proprietary and purchased software to provide claims processing, billing and
collection services to its customers, which are primarily hospitals, medical
clinics, and physician practices. The Company's medical claims processing
service is designed to provide an electronic claims processing, billing and
collection service that expedites payment of claims from private insurance
carriers or government payors such as Medicare and Medicaid. The Company also
offers to its customers processing and collection services for uncollected
"backlog" (aged) claims that were not originally submitted through the Company's
electronic claims processing system. UMY provides customer service and
collection services to health care providers.

The Company also has in the past provided interim staffing services under
the name style "UMClaimPros." This service line was introduced by the Company in
December 1994. UMClaimPros were experienced claims processors available for
customers' interim staffing needs.

AHO was engaged in: outpatient services; twenty four hour a day emergency
care services; partial hospitalization services, or psychosocial rehabilitation
services; screening of patients being considered for admission to State mental
health facilities to determine the appropriateness of such admission; and
consultation and education services. AHO operated three Community Mental Health
Centers ("CMHC's") under the names: Behavioral Health of Mobile ("BHM"), Calhoun
County Behavioral Health ("CCBH"), and Pensacola Center for Behavioral Health
("PCBH").

3

MEDICAL BILLING INDUSTRY OVERVIEW

The U.S. healthcare industry continues to experience tremendous change as
both federal and state governments as well as private industry work to bring
more efficiency and effectiveness to the healthcare system. UMC's business is
impacted by trends in the U.S. healthcare industry. As healthcare expenditures
have grown as a percentage of U.S. gross national product, public and private
healthcare cost containment measures have applied pressure to the margins of
healthcare providers. Historically, some payors have willingly paid the prices
established by providers while other payors, notably the government and managed
care companies, have paid far less than established prices (in many cases less
than the average cost of providing the services). As a consequence, prices
charged payors willing to pay established prices increased in order to recover
the cost of services purchased by the government and others but not paid by them
(i.e., cost shifting). Increasing complexity in the reimbursement system and
assumption of greater payment responsibility by individuals have caused
healthcare providers to experience increased receivables, bad debt levels and
higher business office costs. Providers overcome these pressures on
profitability by increasing their prices, by relying on demographic changes to
support increases in the volume and intensity of medical procedures, and by cost
shifting. As providers experience limitations in their continued ability to
shift cost in these ways, the amount of reimbursement received by UMC's clients
may be reduced and UMC's rate of growth in revenues, assuming present fee
levels, may decline. However, management believes UMC may benefit from
providers' attempts to offset declines in profitability through seeking more
effective and efficient business management services such as those provided by
UMC. UMC continues to evaluate governmental and industry reform initiatives in
an effort to position itself to take advantage of the opportunities created
thereby.

GOVERNMENTAL INVESTIGATIVE RESOURCES AND HEALTHCARE REFORM

The federal government in recent years has placed increased scrutiny on
the billing and collection practices of healthcare providers and related
entities, and particularly on possible fraudulent billing practices. This
heightened scrutiny has resulted in a number of high profile civil and criminal
investigations, lawsuits and settlements.

In November 1998, the Office of Inspector General ("OIG") released
compliance plan guidance for third party billing companies, in which it
identified certain areas which it viewed as particularly problematic, including,
but not limited to, billing for undocumented services, unbundling, upcoding,
inappropriate balance billing, inadequate resolution of overpayments, lack of
integrity in computer systems, failure to maintain the confidentiality of
information records, misuse of provider identification numbers, duplicate
billing and illegal billing company incentives. While not mandatory, OIG
encourages billing companies and healthcare providers to adopt compliance plans.
The existence of an effective compliance plan may reduce the severity of
criminal sanctions for certain offenses and may be considered in the settlement
of civil investigations. Management believes that the operations of the Company
are in compliance with the OIG release.

In 1996, Congress enacted the Health Insurance Portability and
Accountability Act of 1996, which includes significant new requirements
governing the confidentiality of patient health information, an expansion of
provisions relating to fraud and abuse, creates additional criminal offenses
relating to healthcare benefit programs, provides for forfeitures and
asset-freezing orders in connection with certain offenses and contains
provisions for instituting greater coordination of federal, state and local
enforcement agency resources and actions.

4

EXISTING GOVERNMENT REGULATION

UMC's billing and collections activities are governed by numerous federal
and state civil and criminal laws. In general, these laws provide for various
fines, penalties, multiple damages, assessments and sanctions for violations,
including possible exclusion from Medicare, Medicaid and certain other federal
and state healthcare programs.

Submission of claims for services that were not provided as claimed, or
which violate the regulations, may lead to civil monetary penalties, criminal
fines, imprisonment and/or exclusion from participation in Medicare, Medicaid
and other federally funded healthcare programs. Specifically, the Federal False
Claims Act allows a private person to bring suit alleging false or fraudulent
Medicare or Medicaid claims or other violations of the statute. Such actions
have increased significantly in recent years and have increased the risk that a
company engaged in the healthcare industry, such as UMC and its customers, may
become the subject of a federal or state investigation, may ultimately be
required to defend a false claim action, may be subjected to government
investigation and possible criminal fines, may be sued by private payors and may
be excluded from Medicare, Medicaid and/or other federally funded healthcare
programs as a result of such an action.

Credit collection practices and activities are regulated by both federal
and state law. The Federal Fair Debt Collection Practices Act sets forth various
provisions designed to eliminate abusive, deceptive and unfair debt collection
practices by collection agencies. Various states have also promulgated laws and
regulations that govern credit collection practices.

Under Medicare law, physicians and hospitals are only permitted to assign
Medicare claims to a billing and collection services vendor in certain limited
circumstances. Medicare regulations provide that a billing company that prepares
and sends bills for the provider or physician and does not receive and negotiate
the checks made payable to the provider or physician does not violate the
restrictions on assignment of Medicare claims. Management believes that its
practices meet the restrictions on assignment of Medicare claims because, among
other things, it bills only in the name of the provider, checks and payments for
Medicare services are made payable to the provider and the Company lacks any
power, authority or ability to negotiate checks made payable to the provider.

As a participant in the healthcare industry, the Company's operations are
also subject to extensive and increasing regulation by a number of governmental
entities at the federal and state levels. The Company is also subject to laws
and regulations relating to business corporations in general. Management
believes its operations are in compliance with applicable laws.

5

CUSTOMER SERVICES AND FEE STRUCTURE

ONGOING ACCOUNTS RECEIVABLE MANAGEMENT SERVICES: Under the Company's
Ongoing service, the Company edits, submits, performs follow-up, submits
required additional information, and collects claims on behalf of its customers.
In cases where an insurance carrier or governmental payor cannot receive or
efficiently handle the Company's electronically transmitted claims, the Company
will print the claim on a standard industry form and mail it to the insurance
carrier. After the claims are processed, the Company's claims operations
personnel utilize computer-assisted follow-up methods to ensure timely
collection. In most cases the Company charges a percentage of actual claim
payment amounts collected as its fee. In certain cases, the Company may charge a
flat fee per claim for this service. Complete claim settlement reports are sent
to customers on a weekly, semi-monthly or monthly interval. Management believes
that the Company's claims collection experience to date and increasing awareness
throughout the healthcare industry of the need to cut costs and improve cash
flow could increase demand for this type of service. Ongoing accounts receivable
management services revenue accounted for approximately 41%, 57% and 86% of
total revenue in 2000, 2000 and 1999, respectively.

BACKLOG ACCOUNTS RECEIVABLE MANAGEMENT SERVICES: Customers using the
"Backlog" service engage the Company to collect aged claims which usually have
been previously filed with an insurance carrier or governmental payor, but which
remain uncollected. When a customer enters into a backlog collection agreement,
the customer submits completed insurance claim forms to the Company. The claims
are then entered into the Company's claims management and collection system, and
the Company's standard claims processing and collection procedures are applied
to collect these backlog claims. The Company believes that this program is
attractive to potential backlog collection customers because the Company
collects outstanding claims at competitive rates. Backlog collection contracts
generally involve a one-time placement of claims for collection.

PATIENT BILLING SERVICES: The Company offers its customers the option of
having UMC bill the guarantor of each account the appropriate balance remaining
due after all insurance payments due on an account have been collected and
contractual allowances have been posted. Fees for this service vary depending
upon the average balance, age and collectibility of the accounts being worked.

COLLECTION AGENCY SERVICES: These services involve collections of either
(a) "early out" accounts due from individual guarantors which are active
receivables placed for collection within one hundred twenty days of either the
date of service or the date payment was received from a third party payor such
as commercial insurance or Medicare, or (b) guarantor accounts which have been
written off as bad debt. Collection agency services revenue accounted for
approximately 49%, 25% and 11% of total revenue in 2001, 2000 and 1999,
respectively.

UMCLAIMPROS: The Company began providing interim staffing services under
the UMClaimPros label in December, 1994. UMClaimPros are experienced billing and
collection personnel who are employed by UMC and placed on temporary assignments
in hospital and physician business offices. Fees for this service accounted for
approximately 0%, 3%, and 3% of revenue in 2001, 2000, and 1999 respectively.
Management has not yet offered the UMClaimPros service in the Pampa area.

6

FEE STRUCTURE: The Company has established both contingency and
non-contingency based fee structures which are intended to allow prospects for
the Company's services a wide range of pricing options. Under the Company's
contingency based fee structure, fees are charged as a percentage of amounts
collected. For the Company's Ongoing Accounts Receivable Management service, the
Company generally charges healthcare providers contingency fees ranging from 4
to 20 percent of the amount the Company collects on behalf of the providers,
depending upon the average claim amount collected. Backlog Accounts Receivable
Management services are usually priced from 8 to 25 percent of the amount the
Company collects on behalf of the providers, depending upon the age of the
claims. Collection ratios generally range from 0 to about 40 percent for Backlog
projects and about 27 to 50 percent for Ongoing projects. Fees for Patient
Billing services range from 8 to 10 percent of the amounts collected, while
Collection Agency services are priced at 8 to 35 percent of amounts collected.
UMClaimPros services are priced at a per hour rate based on the fully burdened
salary of the assigned personnel. Management believes that the Company's fee
structure for its package of services is competitive.

SOFTWARE AND DATA PROCESSING

The Company's ability to provide its services on a large scale depends on
the successful operation of computer hardware and software capable of handling
the processing and transmission of insurance claims from the customer to the
insurance carrier, and through the intermediate steps that such claims must take
during the process. During 2001, 2000 and 1999, the Company accepted for
processing approximately 220,000, 246,000 and 222,000 claims and accounts. The
Company continuously develops and enhances its systems using programmers
employed by the Company and outside contractors and consultants.

The claims processing software packages currently used by the Company are
specifically designed to expedite claims preparation and processing and,
simultaneously, to reduce errors associated with manual claims processing.
Claims are edited for certain errors, such as invalid or missing information,
using the claims processing software. Claims are then transmitted directly by
the Company to the third party payor or through any one of several insurance
claim clearinghouses used by the Company. The clearinghouses then format and
electronically transmit the claim data according to the specifications of the
individual third party payors, which avoids delays resulting from paper routing
and the errors resulting from third party payor data re-entry. If, however, the
third party payor cannot receive or efficiently handle the Company's
electronically transmitted claims, the Company will print the claim on a
standard industry form and mail it to the third party payor. The Company intends
to continue to enhance and refine its claims processing, customer reporting,
claims tracking and collection functions during 2001 and thereafter in order to
satisfy unique customer requirements.

