UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
- ------- SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ------- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 0-28790
MEDCARE TECHNOLOGIES, INC.
-----------------------------------------
(exact name of registrant as specified in its charter)
DELAWARE 87-0429962 B
- --------- ------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Suite 600 - 2443 Warrenville Rd., Lisle, Illinois 60532
- ------------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (630) 955-3711
----------------
Indicate by check mark whether the registrant: (1) has filed all reports
required 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 for the past 90 days.
Yes X No
----- -----
The number of shares of the Registrant's Common Stock,
$0.001 par value, as of May 5, 1997: 6,647,685.
----------
<PAGE>
MEDCARE TECHNOLOGIES, INC.
FORM 10-Q, QUARTER ENDED MARCH 31, 1997
INDEX
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheet at March 31, 1997 and 1996...................... 3
Consolidated Statement of Operations for the years ended
March 31, 1997, 1996....................................................... 4
Consolidated Statement of Stockholders' Equity from Inception
(January 17, 1986) Through March 31, 1996.................................. 5
Consolidated Statement of Cash Flows for the years ended
March 31, 1997, 1996....................................................... 9
Notes to Consolidated Financial Statements................................. 11
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 16
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
PART II OTHER INFORMATION
Item 1 Legal Proceedings............................................. 18
Item 2 Changes in Securities......................................... 18
Item 3 Defaults Upon Senior Securities............................... 18
Item 4 Submission of Matters to a Vote of Security Holders........... 18
Item 5 Recent Sales of Unregistered Securities.........................18
Item 6 Other Information............................................. 19
Item 7 Exhibits and Reports on Form 8-K.............................. 19
Signature Page............................................................. 219
<PAGE>
Item 1 Financial Statements
<TABLE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
INTERIM CONSOLIDATED BALANCE SHEET
For the THREE Months Period Ending MARCH 31, 1997 AND 1996
(Unaudited)
<CAPTION>
ASSETS 1997 1996
<C> <S> <S>
Current Assets
Cash $1,202,631 $33,585
Accounts Receivable - Trade $31,742 $740
Prepaid Expense $34,373 $0
------------------------------------
Total Current Assets $1,268,746 $34,325
Property and Equipment - Note 2
Office Equipment $2,429 $4,103
Medical Equipment $14,798 $16,799
-------------------------------------
$17,227 $20,902
Less Accumulated Depreciation $12,566 $8,575
Net Book Value $4,641 $12,327
-----------------------------------
Other Assets
Organization Costs (Net of Amortization) $0 $188
Intangible Assets -
The MedCare Program - Note 2 $300,000 $300,000
-------------------------------------
Total Other Assets $300,000 $300,188
-------------------------------------
Total Assets $1,573,387 $346,840
===================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
INTERIM CONSOLIDATED BALANCE SHEET
For the THREE Months Period Ending MARCH 31, 1997 AND 1996
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
<C> <S> <S>
Current Liabilities
Accounts Payable $14,840 $7,584
Notes Payable - Note 3 $25,000 $23,135
Notes Payable - Officers - Note 4 $12,500 $0
----------------------------
Total Current Liabilities $52,340 $30,719
Stockholders' Equity
Preferred Stock, $0.25 Par Value, Authorized
1,000,000 Issued and Outstanding, at March 31,
1997 and 1996, None $0 $0
Common Stock: $0.001 Par Value, Authorized
100,000,000; Issued and Outstanding, 6,647,685
shares at March 31, 1997 and 6,312,185 at March
31, 1996 $6,648 $6,313
Additional Paid-In Capital $2,858,429 $1,076,701
Loss Accumulated During Development Stage ($1,344,029) ($766,893)
----------------------------
Total Stockholders' Equity $1,521,047 $316,121
----------------------------
Total Liabilities and
Stockholders' Equity $1,573,387 $346,840
============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
THROUGH MARCH 31, 1997
(Unaudited)
<CAPTION>
The Three The Three
The Three Months Months Deficit
Months Period Period Accumulated
Period Ending Ending Ending During The
March 31, March 31, March 31, Development
1997 1996 1995 Stage
<S> <C> <C> <C> <C>
Revenues $37,236 $2,483 $0 $47,088
Expenses
General Administrative $197,731 $56,516 $0 $1,398,630
---------------------------------------------------
Total Expenses $197,731 $56,516 $0 $1,398,630
Other Income
Interest Income $1,928 $137 $0 $7,516
---------------------------------------------------
Net Loss ($158,564) ($53,896) $0 $1,344,029)
=====================================================
Net (Loss) Per Share of
Common Stock ($0.02) ($0.01) NIL ($0.02)
======================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
THROUGH DECEMBER 31, 1996
Common Stock
<CAPTION>
Loss
Additional Accumulated
Shares Amount Paid In During the Total
Capital Development
Stage
<S> <C> <C> <C> <C> <C>
Balance, January 17,
1986 0 $0 $0
Issued to officers and
directors at $.002
per share 2,500,000 $2,500 $2,500 $5,000
Issued pursuant to public
offering at $.01 36,450,003 $3,645 $32,805 $36,450
Cost of offering ($7,946) ($7,946)
Net loss from inception
on January 17, 1986
through December 31,
1987 ($316) ($316)
----------------------------------------------------------
Balance, December 31,
1987 6,145,000 $6,145 $27,359 ($316) $33,188
Escrow fee for
public offering ($200) ($200)
Net loss year ended
December 31, 1988 ($1,030) ($1,030)
-----------------------------------------------------------
Balance, December 31,
1988 6,145,000 $6,145 $27,159 ($1,346) $31,958
Net loss year ended
December 31, 1989 ($21,707) ($21,707)
-----------------------------------------------------------
Balance, December 31,
1989 6,145,000 $6,145 $27,159 ($23,053) $10,251
Issuance of stock
in accordance with
plan of merger with
Multi-Spectrum
Group, Inc.
February 28, 1990 55,305,000 $55,305 ($55,305)
Net loss year ended
December 31, 1990
- - unaudited ($10,201) ($10,201)
-----------------------------------------------------------
Balance, December 31,
1990 61,450,000 $61,450 ($28,146) ($33,254) $50
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
THROUGH DECEMBER 31, 1996
Common Stock
<CAPTION>
Loss
Additional Accumulated
Shares Amount Paid In During the Total
Capital Development
Stage
<S> <C> <C> <C> <C> <C>
Net loss year
ended December
31, 1991 -
Unaudited $0 $0
-------------------------------------------------------------
Issued to Group
of Five, Inc.
November 13, 1992 8,772,800 $8,773 $0 $8,773
Net loss year
ended December
31, 1992 -
Unaudited ($8,773) ($8,773)
---------------------------------------------------------------
Balance,
December 31,
1992 70,222,800 $70,223 ($28,146) ($42,027) $50
Net Loss year
ended December
31, 1993 $0 $0
---------------------------------------------------------------
Balance,
December 31,
1993 70,222,800 $70,223 ($28,146) ($42,027) $50
Net loss year
ended December
31, 1994 $0 $0
----------------------------------------------------------------
Balance,
December 31,
1994 70,222,800 $70,223 ($28,146) ($42,027) $50
Reverse Split
1200:1, August
11, 1995 (70,164,281) ($70,164) $70,164
Acquisition of
MedCare UI
System Assets
August 4, 1995 2,000,000 $2,000 $298,000 $3,000,000
Issued pursuant
to a public
offering at $.001
per share
September 20,
1995 4,200,000 $4,200 $625,800 $630,000
Cost of offering ($30,000) ($30,000)
Purchase of 100%
of the outstanding
stock of Manon
Consulting, Ltd.