UMY uses a purchased software application for its collection agency
services. This application runs on the Company's AS/400 hardware platform, and
handles all of the necessary processing of accounts, telephone calls, collection
letters and reports. Custom programming for this application is handled
primarily through the vendor. The Company has the source code for the
application and can modify the application whenever necessary. This software
will continue to be modified and enhanced to improve performance and customer
satisfaction.

7

COMPETITION

The business of medical insurance claims processing, accounts receivable
management and collection agency services is highly competitive and fragmented.
UMC competes with certain national and regional electronic claims processing
companies, claims collection companies, claims management companies, factoring
and financing firms, software vendors and traditional in-house claims processing
and collections departments of hospitals and other healthcare providers. Many
competitors of UMC are several times larger than the Company and could, if they
chose to enter the market for the Company's line of services, devote resources
and capital to the market that are much greater than those which the Company
currently has available or may have available in the future. There can be no
assurance that competition from current or future competitors will not have a
material adverse effect upon the Company.

TRANSITION FROM PROFESSIONAL EMPLOYER ORGANIZATION

Effective, December 26, 2000, UMC discontinued its agreement with
Administaff, Inc., a professional employer organization ("PEO") whereby
Administaff was the employer of record for all UMC employees. UMC has resumed
all payroll and human resource functions internally as of the cancellation date.
The cost savings to UMC as a result of the discontinuation of the agreement are
approximately 7% of gross payroll cost.

INDUSTRY SEGMENTS

Management organizes consolidated UMC around differences in services
offered. UMC provides medical insurance claims processing, medical accounts
receivable management and other healthcare related ancillary business office
services. UMY provides customer service functions, payment monitoring, early out
and bad debt account collection agency services to the health care industry. UMC
and UMY are aggregated into one reportable health care Business Office Services
segment based on the similar nature of the medical claim and patient account
collection services, nature of the information technology and human resource
production processes and service delivery methodologies, and the health care
industry customer base of both UMC and UMY.

PATENTS AND TRADE SECRETS

As has been typical in software-intensive industries, the Company does not
hold any patents. The Company believes that patent protection is of less
importance in an industry characterized by rapid technological change than the
expertise, experience and creativity of the Company's product development
personnel. Employees of the Company are required to sign non-disclosure
agreements. The Company relies on these agreements, its service contracts with
customers, and consulting agreements to protect its proprietary software, and to
date, has had no indication of any material breach of these agreements.

8

EMPLOYEES

At March 15, 2002, the Company had 77 full time, and 7 part time
employees. The Company believes that its relations with its employees are good.
UMC employees are not currently, nor have they ever been, represented by a union
and there have not been any stoppages, strikes or union organizing attempts.

ITEM 2. PROPERTIES

On August 21, 2000, United Medicorp, Inc. completed the purchase of a 20,000
square foot building that serves as its new operations center in Pampa, Texas.
The purchase price of the building was $100,000. In addition, the first mortgage
includes an additional $37,000 allowance for transaction costs and building
improvements. The term of the first mortgage is 20 years, with monthly payments
of principal and interest at a floating rate of prime plus one half percent
(currently 9.0 percent per annum). Consistent with the terms of the previously
disclosed Economic Development and Incentive Agreement with the Pampa Economic
Development Corporation ("PEDC"), the full amount of the $137,000 mortgage is
guaranteed by the PEDC. The Company has made numerous repairs and improvements
to the building including the construction of two executive offices, a computer
room, and a lavatory, and has refurbished the two previously existing
lavatories. The total investment in the building and improvements at December
31, 2001 was $167,000. The company began moving its operations to Pampa in
September of 2000 and completed the relocation of all operations functions in
February 2001.

UMC moved out of the previous corporate office and operations center
located in Dallas, on November 15, 2000. The company completed the transition of
the operations center to Pampa, and moved its corporate offices to a 937 square
foot office space in Garland, Texas at that time. The company signed a 36-month
lease on the office space in Garland, with a lease term from December 1, 2000
through November 30, 2003. Lease payments are scheduled for $703 per month
during the first year, $776 per month during the second year, and $885 per month
during the third year of the lease term. The company has the option of
terminating the lease after the first year, with 90 days written notice. This
move resulted in a reduction of monthly lease expense of approximately $6,800.
Management believes that its facilities are well located and are in good
condition.

ITEM 3. LEGAL PROCEEDINGS

At and for the year ended December 31, 2001 and through March 15, 2002,
the Company has not been a party to any legal proceeding.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to security holders for a vote during the fourth
quarter of 2001.

9

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's $0.01 par value common stock (the "Common Stock"), is the
only class of common equity of the Company and represents the only issued and
outstanding voting securities of the Company. As of March 13, 2002, there were
approximately 1,070 stockholders of record of the Common Stock. The Common Stock
trades on the NASDAQ over-the-counter bulletin board ("OTCBB") market.

The following table sets forth the range of high and low bid prices for
the Common Stock as reported on the OTCBB. Such prices do not include retail
mark-up, markdown or commission and may not necessarily represent actual
transactions.

The last reported sales price of the Common Stock as reported on the
OTCBB, on March 16, 2002 was $0.01 per share.

The Company has never declared or paid cash dividends on its Common Stock.
The payment of cash dividends in the future will depend on the Company's
earnings, financial condition and capital requirements. It is the present policy
of the Company's Board of Directors to retain earnings, if any, to finance the
operations and growth of the Company's business.

10

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents selected consolidated financial data for and
as of each of the five years ended December 31, 2001. The financial data
presented for each of the five fiscal years has been derived from audited
financial statements.

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(1) In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings per Share," and has retroactively restated all periods
presented.

11

See Notes to the Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition.

ITEM 7. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL CONSIDERATIONS

Except for the historical information contained herein, the matters
discussed may include forward-looking statements relating to such matters as
anticipated financial performance, legal issues, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that forward-looking statements
include the intent, belief, or current expectations of the Company and members
of its senior management team, as well as the assumptions on which such
statements are based. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those contemplated by such forward-looking statements. Important factors
currently known to management that could cause actual results to differ
materially from those in forward-looking statements are set forth in the safe
harbor compliance statement for forward-looking statements included as Exhibit
99.1 to this Form 10-K and are hereby incorporated herein by reference. The
Company undertakes 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.

UMC and UMY derive their primary revenues from medical claims processing
and accounts receivable management services. A substantial portion of UMC and
UMY revenues are derived from recurring monthly charges to their customers under
service contracts that typically are cancelable with a 30 to 60 day notice. For
the year ended December 31, 2001, 2000 and 1999, approximately 91%, 82% and 91%
of UMC and UMY revenues were recurring. Recurring revenues are defined as
revenues derived from services that are used by the UMC and UMY customers in
connection with ongoing business, and accordingly exclude revenues from backlog
accounts receivable management, advance funding, UMClaimPros, and consulting
services.

12

The following table sets forth for each period indicated the volume and
gross dollar amount of insurance claims received and fees recognized for each of
the Company's two principal claims management services.

CLAIMS MANAGEMENT SERVICES - PROCESSING VOLUMES

For Ongoing claims, there is typically a time lag of approximately 30 to
90 days from contract execution to complete development of system interfaces and
definition of procedural responsibilities with customer personnel. During this
period, Company personnel survey the customer's existing operations and prepare
for installation. Once the customer begins transmitting claims to the Company,
there is usually a time lag of 30 to 90 days between transmission of claims to
third party payors and collection of those claims from payors.

13

The following table sets forth for each period indicated the volume and
gross dollar amount of customer service and collection accounts received and
fees recognized for UMY.

COLLECTION AGENCY SERVICES - PROCESSING VOLUME

For placements of collection accounts, there is typically a time lag of
approximately 15 to 45 days from contract execution to electronic transfer of
accounts from the customer. In many cases, collection accounts are transferred
to UMY via hard copy media, which requires UMY employees to manually enter
collection account data into the UMY system. Collection fee percentages charged
to the customer vary depending on the service provided the age and average
balance of accounts.

SIGNIFICANT CUSTOMERS

During 2001, 91% of revenue was earned from four customers: Presbyterian
Healthcare Services of New Mexico ("PHS"), Valley Baptist Medical Center
("VBMC"), Inova Health Services ("Inova"), and Brownsville Surgical Hospital
("BSH"). PHS provided revenue totaling $1,744,000 or 63% of total revenue. Of
this, 55% was from Collection Agency Services, 37% was from Ongoing Accounts
Receivable Management Services, and 8% was from Backlog Accounts Receivable
Management Services. VBMC provided revenue of $272,000 or 10% of total revenue.
All of the VBMC revenue was from Collection Agency Services. Inova provided
revenue of $247,000 or 9% of total revenue. All of the Inova revenue was from
Ongoing Accounts Receivable Management Services. BSH provided revenue of
$254,000 or 9%

14

of total revenue. Of this, 97% was from Ongoing Accounts Receivable Management
Services, and 3% was from Collection Agency Services.

During 2000, 76% of revenue was earned from three customers: The
Washington Hospital Center ("WHC"), PHS, and Inova. WHC provided revenue
totaling $657,426 or 28% of total revenue. Of this, 96% was from the Ongoing
Accounts Receivable Management Services, and 4% was from Physician Billing
Services. PHS provided revenue totaling $710,893 or 31% of total revenue. Of
this, 52% was from Backlog Accounts Receivable Management Services, 32% was from
Collection Agency Services, and 16% was from Ongoing Accounts receivable
Management Services. Inova provided revenue totaling $373,724 or 16% of total
revenue. All of the Inova revenue was from Ongoing Accounts receivable
Management Services.

During 1999, $2,486,000 or 79% of revenue was earned from one customer,
Washington Hospital Center "WHC". Of this WHC revenue, 63% was provided as a
result of an Ongoing Accounts Receivable Management services contract, as
amended, entered into in 1992, and 16% related to a physician billing contract
amendment entered into in May, 1997.

LOSS OF SIGNIFICANT CUSTOMERS

During November of 2001, Inova Health Services officially notified the
Company, that they were terminating their Ongoing Accounts Receivable Management
contract. Inova did not place any new business with the Company after August of
2001. All billing and collection efforts made on behalf of Inova were
discontinued on January 11, 2002. Revenues from this contract accounted for
approximately 9%, 16%, and 6% of total consolidated revenues during 2001, 2000,
and 1999 respectively. It is UMC management's understanding that Inova's
decision to terminate was due to poor collection performance during the third
and fourth quarters of 2000 during the period when the Company's operation
center was being moved from Dallas to Pampa.

INCENTIVE FINANCING RELATIVE TO RELOCATION OF OPERATIONS CENTER

During 1999 and the first seven months of 2000, UMC had experienced
increasing difficulty in recruiting and retaining medical billing and collection
staff in the Dallas area. This situation was the result of low unemployment and
strong competition from nearby major hospitals and physician groups for
experienced staff. Low unemployment and escalating competition for qualified
staff had resulted in an overall increase in hourly wage rates and turnover.

Effective July 28, 2000, UMC executed an Economic Development and
Incentive Agreement (the "Agreement"), with the Pampa Economic Development
Corporation ("PEDC"), (previously disclosed). Management entered into this
Agreement in order to: (a) create a new expense paradigm which includes reduced
hourly wages expense, (b) access a pool of applicants who are believed to be
capable of rapidly assimilating training in the job skills related to UMC's
business, and (c) put into place a facility with 20,000 square feet of space at
a cost far below that which would be incurred in the Dallas area.