on October 1,
1995 - Note 1 $0 $0
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
THROUGH DECEMBER 31, 1996
Common Stock
<CAPTION>
Loss
Additional Accumulated
Shares Amount Paid In During the Total
Capital Development
Stage
<S> <C> <C> <C> <C> <C>
Issued for cash
December 31, 1995 16,666 $17 $49,983 $50,000
Issued for services
December 31, 1995 25,000 $25 $74,975 $75,000
Net loss year
ended December 31,
1995 ($691,033) ($691,033)
-----------------------------------------------------------
Balance,
December 31,
1995 6,300,185 $6,301 $1,060,776 ($733,060) $334,016
Issuance of
common stock
under 1995 Stock
Option Plan at
$3.00 per share
during 1996 36,000 $36 $107,964 $108,000
Issuance of common
stock under 1996 S
tock Option Plan
at $4.50 per share
during 1996 3,000 $3 $13,497 $13,500
Issuance of common
stock under Private
Placement at $4.75
per share dated
June 22, 1996 50,000 $50 $237,450 $237,500
Issuance of common
stock under Private
Placement at $4.50
per share dated
December, 1996 56,000 $56 $251,944 $252,000
Net loss for year ended
December 31, 1996 ($452,405) ($452,405)
--------------------------------------------------------------
Balance,
December 31,
1996 6,445,185 $6,445 $1,671,631 ($1,185,465) $492,611
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 17, 1986)
THROUGH DECEMBER 31, 1996
Common Stock
<CAPTION>
Loss
Additional Accumulated
Shares Amount Paid In During the Total
Capital Development
Stage
<S> <C> <C> <C> <C> <C>
Issuance of
common stock
under Stock
Option Plan at
$3.00 per share
dated January,
1997 6,000 $6 $17,944 $18,000
Issuance of
common stock
under Stock
Option Plan at
$4.50 per share
dated January,
1997 2,000 $2 $8,998 $9,000
Issuance of
Common stock
under Stock
Option Plan at
$3.00 per share
dated February,
1997 9,000 $9 $26,991 $27,000
Issuance of
common stock
under Stock
Option Plan at
$4.50 per share
dated February,
1997 3,000 $3 $13,497 $13,500
Issuance of
common stock
under Stock
Option Plan at
$3.00 per share
dated March,
1997 6,500 $6 $19,494 $19,500
Issuance of
common stock
under Private
Placement at
$6.25 per share
dated March,
1997 176,000 $176 $1,099,824 $1,100,000
Net loss for
the period ended
March 31, 1997 ($158,564) ($158,564)
-------------------------------------------------------------
Balance -
March 31, 1997 6,647,685 $6,647 $2,858,429 ($1,344,029) $1,521,047
============================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MARCH 31, 1997, 1996 AND 1995
AND FROM INCEPTION (JANUARY 17, 1996) THROUGH MARCH 31, 1997
(Unaudited)
<CAPTION>
The Three The Three The Three
Months Months Months From
Period Period Period Inception
Ending Ending Ending Through
March 31, March 31, March 31, March 31,
1997 1996 1995 1997
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities: ($158,564) ($53,896) $0 ($1,344,029)
Net (Loss)
Common Stock issued
for services $0 $0 $0 $8,773
Adjustments to reconcile
net (loss) to net cash
provided by operating activities
Depreciation and Amortization $861 $0 $0 $12,586
Change in Assets and Liabilities
(Increase) Decrease in
Accounts Receivable ($24,391) ($100) $0 ($24,491)
(Increase) Decrease in
Prepaid Expenses ($5,366) $0 $0 ($5,366)
(Increase) Decrease in
Organizational Costs $64 $0 $0 ($64)
(Increase) Decrease in
Accounts Payable ($5,532) $6,606 $0 $1,074
--------------------------------------------------
Total Adjustments ($34,364) $6,506 $0 ($16,261)
Net cash provided
(used) by Operating
Activities ($192,928) ($47,390) $0 ($1,351,517)
Cash Flows from
Financing Activities
Proceeds from Sale
of Common Stock $1,187,000 $36,000 $0 $2,511,921
Decrease in Office
& Med Equipment $11,132 $0 $0 $17,227
Notes Payable ($23,135) $0 $0 $25,000
------------------------------------------------
Net cash provided by
financing Activities $1,174,997 $36,000 $0 $2,554,148
-------------------------------------------------
Increase (decrease)
in cash and Cash
Equivalents $982,069 ($11,390) $0 $1,202,631
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
The Three The Three The Three
Months Months Months From
Period Period Period Inception
Ending Ending Ending Through
March 31, March 31, March 31, March 31,
1997 1996 1995 1997
<S> <C> <C> <C> <C>
Cash and cash equivalents
at beginning of Period $220,562 $44,975 $0 $0
Cash and cash equivalents
at end of period $1,202,631 $33,585 $0 $1,202,631
-------------------------------------------------
Supplemental Information
Cash paid For:
Interest $0 $0 $0 $0
-------------------------------------------------
Income Taxes $0 $0 $0 $0
-------------------------------------------------
Non-cash financing
Intangible assets
purchased with
Common Stock $0 $300,000 $0 $300,000
================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
NOTE 1 - ORGANIZATION
MedCare Technologies, Inc. (the "Company"), formerly known as Multi-Spectrum
Group, Inc., was incorporated under the name Santa Lucia Funding, Inc., under
the laws of the State of Utah on January 17, 1986 with an authorized capital
of 50,000,000 common shares with a par value of $.001. On February 8, 1990,
the Company adopted a plan of merger with Multi-Spectrum Group, Inc., a
Delaware Corporation, in which Multi-Spectrum Group, Inc. would be dissolved
and the name of Santa Lucia Funding, Inc. would be changed to Multi-Spectrum
Group, Inc. On August 29, 1995, the Company approved an increase in the
authorized capital to 101,000,000 of which 100,000,000 shares shall be Common
Stock with a par value of $.001 and 1,000,000 shares shall be Preferred Stock
with a par value of $.25 per share, and a name change to MedCare
Technologies, Inc. On August 1, 1996, an agreement and plan of merger was
entered into between the Company and MedCare Technologies, Inc. (A Delaware
Corporation) whereby the state of incorporation was changed to Delaware from the
State of Utah. The Company was inactive during the year 1991, issued stock for
prior years' services during 1992, and was inactive during 1993 and 1994.
The Company had no revenues nor incurred any operating expenses during these
inactive periods, other than the transaction during 1992.
On November 13, 1992, the Company issued 8,772,800 shares of common stock to
Group of Five, Inc. in exchange for services rendered at $.001 per share or
$8,773.
On August 11, 1995, the Stockholders authorized a reverse split of 1200:1
reducing the outstanding common shares to 58,519.
On August 11, 1995, the Company purchased 100% of the outstanding shares of
MedCare Technologies Corporation, a Nevada corporation that was incorporated on
August 26, 1995 for $1.00. MedCare Technologies Corporation was inactive from
the date of incorporation through August 11, 1995, the date the Company
purchased it. MedCare Technologies Corporation will be a wholly owned
subsidiary of the company.
On August 14, 1995, the Company acquired the MedCare UI System (Now, The MedCare
Program) assets in exchange for 2,000,000 shares of the Company's common stock
at $0.15 for a total value of $300,000.
On September 20, 1995, the Company authorized in a 504D Disclosure Memorandum,
4,200,000 shares of its common stock at an offering price of $0.15. On
September 20, 1995,
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
the offering was completed with all shares being issued for a total value of
$630,000, less offering costs of $30,000.
On October 1, 1995, the Company purchased 100% of the outstanding shares of
Manon Consulting, Ltd. Manon Consulting, Ltd. operates a clinic in Calgary,
Canada. Since its purchase by the Company, it has been partially responsible
for the development of the MedCare Program.
The following is a condensed balance sheet of Manon Consulting, Ltd. at October
31, 1995:
Total Assets $12,558
=======
Total Liabilities $23,841
Total Capital
Common Stock $7
Retained Earnings-A Deficit ($11,290)
---------
Total Liabilities and Capital $12,558
=========
The Company paid $7 for the outstanding common stock and assumed liabilities in
excess of assets of $11,290. The excess was charged to operations during 1995.
On December 31, 1995, the Company issued 16,666 shares of its common stock for
$50,000 cash.
On December 31, 1995, the Company issued 25,000 shares of its common stock in
exchange for consulting services for a total value of $75,000.
During 1996, the Company issued 44,000 shares of its common stock at $3.00 per
share under its 1995 Stock Option Plan, or $132,000.
During 1996, the Company issued 3,000 shares of its common stock at $4.50 per
share under its 1996 Stock Option Plan, or $13,500.
On June 22, 1996, the Company issued 50,000 shares of its common stock at $4.75
per share in a 504D private placement memorandum, or $237,500.
On November 18, 1996, the Company issued 56,000 shares of its common stock at
$4.50 per share in a 504D private placement memorandum, or $252,000.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Corporation)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
NOTE 1 -- ORGANIZATION (Continued)
On January 1, 1997, the Company discontinued the operations of Manon Consulting,
Ltd. and transferred its research and development function to the Company's
office in Lisle, IL.
On January 28, 1997, the Company issued 6,000 shares of its common stock at
$3.00 per share and 2,000 shares of its common stock at $4.50 per share under
its Stock Option Plan for $27,000 cash.