In exchange for providing jobs within the city limits of Pampa, Texas, at
a lower hourly rate than is possible in the Dallas area, the Agreement calls for
the PEDC to provide the following incentives to UMC:

15

(a) an incentive payment of $192,000 which was made upon the closing of
the purchase of the new operations center facility in Pampa. The Agreement
includes a claw back provision whereby if UMC does not maintain a minimum of 30
full time equivalent employees ("FTEE") employed in its Pampa operations center
during any given year of the eight years of the Agreement beginning with the
year ended December 31, 2001, UMC will be required to remit $24,000 back to PEDC
for each such year. UMC met the FTEE requirement for this incentive in 2001, and
recognized $24,000 of the incentive revenue in December 2001.

(b) an incentive payment of $40,000 per calendar year (for a maximum of
$320,000) so long as UMC provides a minimum average of 40 FTEE employed in its
Pampa operations center during each of the eight calendar years of the Agreement
commencing with the year ending December 31, 2001. UMC recognized $40,000 in
revenue from this incentive for 2001.

(c) an incentive payment of $1,000 per job per calendar year (for a
maximum of $80,000) for each FTEE from the 41st up to and including the 50th
FTEE employed in its Pampa operations center during each of the eight calendar
years of the Agreement commencing with the year ending December 31, 2001. UMC
recognized $10,000 in revenue from this incentive for 2001.

(d) an incentive payment of $500 per calendar year (with no cap or limit)
for each FTEE from the 51st and over employed in its Pampa operations center
during each of the eight calendar years of the Agreement commencing with the
year ending December 31, 2001. UMC recognized $5,875 in revenue from this
incentive for 2001.

(e) an incentive payment of $10,000 which has been paid to UMC based on
the condition that UMC had 40 persons employed in its Pampa operations center at
December 31, 2000, and

(f) PEDC guaranteed up to $137,000 for the benefit of UMC's lender (the
"Lender"), relative to the purchase of the operations center facility in Pampa.
In addition, PEDC will pay to UMC $27,400 per year during each of the first five
years of the Agreement (for a maximum of $137,000) commencing with the year
ending December 31, 2001. After offsetting the total monthly payments made to
Lender during the preceding 12 months from this annual payment, UMC will remit
the balance to the Lender. PEDC will be released from paying any and all unpaid
annual payments if UMC defaults on its obligations to its Lender or if UMC
discontinues its operations in Pampa within five years of July 28, 2000.

On August 21, 2000 UMC purchased a building in Pampa, located at 200 N.
Cuyler Street that serves as its Pampa operations center, and simultaneously
received payment of the relocation incentive totaling $192,000 (as specified in
paragraph (a) above). On December 31, 2000 UMC had 45 full time and 2 part time
employees at its Pampa operations center, and qualified for the initial
incentive payment as specified in paragraph (e) above. This payment was applied
to the forgivable loan from the PEDC that is detailed below. On July 28, 2001
UMC received $27,400 from the PEDC in payment of the incentive described in
paragraph (f) above. Of this, $14,178 was remitted to National Bank of Commerce
(the lien holder on the building) as a principal payment on the building loan in
accordance with paragraph (f). As of March 15, 2002 UMC had 73 full time, and 5
part time employees at its Pampa operations center.

16

There can be no assurance that UMC will be successful in: (a) continuing
to meet the aforementioned minimum employment requirements to trigger incentive
payments, (b) maintaining the minimum employment requirements to prevent
triggering the aforementioned claw back provision, or (c) averting a default to
its Lender or discontinuing its operations in Pampa within five years to prevent
PEDC from being released from paying any and all unpaid annual payments to UMC
relative to the aforementioned terms of the PEDC Agreement.

FORGIVABLE LOAN AGREEMENT

During the first 60 days of operation in Pampa, UMC experienced
difficulties with its data communications from Pampa to Dallas. This resulted in
reduced productivity in Pampa, delays in revenue generation, and unexpected
costs in diagnosing and managing data communications. In addition UMC expended
$11,964 for moving expenses and $92,110 in capital expenditures for equipment
and improvements to prepare the Pampa building for operations. Due to the effect
of these issues, UMC developed a need for additional working capital. As a
result, UMC executed a Forgivable Loan Agreement with the PEDC on October 31,
2000 (previously disclosed). Pursuant to the Forgivable Loan Agreement, the PEDC
loaned UMC $50,000, as an advance against scheduled incentive payments for 2000
and 2001. The principal amount of the loan was due and payable or forgivable
based on the terms and conditions of the Economic Development and Incentive
Agreement executed with the PEDC on July 28, 2000. The loan had an interest rate
of 9.5% per annum, which was not forgivable. The entire loan amount was
satisfied by incentives earned by UMC under paragraphs (b), (c), (d) and (e)
through the third quarter of 2001. The total interest paid by UMC on this loan
during 2001 was $2,659.

RESULTS OF OPERATIONS

The following table sets forth certain items from the Company's
Consolidated Statements of Operations expressed as a percentage of revenues:

17

2001 COMPARED TO 2000

REVENUES increased $487,900 or 21% primarily due to the following:

o Ongoing Accounts Receivable Management Services revenue of $1,147,000 in
2001 decreased by $172,321 compared to 2000 primarily due to the effect of
the aforementioned loss of the WHC contract, which was partially offset by
increased placements from new and existing customers during 2001.
Management believes that such increased placements will continue in 2002.
One of the Company's customers, which accounted for approximately 22% of
Ongoing Accounts Receivable Management Services revenue during 2001, has
been experiencing cash flow problems over the past year. This has caused
the customer to be slow in paying the Company's invoices. Although these
problems have not resulted in the need to reserve any of the customer's
outstanding invoices at 12/31/01, such problems could affect revenues for
2002, if the customer is not able to successfully find a solution for
them. Assuming that these problems do not affect 2002 revenues, and that
there are no other significant changes in the existing volume and mix of
claims placed by the Company's customers as of December 31, 2001, Ongoing
Accounts Receivable Management Services will generate revenues from such
customers of approximately $1.4 million in 2002.

o Backlog Accounts Receivable Management Services revenue of $139,000 in
2001 decreased by $322,000 compared to 2000 as a result of the winding
down of a Backlog medical claims management contract executed on March 22,
2000 with a major hospital system located in New Mexico. This contract
generated revenues of $139,000 and $370,000 in 2001, and 2000
respectively. Management does not anticipate any significant revenues from
this contract in 2002. In November of 2001 the Company executed a Backlog
Accounts Receivable Management contract with a hospital in central Texas.
Assuming that there are no significant changes in the existing volume and
mix of claims placed by the Company's customers as of December 31, 2001,
Backlog Accounts Receivable Management Services will generate revenues
from such customers of approximately $30,000 in 2002.

o Collection Agency Services revenue of $1,376,000 in 2001 increased by
$813,000 compared to 2000 due primarily to a collection agency services
contract executed October 13,2000. This contract generated revenues of
$891,000 and $227,000 in 2001 and 2000 respectively. The Company also
received a significant increase in placements during 2001 from a
collection agency services contract executed in March of 2000. This
contract provided revenues of $272,000 and $35,000 in 2001 and 2000
respectively. Assuming that there are no significant changes in the
existing volume and mix of accounts placed by the Company's customers as
of December 31, 2001, Collection Agency Services will generate revenues
from such customers of approximately $1.6 million in 2002.

o Other revenue of $121,000 in 2001 increased by $13,000 compared to 2000
which was primarily due to incentives received in accordance with the
agreement with the PEDC. Assuming that the Company continues to meet the
incentive requirements, this agreement will generate approximately
$110,000 in incentive revenues in 2002.

o UMClaimPros revenue of $2,000 in 2001 decreased by $56,000 compared to
2000 due to the discontinuation of UMClaimPro services in February of
2001.

18

WAGES AND BENEFITS expense increased $114,000 or 7% primarily due to
increased headcount as a result of increased business placements during 2001. As
of March 15, 2002, UMC had a total of 73 full time and 5 part time employees in
Pampa, and 4 full time employees in Dallas. Assuming no significant change in
the Company's core services, management expects that wages and benefits should
remain at approximately 63% of revenues in 2002.

SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") expense increased $16,000 or
3%. Assuming no significant change in the Company's core services, management
expects that SG&A should remain at approximately 19% of revenues in 2002.

OFFICE, VEHICLE AND EQUIPMENT RENTAL expense decreased $77,000 or 79%
primarily due to the move of the Companies operations center from Dallas to
Pampa in September of 2000, and the movement of its corporate offices to a 937
square foot space in Garland, Texas in November of 2000. This allowed the
Company to negotiate the early termination of its lease agreement for 6,836
square feet of office space in Dallas, resulting in a monthly expense reduction
of approximately $6,800. The company also had two leased automobiles, which
reached the end of their lease terms in March and April of 2001. Both vehicles
were purchased at the end of the lease terms. Assuming no significant changes in
office space and equipment leased at 12/31/01, management expects lease and
rental expense to be less than 1% of revenues in 2002.

DEPRECIATION AND AMORTIZATION expense decreased $15,000 or 13% in 2001.
Management expects depreciation and amortization expense to remain at
approximately 4% of revenues in 2002.

PROFESSIONAL FEES expense increased $17,000 or 40% primarily due to
increased tax preparation fees and costs associated with business licenses in
Louisiana and New Mexico.

INTEREST, NET decreased $3,000 or 8% primarily due to lower interest
rates, and paid down balances on notes and leases payable.

PROVISION FOR DOUBTFUL ACCOUNTS AND NOTES decreased $30,000 due to
recovery of accounts previously reserved, and good collection experience in
2001.

LIQUIDITY AND CAPITAL SOURCES

At December 31, 2001, the Company's liquid assets, consisting of cash,
totaled $4,000 compared to $8,000 at December 31, 2000. The working capital
deficit was ($24,000) and ($226,000) at December 31, 2001 and December 31, 2000,
respectively. Working capital increased primarily due the net operating income
for the year ended December 31, 2001.

Cash flow from operations in 2001 provided cash of $181,000, compared to
$162,000 cash used in operating activities from continuing operations in 2000.
This increase is primarily due to the 2001 net operating income of $266,000
increased by depreciation ($51,000) and amortization ($49,000) offset by
increases in accounts receivable ($112,000), and decreases in accounts payable
($62,000). In 2001, cash flow from continuing operations was supplemented by
incentives received from the Pampa Economic Development Commission to cover
working capital and liquidity requirements for continuing operations.

19

Investing activities in 2001 consisted of the purchases of furniture, fixtures,
equipment, building improvements, and two company automobiles, which had
previously been leased. Total cash used for investments was $90,000, of which
$61,000 was used for the purchase of furniture, fixtures and equipment, $20,000
was used to purchase the two company automobiles, and $8,000 was for the
purchase of building improvements. Total cash used in investing activities
during 2000 was $213,000. The Company's fixed assets are in good working order
and sufficient to support continuing operations.

Financing activities in 2001 consisted of borrowings under a bank loan for
the purchase of the two company automobiles in the amount of $20,000, and
principal payments on capital lease obligations and notes payable which used
cash of $115,000.

On December 28, 1999, the Company executed a $500,000 recourse factoring
agreement which may be terminated by either party with ten days notice. The
agreement is secured by all of the Company's non-factored accounts receivable
and is personally guaranteed by Peter Seaman, Chairman and CEO. Other
significant terms of the factoring agreement include recourse for invoices
remaining unpaid at 90 days, interest at prime plus 2.5%, and a factoring fee of
1% of the face value of each invoice.

Management believes that current cash and cash equivalents and projected
cash flows from operations together with the Company's factoring agreement,
incentives under the Economic Development and Incentive Agreement, capital lease
and other potential financing should be sufficient to support projected growth
in revenues through fiscal 2002.

1999 COMPARED TO 1998

REVENUES decreased $860,544 or 27% primarily due to the following:

o Ongoing Accounts Receivable Management Services revenue of $1,153,000 in
2000 decreased by $1,567,000 compared to 1999 primarily due to effect of
the aforementioned loss of the WHC contract.

o Backlog Accounts Receivable Management Services revenue of $415,000 in
2000 increased by $415,000 compared to 1999 of which $370,000 was due to a
medical claims management contract executed on March 22, 2000 with a major
hospital system located in New Mexico.

o Collection Agency Services revenue of $563,000 in 2000 increased by
$231,000 compared to 1999 of which $227,000 is due to a collection agency
services contract executed October 13, 2000.

o Other revenue of $63,000 in 2000 increased by $50,000 compared to 1999
which was primarily due to contract programming services provided to a
customer in 2000.

o UMClaimPros revenue of $58,000 in 2000 decreased by $35,000 compared to
1999 primarily due to the discontinuation of UMClaimPro service
utilization by two customers in 1999.

20

WAGES AND BENEFITS expense decreased $416,000 or 20% primarily due to
headcount reductions through attrition during the first months of 2000, and the
gradual transition of jobs from Dallas to the new operations center in Pampa.

SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") expense decreased $94,000 or
15% primarily due to expense reductions in conjunction with the aforementioned
revenue reductions.

OFFICE, VEHICLE AND EQUIPMENT RENTAL expense decreased $45,000 or 32%
primarily due to the August 2, 1999 office space reduction option exercised by
the Company whereby 3,300 square feet of office space was vacated on September
2, 1999 resulting in a monthly expense reduction of approximately $3,500. In
November of 2000, the Company negotiated the early termination of its lease
agreement for 6,836 square feet of office space in Dallas, and moved it
corporate offices to a 937 square foot space in Garland, Texas, resulting in a
monthly expense reduction of approximately $6,800.

DEPRECIATION AND AMORTIZATION expense decreased $2,000 or 1.7% in 2000.

PROFESSIONAL FEES expense decreased $26,000 or 38% primarily due to
decreased audit fees allocated to UMC in 2000 as compared to 1999 and $10,000 in
expense related to capital raising efforts throughout 1999.

INTEREST, NET decreased $7,000 or 15% primarily due to the balance of net
cash employed under the Company's factoring agreement being less than funds
borrowed under the Company's previous credit facility, partially offset by
increased interest rates.

OTHER EXPENSE decreased $26,000 primarily due to accruals related to AHO
and a loss on the rollover financing of the Company's IBM AS/400 during 1999.
These expenses were non-recurring.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company qualifies as a small business issuer as defined in Rule 12b-2
of the Securities Exchange Act of 1934. As such, the Company is not required to
provide information related to the quantitative and qualitative disclosures
about market risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's Consolidated Financial Statements appear beginning at page
35.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On January 25, 1999, the Company appointed Hein + Associates LLP as its
independent accountant. Hein + Associates LLP accepted such appointment. The
Company has had no relationship with Hein + Associates LLP required to be
reported pursuant to Regulation S-K Item 304(a)(2).

21

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

PETER W. SEAMAN (52) was elected President and Chief Executive Officer on
February 10, 1994, and Chairman of the Board of Directors on November 12, 1996.
Mr. Seaman joined the Company on July 17, 1991 as Vice President and Chief
Financial Officer and was elected to the Board of Directors on August 12, 1991.
Mr. Seaman's prior employment includes serving as Director of Business
Development for TRW Receivables Management Services from March, 1989 to June,
1991, and Vice President of Planning and Systems Development for the Accounts
Receivable Management Division of the Chilton Corporation from March, 1986 to
March, 1989. Prior to joining the Chilton Corporation, Mr. Seaman was Vice
President and Chief Financial Officer for Corliss, Inc., a collection systems
and services company. Before that, Mr. Seaman held a number of finance,
marketing, and auditing positions with the Datapoint Corporation, Rockwell
International, and Coopers and Lybrand. Mr. Seaman holds a B.A. in Accounting
from Duke University, and is a Certified Public Accountant. Mr. Seaman was
elected to the Board of Directors of the South Texas Chapter of the Healthcare
Financial Management Association on June 1, 2001.

MICHAEL P. BUMGARNER (58) was elected to the Board of Directors on
November 12, 1996. Mr. Bumgarner is the Chairman of the Audit Committee of the
Board of Directors. Mr. Bumgarner is President/CEO of msi21, Inc., a Dallas,
Texas based medical management consulting firm positioned to deliver
accreditation preparation, ongoing regulatory and reimbursement compliance and
other management services to all types of medical facilities through its
interactive multi-layered web site and its strategically located Professional
Affiliates, nationally. Mr. Bumgarner's prior experience includes Chairman/CEO
of Beacon Enterprises, Inc., a holding company which he co-founded in May, 1994
with interests in a number of healthcare concerns including GSS "Gold Seal
Services", one of the largest home healthcare providers in the San Antonio area.
GSS was sold to a Dallas based public company in December 1996. Prior to
starting Beacon Enterprises, Mr. Bumgarner worked as a consultant for a number
of national distributors of cardiovascular equipment in the southwest United
States. From 1977 to 1986, Mr. Bumgarner was founder and president of a national
healthcare company providing arrhythmia monitoring by telephone to patients in
their homes. During this period, he developed the "continuous loop memory"
arrhythmia transmitter and received a patent registered in the U.S. Patent
Office. After graduating from Auburn University, he was honorably discharged
from the USAF as a Captain and carried his electronics background to the medical
industry where he has spent over 30 years gaining extensive senior business and
management experience.

JOHN F. LEWIS (55) was elected to the Board of Directors on November 12,
1996. Mr. Lewis is President/CEO of Lewis Consulting, LLC., a national health
care policy and financial assessment consulting firm specializing in Medicare
reimbursement and regulatory compliance for a number of healthcare industry
concerns in Puerto Rico and the Caribbean market area. From 1992 to 1996, Mr.
Lewis served as Health Advisor to the Governor of the U.S. Virgin Islands. From
1988 to 1992, Mr. Lewis was employed as Assistant Vice President for Medicare
Operations at Seguros de Servicios de Salud, the

22

Medicare Part B Carrier for Puerto Rico and the Caribbean. Mr. Lewis holds his
degree in Business Administration from the American College of Switzerland and
his MBA, University of Geneva, School of Business and Socio-Economics,
Switzerland.

MORGAN HAY (53) was elected Vice President on February 25, 2002, with
primary responsibility for sales and marketing. Mr. Hay was previously Vice
President of Finance for Valley Baptist Medical Center, a 540-bed acute care
facility, in Harlingen, Texas, where he was employed from 1991 to 2002. Prior to
his employment with Valley Baptist Medical Center, Mr. Hay held finance
positions with St. Joseph Hospital, Fort Worth, Texas; Sherman Healthcare, Inc.,
Sherman, Texas; and Cooper Communities, Inc. and Wicklow Corporation, real
estate development and construction companies in Bentonville, Arkansas. Mr. Hay
holds a BBA in Business Management from Stetson University and a BSBA in
Accounting from Missouri Southern State College. Mr. Hay is a Certified Public
Accountant (CPA) and a Fellow in the Healthcare Financial Management Association
(FHFMA). Mr. Hay is Past President of the South Texas Chapter of the Healthcare
Financial Management Association

NATHAN BAILEY (41) was elected Vice President and Corporate Controller on
March 25, 2002 with primary responsibility for Finance and Accounting. Mr.
Bailey Joined the Company on August 27, 2000 as the Corporate Controller. Mr.
Bailey has previously served as an accountant for Engineered Carbons, Inc,
Borger, Texas from 1998 to 2000; Controller for Nunn Manufacturing, Amarillo,
Texas 1998; General Manager and Controller for West Texas Ford Lincoln Mercury,
Inc., Pampa Texas, from 1992 to 1998; and Controller for The Texas Cattle
Feeders Association in Amarillo, Texas from 1990 to 1992. Mr. Bailey practiced
public accounting from 1985 to 1990 with KPMG Peat Marwick, and H.V. Robertson
and Co. both in Amarillo, Texas. Mr. Bailey holds a BBA in accounting from West
Texas State University and is a Certified Public Accountant.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT OF 1934

Pursuant to Section 16(a) of the Securities Act of 1934 and the rules
issued thereunder, the Company's executive officers and directors are required
to file with the Securities and Exchange Commission reports of ownership and
changes in ownership of the Common Stock. Copies of such reports are required to
be furnished to the Company. All required forms have been timely filed.

23

ITEM 11. EXECUTIVE COMPENSATION

Set forth below are tables showing in summary form, the compensation paid
for the years shown in the table to Mr. Seaman and exercise and year end
valuation information pertaining to stock options and warrants granted to Mr.
Seaman. No other executive officer of the Company received total annual salary
and bonus in excess of $100,000 in the fiscal years 2001, 2000 or 1999:

SUMMARY COMPENSATION TABLE

AGGREGATED OPTION/WARRANT EXERCISES
AND FISCAL YEAR-END OPTION/WARRANT VALUES

(3) The last reported sale of the Company's Common Stock as reported on the
NASD OTC Bulletin Board as of December 31, 2001 was $0.02 per share. Value
is calculated on the basis of the difference between the option exercise
price and $0.02 multiplied by the number of shares of Common Stock
underlying the option or warrant.

24

COMPENSATION OF DIRECTORS

An officer of the Company who also serves as a Director of the Company
receives no additional compensation for serving as a Director or as a member or
chair of a committee. Through December 31, 2001 non-employee members received no
cash compensation for serving on the Board of Directors, but were reimbursed for
expenses of meeting attendance. Beginning in 2002, non-employee board members
will receive compensation of $500 per board meeting in addition to reimbursement
for expenses of meeting attendance.

Pursuant to the 1995 Stock Option Plan, each non-employee director shall
receive nonqualified stock options for the purchase of 25,000 shares of Common
Stock. These options shall be granted on the first and each subsequent
anniversary of the approval of the 1995 Stock Option Plan by stockholders, as
long as the director serves on the Board. The exercise price shall be the fair
market value of the Common Stock on the date the nonqualified stock options are
granted. One half of the option shall be exercisable immediately and the
remainder of the option shall become exercisable on the first anniversary date
of the grant. All options shall expire on the tenth anniversary of the date
granted.

Subsequent to stockholder approval of the 1995 Stock Option Plan, the
Board of Directors determined that in light of the condition of the Company
immediately prior to November 12, 1996 when the current members of the Board of
Directors were elected, the provisions of the 1995 Stock Option Plan regarding
director compensation were inadequate to attract and retain qualified board
members. As such, on April 1, 1997, warrants to purchase a total of 1,200,000
shares of the Company's common stock at $0.08 per share were issued to the three
non-employee board members with each member receiving a warrant for 400,000
shares. These warrants were issued in lieu of the options that would have been
issued to the board members under the 1995 Stock Option Plan. One of the board
members resigned on February 26, 2001; the warrants issued to him expired on May
26, 2001. These warrants are exercisable 33 1/3% immediately, 66 2/3% after
twelve months from the effective date of the grant, and 100% after twenty four
months from the effective date of the grant. These warrants expire on the
earlier of (a) March 31, 2007, (b) the date on which the Director's services are
terminated for cause, (c) three months after the expiration of the Director's
term, resignation from the Board of Directors, or termination of the Director
due to the sale

25

of the Company or (d) twelve months after the services as a Director are
terminated by reason of the Director's death of disability. None of these
warrants had been exercised as of December 31, 2001.

On March 19, 1997, each non-employee member of the Board of Directors
entered into a Director's Incentive Compensation Agreement ("DICA"). This
agreement has a term of three years under which the director shall be paid a
commission based on fees billed and collected from new customers sold by or with
the assistance from such director. The commission will be 10 percent during the
first year of a contract with a given customer, 6 percent during the second
contract year, and 4 percent thereafter. The Director's compensation may be paid
in either cash, common stock, or stock purchase warrants upon approval of the
Compensation and Stock Option Committee. For the year ended December 31, 2000,
the Company paid $2,600 in commissions to a non-employee director under the DICA
agreement. The Company did not pay any commissions under DICA during the years
1999 or 2001.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of the Compensation Committee are Messrs. Lewis and
Bumgarner. None of the members of the Company's Compensation Committee served as
a member of the compensation committee or other board committees performing
similar functions of any other registered entity in 2001.

ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and the notes thereto set forth certain information
regarding the beneficial ownership of shares of the Company's Common Stock as of
March 15, 2002 by (i) each current director; (ii) all current directors and
officers of the Company as a group; and (iii) each person known to the Company
to own beneficially more than five percent (5%) of the currently outstanding
Common Stock. Unless there is a footnote to the contrary, sole voting and
investment power in the shares owned are held either by the named individual
alone or by the named individual and his or her spouse:

26

(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to the shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable. Beneficial ownership as reported in the above table has
been determined in accordance with Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The percentages are based
upon 29,210,217 shares outstanding except with respect to certain persons
who hold presently exercisable options or warrants to purchase shares. The
percentage for each person who holds presently exercisable options or
warrants is based upon the sum of 29,210,217 shares outstanding plus the
number of shares subject to presently exercisable options or warrants held
by such person.

(2) According to a Schedule 13D filed with the Company, Mercury Asset
Management plc. ("MAM") manages investments for its clients and the
securities indicated are held solely for the accounts of such clients.
With respect to 3,267,200 of the shares held on behalf of a unit trust, a
wholly-owned subsidiary of MAM, as manager of the trust, has power to vote
the shares. MAM has the power to sell the shares for the benefit of the
trust. With respect to the remainder of the shares, MAM has dispositive
power, but not voting power, subject to its clients' guidelines. MAM does
not admit that it is the beneficial owner of any of the indicated shares.

(3) As required by the Securities and Exchange Commission, this column
includes shares available under exercisable options /warrants as well as
shares that may be acquired within 60 days of March 31, 2001, upon
exercise of options/warrants.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On March 19, 1997, each non-employee member of the Board of Directors
entered into a Director's Incentive Compensation Agreement ("DICA"). This
agreement has a term of three years under which the director shall be paid a
commission based on fees billed and collected from new customers sold by or with
the assistance from such director. The commission will be 10 percent during the
first year of a contract with a given customer, 6 percent during the second
contract year, and 4 percent thereafter. The Director's compensation may be paid
in either cash, common stock, or stock purchase warrants upon approval of the
Compensation and Stock Option Committee. For the year ended December 31, 2000,
the Company paid

27

$2,600 in commissions to a non-employee director under the DICA agreement. The
Company did not pay any commissions under DICA during the years 1999 or 2001.

For the year ended December 31, 2001, the Company recognized $26,000 in
commission expense for new business introduction from a corporation of which the
majority shareholder is a non-employee Director of UMC. This commission expense
was recognized pursuant to a contract with the corporation in which UMC agrees
to pay said corporation a percentage of the fees billed and collected from any
new customers sold by or with the assistance of the corporation. The commission
will be 10 percent during the first year of a contract with a given customer, 6
percent during the second contract year, and 4 percent thereafter.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

Reference is made to the Consolidated Financial Statements and
Financial Statement Schedules included at page 33.

2. Financial Statement Schedules

Reference is made to the Consolidated Financial Statements and
Financial Statement Schedules included at page 33.

3. Exhibits:

3.1 Certificate of Incorporation of the Company, filed with
Secretary of State of Delaware on February 26, 1988, is
incorporated herein by reference to Exhibit 3 (a) of the
Company's Registration Statement on Form S-1, Commission File
No. 33-20989, filed with the Commission on March 30, 1988 and
declared effective June 7, 1988 (previously filed).

3.2 By-Laws of the Company are incorporated herein by reference to
Exhibit 3 (b) of the Company's Registration Statement on Form
S-1, Commission File No. 33-20989, filed with the Commission
on March 30, 1988 and declared effective June 7, 1988
(previously filed).

3.3 Certificate of Amendment to Certificate of Incorporation of
the Company, filed with Secretary of State of Delaware on July
12, 1989, is incorporated herein by reference to Exhibit 3 of
the Company's Current Report on Form 8-K, filed with the
Commission on July 25, 1989 (previously filed).

3.4 Certificate of Amendment to Certificate of Incorporation of
the Company, filed with Secretary of State of Delaware on
August 9, 1989, is incorporated herein by reference to Exhibit
3.2 of the Company's Form 10-Q filed for the fiscal quarter
ended September 30, 1989 (previously filed).

28

4.3 Specimen Form of Certificate of Common Stock of the Company is
incorporated herein by reference to Exhibit 4.3 of the
Company's Registration Statement on Form S-1, Commission File
No. 33-35177, originally filed with the Commission on June 1,
1990 and declared effective July 27, 1990 (previously filed).

4.4 Article Fourth of the Company's Certificate of Incorporation
is incorporated herein by reference to Exhibit 3 of the
Company's Current Report on Form 8-K, filed with the
Commission on July 25, 1989 (previously filed).

4.5 Certificate of Amendment to Certificate of Incorporation,
filed with the Secretary of State of Delaware on June 21, 1990
is incorporated herein by reference to Exhibit 4.5 of the
Company's Registration Statement on Form S-1, Commission File
No. 33-35177, originally filed with the Commission on June 1,
1990 and declared effective on July 27, 1990 (previously
filed).

4.6 Form of Common Stock Purchase Warrant for 400,000 shares
issued to Thomas H. McConnell, III (previously filed).

4.7 Form of Common Stock Purchase Warrant for 400,000 shares
issued to Michael P. Bumgarner (previously filed).

4.8 Form of Common Stock Purchase Warrant for 400,000 shares
issued to John F. Lewis (previously filed).

4.9 Form of Common Stock Purchase Warrant issued to Peter W.
Seaman for 500,000 shares (previously filed).

4.10 Form of Common Stock Purchase Warrant issued to Peter W.
Seaman for 1,500,000 shares (previously filed).

4.11 Form of Common Stock Purchase Warrant issued to R. Kenyon
Culver for 500,000 shares (previously filed).

4.12 Form of Common Stock Purchase Warrant issued to R. Kenyon
Culver for 1,500,000 shares (previously filed).

9. Not Applicable.

10.7 1992 Stock Option Plan of the Company is incorporated herein
by reference to Exhibit 10.24 of the Company's Registration
Statement on Form S-1, Commission File No. 33-35178
(previously filed).

10.11 Customer Service Agreement dated December 15, 1992 by and
between the Company and the Washington Hospital Center is
incorporated herein by reference to Exhibit 10.27 of the
Company's Registration Statement on Form S-1, Commission File
No. 33-35178 (previously filed).

29

10.14 Standard Office Building Lease Agreement dated June 1, 1989,
between the Registrant and Aetna Life Insurance Company
(previously filed).

10.15 Third Amendment to Lease, dated May 1, 1992, between the
Registrant and Aetna Life Insurance Company (previously
filed).

10.19 Certificate of Amendment to Certificate of Incorporation of
the Company, filed with Secretary of State of Delaware on
August 3, 1993 (previously filed).

10.22 1995 Stock Option Plan (previously filed).

10.23 Modification and Ratification of Lease, dated July 19, 1995
(previously filed).

10.25 Severance Agreement by and between Registrant and Mary E.
Rogers (previously filed).

10.26 Severance Agreement by and between Registrant and Peter W.
Seaman (previously filed).

10.28 Director's Incentive Compensation Agreement by and between
Registrant and Thomas H. McConnell, III (previously filed).

10.29 Director's Incentive Compensation Agreement by and between
Registrant and John F. Lewis. (previously filed).

10.30 Director's Incentive Compensation Agreement by and between
Registrant and Michael P. Bumgarner. (previously filed).

10.31 Amendment No. 1 to Customer Service Agreement dated December
15, 1992 by and between the Company and the Washington
Hospital Center relating to collection of Department of
Emergency Medicine claims is incorporated herein by reference
to Exhibit 10.27 of the Company's Registration Statement on
Form S-1, Commission File No. 33-35178 (previously filed).

10.32 Amendment No. 2 to Customer Service Agreement dated December
15, 1992 by and between the Company and the Washington
Hospital Center relating to collection of physician claims is
incorporated herein by reference to Exhibit 10.27 of the
Company's Registration Statement on Form S-1, Commission File
No. 33-35178 (previously filed).

10.33 Collection Services Agreement dated January 17, 1997 by and
between the Registrant and Presbyterian Healthcare System
(previously filed).

10.34 Early Out Collection Agreement dated May 1, 1997 by and
between the Registrant and Presbyterian Healthcare System
(previously filed).

10.35 Secondary Collection Agreement dated October 31, 1997 by and
between the Registrant and Presbyterian Healthcare System
(previously filed).

30

10.36 Loan Agreement dated December 11, 1998 by and between the
Registrant and Texas Central bank (previously filed).

10.37 Promissory Note dated December 11, 1998 by and between the
Registrant and Texas Central bank (previously filed).

10.38 Factoring Agreement and Security Agreement dated December 28,
1999 by and between the Registrant and Metro Factors, Inc.
(previously filed).

10.39 Economic Development and Incentive Agreement by and between
the Registrant and the Pampa Economic Development Corporation.
(previously filed)

10.40 Forgivable Loan Agreement by and between the Registrant and
the Pampa Economic Development Corporation. (previously filed)

22.1 Subsidiaries of the Company (previously filed).

99.1 Safe Harbor Compliance Statement for Forward-Looking
Statements

99.2 Voluntary Petition United States Bankruptcy Court Northern
District of Texas - Chapter 7 (previously filed)

(b) Reports on Form 8-K

No reports of Form 8-K were filed during the fourth quarter of 2001.

31

SIGNATURES

PURSUANT TO THE REQUIREMENT OF SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

United Medicorp, Inc.

Date: March 28, 2002 By: /s/ Peter W. Seaman
---------------------------------------------------------
PETER W. SEAMAN,
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

32

UNITED MEDICORP, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2001

ITEMS 8 AND 14(a)

33

UNITED MEDICORP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
[ITEM 8 AND 14(a)]

Other financial statement schedules have been omitted because they are not
applicable or the required information is shown in the Consolidated Financial
Statements or Notes thereto.

34

UNITED MEDICORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these
consolidated financial statements

35

UNITED MEDICORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these
consolidated financial statements

36

UNITED MEDICORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE PERIOD FROM DECEMBER 31, 1998 TO DECEMBER 31, 2001

The accompanying notes are an integral part of these
consolidated financial statements

37

UNITED MEDICORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these
consolidated financial statements

38

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

A. THE COMPANY

United Medicorp Texas, Inc., was incorporated in the State of Texas on
March 13, 1989 ("UMC-Texas"). On July 10, 1989, in an exchange of stock,
UMC-Texas was acquired by Gamma Resources, Inc., a publicly-owned Delaware shell
corporation, which simultaneously changed its name to United Medicorp, Inc. (the
"Company", "UMC" or the "Registrant"). On November 18, 1996, the Company filed
"Articles of Amendment to the Articles of Incorporation of Sterling Hospital
Systems, Inc." whereby this wholly owned subsidiary of UMC was renamed United
MoneyCorp, Inc. ("UMY"). UMY has been designated as the legal entity under which
UMC operates a collection agency. On August 7, 1998, UMC acquired 100% of the
common stock of Allied Health Options, Inc. ("AHO"), an Alabama corporation.
Effective June 30, 1999, the Company discontinued the operations of AHO. On
October 14, 1999, AHO filed a voluntary petition in the United States Bankruptcy
Court for the Northern District of Texas to liquidate pursuant to Chapter 7 of
Title 11 of the United States Bankruptcy code. On November 16, 1999, the Chapter
7 bankruptcy 341 creditors meeting was held. Unless the context indicates
otherwise, references herein to the Company include UMC and its operating
subsidiary UMY, and exclude AHO.

The Company provides medical insurance claims processing and accounts
receivable management services to healthcare providers. The Company employs
proprietary and purchased software to provide claims processing, billing and
collection services to its customers, which are primarily hospitals, medical
clinics, and physician practices. The Company's medical claims processing
service is designed to provide an electronic claims processing, billing and
collection service that expedites payment of claims from private insurance
carriers or government payors such as Medicare and Medicaid. The Company also
offers to its customers processing and collection services for uncollected
"backlog" (aged) claims that were not originally submitted through the Company's
electronic claims processing system. UMY provides customer service and
collection services to health care providers.

The Company also has in the past provided interim staffing services under
the name style "UMClaimPros." This service line was introduced by the Company in
December 1994. UMClaimPros were experienced claims processors available for
customers' interim staffing needs.

AHO was engaged in: outpatient services; twenty four hour a day emergency
care services; partial hospitalization services, or psychosocial rehabilitation
services; screening of patients being considered for admission to State mental
health facilities to determine the appropriateness of such admission; and
consultation and education services. AHO operated three Community Mental Health
Centers ("CMHC's") under the names: Behavioral Health of Mobile ("BHM"), Calhoun
County Behavioral Health ("CCBH"), and Pensacola Center for Behavioral Health
("PCBH"). BHM and CCBH obtained Health Care Financing Administration ("HCFA")
certification to provide partial hospitalization services as a CMHC under
Medicare Part A effective February 1, 1996. PCBH obtained HCFA certification to
provide partial hospitalization services as a CMHC under Medicare Part A
effective October 2, 1996.

39

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
UMC and its wholly owned subsidiaries UMY and AHO. All material intercompany
transactions and balances have been eliminated in consolidation. Certain prior
year balances have been reclassified to conform with current year presentation.
Effective June 30, 1999, the Company discontinued the operations of AHO as
discussed in Note C. As such, AHO's results are classified as discontinued
operations for all periods presented.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from these estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand.

FACTORED ACCOUNTS RECEIVABLE WITH RECOURSE

Factored accounts receivable are accounted for pursuant to SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("SFAS No. 140").

Pursuant to SFAS No. 140, the Company treats its factored accounts
receivable as a sales transaction, and as such, no liability is recognized for
the amount of the proceeds received from the transfer of the accounts
receivable.

PROVISION FOR DOUBTFUL ACCOUNTS

UMC accounts receivable are reserved on an account by account basis. In
general, accounts aged greater than 120 days are fully reserved.

PROPERTY AND EQUIPMENT, AND ASSETS HELD UNDER CAPITAL LEASES

Property and equipment are recorded at cost. Leased property meeting
certain criteria is capitalized and the present value of the related lease
payments is recorded as a capital lease obligation. Expenditures for repairs and
maintenance are charged to expense as incurred, and expenditures for major
renewals and betterments are capitalized. Depreciation and amortization are
computed using the straight-line method over the estimated useful life of the
asset, ranging from three to seven years. Upon disposition of assets, the cost
and related accumulated depreciation or amortization is removed from the
accounts and the resulting gain or loss is recorded.

Property and equipment are reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset or group of
assets may not be recoverable. The impairment review would include a comparison
of future cash flows expected to be generated by the

40

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

asset or group of assets with their associated carrying value. If the carrying
value of the asset or group of assets exceeds expected cash flows (undiscounted
and without interest charges), an impairment loss is recognized for the excess
of carrying amounts over fair value. On November 15, 2000 UMC moved out of its
executive offices and operations center in Dallas, Texas, to which it had
previously made several leasehold improvements. At December 31, 2000 these
improvements had a net depreciable value of approximately $23,000, which was
written off as a part of relocation cost.

BILLING AND COLLECTION SERVICES REVENUE RECOGNITION

The Company's billing and collection services revenue is recognized upon
receipt by the customer of payment from a third party payor or guarantor of a
patient's account and upon notification by the customer to the Company that such
payment has been received, or upon receipt of such payment by UMC.

OTHER REVENUE RECOGNITION

For 2001 other revenues consisted primarily of incentives from the PEDC
agreement, which were recognized when earned according to the agreement. For
2000 and 1999, other revenues consisted primarily of advance funding fees and
consulting revenues recognized as services were performed. Consulting revenues
were netted with the associated cost of services.

EARNINGS PER SHARE

The Company applies SFAS No. 128, "Earnings Per Share" ("SFAS No. 128")
which requires companies to present on the face of the statement of operations,
basic earnings per share ("EPS") and diluted EPS. Companies with complex capital
structures are required to reconcile the numerator and denominator used in the
basic EPS computation to the numerator and denominator used in the diluted EPS
computation. For each of the three years ended December 31, 2001, basic EPS
calculations are based on the weighted-average number of common shares
outstanding during the period, while diluted EPS calculations are based on the
weighted-average number of common shares and dilutive common share equivalents
outstanding during each period.

INCOME TAXES

Income taxes are accounted for pursuant to SFAS No. 109, "Accounting for
Income Taxes" ("SFAS No. 109"). SFAS No. 109 requires that deferred income taxes
reflect the tax consequences on future years of differences between the tax
basis of assets and liabilities and their basis for financial reporting purposes
and that future tax benefits, such as Net Operating Loss Carryforwards (NOLs),
are required to be recognized to the extent that realization of such benefits is
more likely than not.

41

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

STOCK-BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-based Compensation" ("SFAS No. 123")
requires Companies to include the fair value of stock options and other
stock-based compensation issued to employees and non-employees as compensation
expense in the income statement or to disclose the pro-forma effect on net
income and earnings per share of such compensation expense in the footnotes to
the Company's financial statements. The Company has elected to continue to
account for its employee stock options issued under approved Stock Option Plans
and warrants issued to the members of the Company's Board of Directors on April
1, 1997 and November 12, 1996, pursuant to APB25 "Accounting for Stock Issued to
Employees." This decision results in recognition of no compensation expense for
employee or director stock options that are granted with an exercise price at or
greater than the market price on the date of grant. However, in accordance with
the disclosure provisions of SFAS No. 123, the Company has provided proforma
basis information to reflect results of operations and earnings per share had
compensation expense been recognized for these items. All other equity
instruments issued by the Company to employees and non-employees will be
recognized pursuant to SFAS No. 123, which will impact the Company's
consolidated balance sheet and statement of operations.

C. INCENTIVE FINANCING RELATIVE TO RELOCATION OF OPERATIONS CENTER

During 1999 and the first seven months of 2000, UMC had experienced
increasing difficulty in recruiting and retaining experienced medical billing
and collection staff in the Dallas area. This situation was the result of low
unemployment and strong competition from nearby major hospitals and physician
groups for experienced staff. Low unemployment and escalating competition for
qualified staff had resulted in an overall increase in hourly wage rates and
turnover.

Effective July 28, 2000, UMC executed an Economic Development and
Incentive Agreement (the "Agreement"), with the Pampa Economic Development
Corporation ("PEDC").

In exchange for providing jobs within the city limits of Pampa, Texas, at
a lower hourly rate than is possible in the Dallas area, the Agreement calls for
the PEDC to provide the following incentives to UMC:

(a) an incentive payment of $192,000 which was made upon the closing of
the purchase of the new operations center facility in Pampa. The Agreement
includes a claw back provision whereby if UMC does not maintain a minimum of 30
full time equivalent employees ("FTEE") employed in its Pampa operations center
during any given year of the eight years of the Agreement beginning with the
year ended December 31, 2001, UMC will be required to remit $24,000 back to PEDC
for each such year. UMC met the FTEE requirement for this incentive in 2001, and
recognized $24,000 of the incentive revenue in December 2001.

(b) an incentive payment of $40,000 per calendar year (for a maximum of
$320,000) so long as UMC provides a minimum average of 40 FTEE employed in its
Pampa operations center during each of the eight calendar years of the Agreement
commencing with the year ending December 31, 2001. UMC recognized $40,000 in
revenue from this incentive for 2001.

42

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(c) an incentive payment of $1,000 per job per calendar year (for a
maximum of $80,000) for each FTEE from the 41st up to and including the 50th
FTEE employed in its Pampa operations center during each of the eight calendar
years of the Agreement commencing with the year ending December 31, 2001. UMC
recognized $10,000 in revenue from this incentive for 2001.

(d) an incentive payment of $500 per calendar year (with no cap or limit)
for each FTEE from the 51st and over employed in its Pampa operations center
during each of the eight calendar years of the Agreement commencing with the
year ending December 31, 2001. UMC recognized $5,875 in revenue from this
incentive for 2001.

(e) an incentive payment of $10,000 which was paid to UMC based on the
condition that UMC had 40 persons employed in its Pampa operations center at
December 31, 2000, and

(f) PEDC guaranteed up to $137,000 for the benefit of UMC's lender (the
"Lender"), relative to the purchase of the operations center facility in Pampa.
In addition, PEDC will pay to UMC $27,400 per year during each of the first five
years of the Agreement (for a maximum of $137,000) commencing with the year
ending December 31, 2001. After offsetting the total monthly payments made to
Lender during the preceding 12 months from this annual payment, UMC will remit
the balance to the Lender. PEDC will be released from paying any and all unpaid
annual payments if UMC defaults on its obligations to its Lender or if UMC
discontinues its operations in Pampa within five years of July 28, 2000.

On August 21, 2000 UMC purchased a building in Pampa that serves as its
Pampa operations center, and simultaneously received payment of the relocation
incentive totaling $192,000 (as specified in paragraph (a) above. On December
31, 2000 UMC had 45 full time and 2 part time employees at its Pampa operations
center, and qualified for the initial incentive payment as specified in
paragraph (e) above. This payment was applied to the forgivable loan from the
PEDC that is detailed below. On July 28, 2001 UMC received $27,400 from the PEDC
in payment of the incentive described in paragraph (f) above. Of this, $14,178
was remitted to National Bank of Commerce (the lien holder on the building) as a
principal payment on the building loan in accordance with paragraph (f). As of
March 15, 2002 UMC had 73 full time, and 5 part time employees at its Pampa
operations center.

There can be no assurance that UMC will be successful in: (a) continuing
to meet the aforementioned minimum employment requirements to trigger incentive
payments, (b) maintaining the minimum employment requirements to prevent
triggering the aforementioned claw back provision, or (c) averting a default to
its Lender or discontinuing its operations in Pampa within five years to prevent
PEDC from being released from paying any and all unpaid annual payments to UMC
relative to the aforementioned terms of the PEDC agreement.

D. ALLIED HEALTH OPTIONS, INC. - BANKRUPTCY PETITION, DISCONTINUED OPERATIONS
AND GOODWILL WRITE-OFF

Effective June 30, 1999 (the "Measurement Date" pursuant to APB Opinion
No. 30 Reporting the Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions), the Company discontinued the operations of
AHO for those reasons explained below. The Disposal Date was October 14, 1999,
at which time, AHO filed a voluntary petition in the United States Bankruptcy
Court for the Northern District of Texas to

43

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

liquidate pursuant to Chapter 7 of Title 11 of the United States Bankruptcy
Code. The filing was made primarily due to the insolvency of AHO. At October 14,
1999, the net liabilities of AHO totaled approximately $2.7 million of which
approximately $1,059,000 represented unsecured intercompany loans and other
forms of working capital provided by UMC. Simultaneous with the filing of the
Chapter 7 petition, and pursuant to SFAS No. 94, "Consolidation of All
Majority-Owned Subsidiaries" the accounts of AHO were deconsolidated.

The net operating results of AHO and the loss on disposal of AHO are
reported in the Consolidated Statements of Operations as "Loss from discontinued
operations" and "Loss on disposal of discontinued operations" and the net cash
flows are reported in the Consolidated Statements of Cash Flows as "Net cash
used in discontinued operations."

Summarized financial information for the discontinued operations of AHO for
the year ended December 31, 1999 is as follows:

E. FACTORED ACCOUNTS RECEIVABLE WITH RECOURSE

On December 28, 1999, the Company executed a $500,000 recourse factoring
agreement, which may be terminated by either party with ten days notice. The
agreement is secured by all of the Company's non-factored accounts receivable
and is personally guaranteed by the Company's Chief Executive Officer. The
factor has recourse against the Company, its collateral and guarantor should
factored invoices remain unpaid at 90 days. Interest at prime plus 2.5% is
charged against the net cash deployed by the factor which is computed as total
advances to the Company less reserve in excess of 20% of the face value of the
factored invoices, if any. The company receives a maximum advance of 80% for
each invoice sold. Upon payment in full of the invoice by the customer to the
factor, the Company then has access to the remaining 20% net of interest and
fees.

44

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

F. PROPERTY AND EQUIPMENT / ASSETS UNDER CAPITAL LEASES

At December 31, 2001 property and equipment consist of the following:

At December 31, 2000 property and equipment consist of the following:

Depreciation expense related to property and equipment was $51,446,
$52,031 and $67,909 during 2001, 2000 and 1999, respectively. Amortization
expense relative to assets under capital leases was $49,208, $63,264 and $49,659
during 2001, 2000 and 1999, respectively.

G. CAPITAL LEASE OBLIGATIONS

On June 2, 1999, the Company leased a new IBM A/S 400 Model 620 computer
for a term of 36 months. The total amount financed, including the rollover of
the remaining lease payments under the previous A/S 400 lease and financing of
the maintenance contract on the new computer, was $174,278, of which $98,420
represents the cost of the AS/400 and related equipment, $63,906 represents
rollover financing and consolidation of all other IBM capital lease obligations,
and $11,952 represents financed maintenance. This equipment may be purchased at
the end of the lease for the then fair market value.

During 1999, the Company entered into one software lease through a single
lessor for a term of 36 months. This software may be purchased at the end of the
lease at no cost.

During 1998, the Company entered into various equipment leases through a
single lessor. This equipment may be purchased at the end of the lease for $1.

45

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

At December 31, the remaining capital lease obligations are as follows:

2002..................................................................... $ 33,155
Less interest............................................................ 1,565
-----------
Principal amount of net lease payments................................... $ 31,590
===========

Interest expense on capital lease obligations was $6,026, $13,610 and
$17,007 during 2001, 2000 and 1999, respectively.

H. NOTES PAYABLE

Notes payable at December 31, consists of the following:

46

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

As of December 31, 2001, future maturities of notes payable were as follows:

Year ending December 31:
2002........................................................................ $ 19,031
2003........................................................................ 13,154
2004........................................................................ 10,198
2005........................................................................ 10,843
2006........................................................................ 11,512
Thereafter.................................................................. 66,297
-----------
Total........................................................................ $ 131,035
===========

I. INCOME TAXES

There is no current or deferred tax expense for the years ended December
31, 2001, 2000 and 1999. The Company utilized NOL carryforwards to offset
taxable income in 2001 and recorded a net operating tax loss ("NOL") in 2000 and
1999.

SFAS No. 109 requires that deferred income taxes reflect the tax
consequences on future years of differences between the tax basis of assets and
liabilities and their basis for financial reporting purposes. In addition,
future tax benefits, such as NOLs, are required to be recognized to the extent
that realization of such benefits is more likely than not. Realization of the
future tax benefits related to deferred tax assets is dependent on many factors,
including the Company's ability to generate taxable income within the net
operating loss carryforward period. At December 31, 2001, 2000 and 1999, the
Company's deferred tax assets are fully reserved. At December 31, 2001, 2000 and
1999, the Company had no net deferred tax liability. The tax effects of
temporary differences and NOLs that give rise to the deferred tax assets at
December 31, are as follows:

From inception in March 1989 to March 1992, the Company generated NOLs
totaling $13.9 million. In March 1992, the Company experienced an ownership
change as defined by Section 382 of the Internal Revenue Code. As a result of
this event, the Company will be limited in its ability to use pre-change NOL
carryforwards to reduce subsequent taxable income. The amount of taxable income
that can be offset by pre-change NOL carryforwards in any annual period is
limited to approximately $358,000 through 2007. Post-change NOL carryforwards
which are not subject to limitation total $5.3 million and will expire in
varying amounts between 2007 and 2020.

47

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

J. STOCKHOLDERS' EQUITY

At December 31, 2001, there were 5,000,000 shares of 10% cumulative
preferred stock, par value $0.01 authorized but not issued. The preferred stock
may be issued in series and include rights and preferences as designated by the
Company's board of directors.

The Company has outstanding warrants and options as described in Notes L
and M. There were 4,010,000 shares of Common Stock reserved for issuance of
outstanding warrants and options at December 31, 2001.

K. EARNINGS PER SHARE

The following table shows the amounts used in computing EPS and the effect
on the weighted average number of shares of dilutive common stock equivalents:

L. WARRANTS

Effective December 28, 1999, warrants to purchase a total of 1 million
shares of UMC Common Stock at $0.00 per share were issued to the Company's
Chairman and Chief Executive Officer and to the Chief Financial Officer of the
Company (the "Holders') with each individual receiving a warrant to purchase
500,000 shares as consideration for their personal guarantees of the Company's
recourse factoring agreement. These warrants were 100% exercisable on the grant
date and expire on the earlier of (a) December 27, 2009, (b) the date on which
the Holder's services are terminated for cause, (c) three months after the
expiration of the Holder's term as a Director or resignation from the Board of
Directors or as an Officer, or termination of the Holder due to the sale of the
Company or (d) twelve months after the Holder's services as an Officer or
Director are terminated by reason of the individual's death or disability. These
warrants were accounted for pursuant to SFAS No. 123 and as such, for the year
ended December 31, 1999, the Company recorded $30,000 of expense and additional
paid-in capital to reflect the estimated fair value of these warrants. On
November 15, 2000, one half, or warrants to purchase 500,000 shares expired, due
to the resignation of the Company's Chief Financial Officer three months prior.
On May 3, 2001 the warrant for the remaining 500,000 shares was exercised by the
Company's Chief Executive Officer.

Effective December 28, 1999, warrants to purchase a total of 3 million
shares of UMC Common Stock at $0.00 per share were issued to the Company's
Chairman and Chief Executive Officer and to the Chief Financial Officer with
each individual receiving a warrant to purchase 1,500,000 shares as

48

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

incentive to reposition the Company such that their personal guarantees would no
longer be required. These warrants will become fully exercisable upon: (i)
release of any and all personal guarantee(s) required to obtain financing from
the Company's factor or any other financing source which may succeed the factor,
and (ii) the Company qualifying for bank credit for which personal guarantees
are not required or, (iii) elimination of the Company's need for financing to
meet its working capital and other operating requirements. These warrants expire
on the earlier of (a) December 27, 2009, (b) the date on which the Holder's
services are terminated for cause, (c) three months after the expiration of the
Holder's term as a Director or resignation from the Board of Directors or as an
Officer, or termination of the Holder due to the sale of the Company, (d) twelve
months after the Holder's services as an Officer or Director are terminated by
reason of the individual's death or disability, or (e) upon revocation by the
Holder of any personal guarantee necessary to secure the Company's factoring
agreement, or any successor to the factor, provided, however, that these
warrants shall continue in force if all of the Company's obligations that are
secured by the Holder's personal guarantee(s) are repaid in full, and the
Holder's personal guarantee(s) are no longer necessary in order for the Company
to meet its needs for working capital and other operating requirements. These
warrants were accounted for pursuant to SFAS No. 123 and as such, for the year
ended December 31, 1999 recognition of expense and additional paid-in capital of
$90,000 has been deferred until such time as the aforementioned vesting
requirements have been achieved. On November 15, 2000, one half, or warrants to
purchase 1,500,000 shares expired due to the resignation of the Chief Financial
Officer three months prior. These warrants were not exercisable as of December
31, 2001 or as of the date of this report.

The Company has a Director's Incentive Compensation Agreement ("DICA")
with each of its external directors. On March 12, 1998, a warrant to purchase
39,161 shares of the Company's common stock at $0.13 per share was issued to one
director in conjunction with commissions earned under the DICA. On August 28,
1998, a warrant to purchase 70,186 shares of the Company's common stock at $0.07
per share was issued to the same director in conjunction with commissions earned
under the DICA. Both warrants were immediately exercisable. Both warrants expire
on the earlier of (a) March 31, 2007, (b) the date on which the Director's
services are terminated for cause, (c) three months after the expiration of the
Director's term, resignation from the Board of Directors, or termination of the
Director due to the sale of the Company or (d) twelve months after the services
as a Director are terminated by reason of the Director's death or disability.
None of these warrants had been exercised as of December 31, 2001.

On April 1, 1997, warrants to purchase 1,200,000 shares of UMC Common
Stock at $0.08 per share were issued to three directors of UMC with each
director receiving a warrant for 400,000 shares. These warrants are exercisable
33 1/3 % immediately, 66 2/3% after twelve months from the effective date of the
grant, and 100% after twenty-four months from the effective date of the grant.
These warrants expire on the earlier of (a) March 31, 2007, (b) the date on
which the Director's services are terminated for cause, (c) three months after
the expiration of the Director's term, resignation from the Board of Directors,
or termination of the Director due to the sale of the Company or (d) twelve
months after the services as a Director are terminated by reason of the
Director's death of disability. None of these warrants had been exercised as of
December 31, 2001.

On November 12, 1996, warrants to purchase 130,000 shares of UMC Common
Stock at $0.06 per share were issued to three former directors of UMC. These
warrants expired on November 11, 2001.

49

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Neither the warrants or the shares of common stock represented by these
warrants have been registered under the Securities Act of 1933.

M. OPTIONS

At the Annual Meeting of Stockholders on August 28, 1998, the Company's
stockholders approved the adoption of the 1998 Stock Option Plan (the "1998
Plan"), which provides for the issuance of both "incentive" and "nonqualified"
stock options. A total of 1,000,000 shares are issuable under the 1998 Plan. At
December 31, 2001, no options were outstanding under the 1998 Plan.

At the Annual Meeting of Stockholders on August 14, 1995, the Company's
stockholders approved the adoption of the 1995 Stock Option Plan (the "1995
Plan"), which provides for the issuance of both "incentive" and "nonqualified"
stock options. A total of 1,000,000 shares are issuable under the 1995 Plan. At
December 31, 2001, options for 977,500 shares were outstanding under the 1995
Plan.

At the Annual Meeting of Stockholders on July 13, 1992, the Company's
stockholders approved the adoption of the 1992 Stock Option Plan (the "1992
Plan"), which provides for the issuance of both "incentive" and "nonqualified"
stock options. A total of 1,000,000 shares are issuable under the Plan. In
addition, the Company's Third Amended and Restated 1989 Stock Option Plan (the
1989 Plan) was revised such that no more options may be granted under that plan.
At December 31, 2001, options for 732,500 and 0 shares were outstanding under
the 1992 and 1989 Plans, respectively.

Under the terms of the aforementioned Plans, the exercise price for both
incentive and nonqualified stock options to purchase shares of the Company's
Common Stock may be granted at a price not less than the market price of the
stock at the date of grant. Accordingly, no compensation expense has been
recognized for the Company's stock option plan. Stock options may be granted to
holders of 10 percent or more of the Company's voting power at exercise prices
no less than 110 percent of the market price of the stock at the date of grant.
Both option types are exercisable, in annual increments of one-third or one half
of the total options granted, on the anniversary dates following the award. The
Compensation Committee of the board of directors approves the number of shares
to be granted to employees and the term of the vesting. Options that have
expired or that have been canceled are available for future grants under the
Plans.

None of the option plans or the shares of common stock represented by the
option plans have been registered under the Securities Act of 1933 except for
the 1992 Plan.

50

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The following table summarizes activity for the years ended December 31:

N. SFAS NO. 123 PRO FORMA

Pro forma net income (loss) and earnings per share presented below reflect
the results of the Company as if the fair value based accounting method
described in SFAS No. 123 had been used to account for stock and warrant-based
compensation costs, net of taxes and forfeitures of prior year grants:

51

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The fair value for options granted in 2001, 2000 and 1999 was estimated at
the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants during the years ended
December 31:

The fair value for warrants granted in 2001, 2000 and 1999 was estimated
at the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants during the years ended
December 31:

O. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF MARKET AND CREDIT RISK

The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable, and accrued expenses approximate fair value due to the short
term maturities of these instruments. The fair value of cash equivalents is
determined by reference to market data. The fair value of debt and capital lease
obligations approximate carrying value as the related interest rates approximate
current market rates.

Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash equivalents and trade
receivables. It is the Company's practice to place its cash equivalents and
investments in high quality money market accounts. Generally, the Company does
not require collateral or other security to support customer receivables. When
possible, the Company will structure contracts such that provider payments are
remitted directly to UMC whereby UMC can

52

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

collect its fee and remit a net payment back to the customer. The Company does
not expect its customers to fail to meet their obligations and, as such,
considers the credit risk associated with its trade accounts receivable to be
minimal.

The percentage market mix of total revenue from continuing operations for
the years ended December 31, was:

The percentage market mix of total net accounts receivable for the years
ended December 31, was:

P. RELATED PARTY TRANSACTIONS

On March 19, 1997, each non-employee member of the Board of
Directors entered into a Director's Incentive Compensation Agreement ("DICA").
This agreement has a term of three years under which the director shall be paid
a commission based on fees billed and collected from new customers sold by or
with the assistance from such director. The commission will be 10 percent during
the first year of a contract with a given customer, 6 percent during the second
contract year, and 4 percent thereafter. The Director's compensation may be paid
in either cash, common stock, or stock purchase warrants upon approval of the
Compensation and Stock Option Committee. For the year ended December 31, 2000,
the Company paid $2,600 in commissions to a non-employee director under the DICA
agreement. The Company did not pay any commissions under DICA during the years
1999 or 2001. The Company has also in the past issued certain warrants under
DICA as described in Note L.

For the year ended December 31, 2001, the Company paid $9,600 in
commissions for new business introduction to a corporation of which the majority
shareholder is a non-employee Director of UMC. This commission was paid pursuant
to a contract with the corporation in which UMC agrees to pay said corporation a
percentage of the fees billed and collected from any new customers sold by or
with the assistance of the corporation. The commission will be 10 percent during
the first year of a contract with a given customer, 6 percent during the second
contract year, and 4 percent thereafter.

53

UNITED MEDICORP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Q. SEGMENT REPORTING

The Company applies SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments.

Management organizes consolidated UMC around differences in services
offered. UMC provides medical insurance claims processing, medical accounts
receivable management and other healthcare related ancillary services. UMY
provides customer services, early out, bad debt and secondary account collection
agency services to the health care industry. UMC and UMY are aggregated into one
reportable health care Business Office Services segment based on the similarity
of the nature of the medical claim or account collection services, nature of the
information technology and human resource production process and service
delivery methodologies, as well as the predominantly health care industry
customer base of both UMC and UMY.

R. QUARTERLY FINANCIAL DATA (UNAUDITED)

54

INDEPENDENT AUDITOR'S REPORT

Board of Directors
United Medicorp, Inc.
Dallas, Texas

We have audited the accompanying consolidated balance sheets of United Medicorp,
Inc. as of December 31, 2001 and 2000, and the related consolidated statements
of operations, stockholder's equity (deficit), and cash flows for the years
ended December 31, 2001, 2000 and 1999. Our audits also included the financial
statement schedule referred to in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and schedule
based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United Medicorp,
Inc. as of December 31, 2001 and 2000, and the consolidated results of its
operations and its cash flows for the years ended December 31, 2001, 2000 and
1999 in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

Hein + Associates LLP

March 1, 2002
Dallas, Texas

55

UNITED MEDICORP, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

- ----------

DECEMBER 31, 2001:

(2) Represents write-off of uncollectible trade receivables.

DECEMBER 31, 2000:

(2) Represents write-off of uncollectible trade receivables.

DECEMBER 31, 1999:

(1) Represents the allowance for doubtful accounts balance associated with the
acquisition of Allied Health Options, Inc. included in loss on
discontinued operations of AHO.

(2) Represents write-off of uncollectible trade receivables and the note
receivable.

56

INDEX TO EXHIBIT

4.3 Specimen Form of Certificate of Common Stock of the Company is
incorporated herein by reference to Exhibit 4.3 of the
Company's Registration Statement on Form S-1, Commission File
No. 33-35177, originally filed with the Commission on June 1,
1990 and declared effective July 27, 1990 (previously filed).

4.4 Article Fourth of the Company's Certificate of Incorporation
is incorporated herein by reference to Exhibit 3 of the
Company's Current Report on Form 8-K, filed with the
Commission on July 25, 1989 (previously filed).

4.5 Certificate of Amendment to Certificate of Incorporation,
filed with the Secretary of State of Delaware on June 21, 1990
is incorporated herein by reference to Exhibit 4.5 of the
Company's Registration Statement on Form S-1, Commission File
No. 33-35177, originally filed with the Commission on June 1,
1990 and declared effective on July 27, 1990 (previously
filed).

4.6 Form of Common Stock Purchase Warrant for 400,000 shares
issued to Thomas H. McConnell, III (previously filed).

4.7 Form of Common Stock Purchase Warrant for 400,000 shares
issued to Michael P. Bumgarner (previously filed).

4.8 Form of Common Stock Purchase Warrant for 400,000 shares
issued to John F. Lewis (previously filed).

4.9 Form of Common Stock Purchase Warrant issued to Peter W.
Seaman for 500,000 shares (previously filed).

4.10 Form of Common Stock Purchase Warrant issued to Peter W.
Seaman for 1,500,000 shares (previously filed).

4.11 Form of Common Stock Purchase Warrant issued to R. Kenyon
Culver for 500,000 shares (previously filed).

4.12 Form of Common Stock Purchase Warrant issued to R. Kenyon
Culver for 1,500,000 shares (previously filed).

9. Not Applicable.

10.7 1992 Stock Option Plan of the Company is incorporated herein
by reference to Exhibit 10.24 of the Company's Registration
Statement on Form S-1, Commission File No. 33-35178
(previously filed).

10.11 Customer Service Agreement dated December 15, 1992 by and
between the Company and the Washington Hospital Center is
incorporated herein by reference to Exhibit 10.27 of the
Company's Registration Statement on Form S-1, Commission File
No. 33-35178 (previously filed).

10.14 Standard Office Building Lease Agreement dated June 1, 1989,
between the Registrant and Aetna Life Insurance Company
(previously filed).

10.15 Third Amendment to Lease, dated May 1, 1992, between the
Registrant and Aetna Life Insurance Company (previously
filed).

10.19 Certificate of Amendment to Certificate of Incorporation of
the Company, filed with Secretary of State of Delaware on
August 3, 1993 (previously filed).

10.22 1995 Stock Option Plan (previously filed).

10.23 Modification and Ratification of Lease, dated July 19, 1995
(previously filed).

10.25 Severance Agreement by and between Registrant and Mary E.
Rogers (previously filed).

10.26 Severance Agreement by and between Registrant and Peter W.
Seaman (previously filed).

10.28 Director's Incentive Compensation Agreement by and between
Registrant and Thomas H. McConnell, III (previously filed).

10.29 Director's Incentive Compensation Agreement by and between
Registrant and John F. Lewis. (previously filed).

10.30 Director's Incentive Compensation Agreement by and between
Registrant and Michael P. Bumgarner. (previously filed).

10.31 Amendment No. 1 to Customer Service Agreement dated December
15, 1992 by and between the Company and the Washington
Hospital Center relating to collection of Department of
Emergency Medicine claims is incorporated herein by reference
to Exhibit 10.27 of the Company's Registration Statement on
Form S-1, Commission File No. 33-35178 (previously filed).

10.32 Amendment No. 2 to Customer Service Agreement dated December
15, 1992 by and between the Company and the Washington
Hospital Center relating to collection of physician claims is
incorporated herein by reference to Exhibit 10.27 of the
Company's Registration Statement on Form S-1, Commission File
No. 33-35178 (previously filed).

10.33 Collection Services Agreement dated January 17, 1997 by and
between the Registrant and Presbyterian Healthcare System
(previously filed).

10.34 Early Out Collection Agreement dated May 1, 1997 by and
between the Registrant and Presbyterian Healthcare System
(previously filed).

10.35 Secondary Collection Agreement dated October 31, 1997 by and
between the Registrant and Presbyterian Healthcare System
(previously filed).

10.36 Loan Agreement dated December 11, 1998 by and between the
Registrant and Texas Central bank (previously filed).

10.37 Promissory Note dated December 11, 1998 by and between the
Registrant and Texas Central bank (previously filed).

10.38 Factoring Agreement and Security Agreement dated December 28,
1999 by and between the Registrant and Metro Factors, Inc.
(previously filed).

10.39 Economic Development and Incentive Agreement by and between
the Registrant and the Pampa Economic Development Corporation.
(previously filed)

10.40 Forgivable Loan Agreement by and between the Registrant and
the Pampa Economic Development Corporation. (previously filed)

22.1 Subsidiaries of the Company (previously filed).

99.1 Safe Harbor Compliance Statement for Forward-Looking
Statements

99.2 Voluntary Petition United States Bankruptcy Court Northern
District of Texas - Chapter 7 (previously filed)

(b) Reports on Form 8-K

No reports of Form 8-K were filed during the fourth quarter of 2001.