On February 18, 1997, the Company issued 9,000 shares of its common stock at
$3.00 per share and 3,000 shares at $4.50 per share under its Stock Option
Plan for $40,500 cash.
On March 18, 1997, the Company issued 6,500 shares of its common stock at
$3.00 per share under its Stock Option Plan for $19,500 cash.
On March 25, 1997, the Company issued 17,600 shares of its common stock at
$6.25 per share in Private Placement for $1,100,000 cash.
The Company is a development stage company, as defined in the Financial
Accounting Standard Board No. 7. The Company is devoting substantially all
of its present efforts in securing and establishing a new business, and
although planned principal operations have commenced, there have been no
significant revenues. This factor raises substantial doubt about its ability
to continue as a going concern.
The financial statements have been prepared on the basis of accounting
principles applicable to a going concern. Accordingly, they do not purport
to give effect to adjustments, if any, that may be necessary should the
Company be unable to continue as a going concern. The continuation of the
Company as a going concern, is dependent upon its ability to establish itself
as a profitable business. The Company's ability to achieve these objectives
cannot be determined at this time. It is the Company's belief
that this can be accomplished and the Company will viable entity.
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. Method of Accounting
The Company maintains its books and prepares its financial statements on the
accrual basis of accounting.
B. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity of
three months or less to be cash and cash equivalents.
C. Equity Method
Investments in companies is using the equity method of accounting.
D. Organizational Expenses
Organizational expenses represent legal and filing fees. The Company will
amortize its organization costs over sixty (60) months using the straight
line method.
E. Property and Equipment
Property and equipment, stated at cost, is depreciated under the straight-line
method over their estimated useful lives as follows:
Office Equipment 3 to 5 years
Medical Equipment 3 to 5 years
Depreciation charged to expense during the period was $860.00 in 1997.
F. Income Taxes
There has been no provision for income taxes, because of the losses that the
Company has incurred to date. The Company has net operating losses that will
expire beginning with the year 2003 through 2008, in the amount of $1,200,691
and $575,960, in 1996 and 1995, respectively, unless utilized by the Company.
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
MEDCARE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
G. Earnings or (Loss) Per Share
Earnings or loss per share is computed using the weighted average number of
shares of common stock outstanding.
H. Leases
The Company currently has the use of approximately 500 square feet of office
space, the use of 2 board rooms, and all office equipment, including a
photocopier and telephone equipment, on a shared basis with one of the
Company's directors. The offices are located at Suite 1408 - 400 Burrard
Street, Vancouver, British Columbia, Canada. No rent is paid. There is no
lease agreement in place. A second office is located at 2443 Warrenville
Road, Suite 600, Lisle, Illinois, 60532. These offices are rented on a month-
to-month basis for $160 per month. Additional offices are located in Overland
Park, KS, Norman, OK, and Winter Park, FL. No rent is currently being paid
on these offices.
NOTE 3 - NOTES PAYABLE
The Company has loans payable to officers of related companies that are paid
back as cash flows allow. The notes are demand notes with no interest rate
currently applicable. On March 7, 1996, the Company borrowed $25,000 from a
non-related company. The note is a demand note with no interest rate
currently applicable.
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
Notes payable represent advance from related officers that are paid back as
cash flows allow. The notes are demand notes with no interest rate currently
applicable. The President of the Company loaned the Company $12,500 on August
18, 1996. The note is a demand note with no interest rate currently applicable.
NOTE 5 - DISCONTINUED OPERATION
In January 1997, a wholly-owned subsidiary, Manon Consulting Co.,
discontinued its clinic services. The settlement of its assets, liabilities
and obligations has been written down as a gain or loss from discontinued
operation and roll over to the Company's income in this period.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
WHEN USED IN THIS DISCUSSION, THE WORDS "BELIEVES," "ANTICIPATES,"
"EXPECTS"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS.
SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES
WHICH COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED.
READERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS,
WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO
OBLIGATION
TO REPUBLISH REVISED FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS
OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURENCE OF
UNANTICIPATED
EVENTS. READERS ARE ALSO URGED TO CAREFULLY REVIEW AND CONSIDER
THE VARIOUS
DISCLOSURES MADE BY THE COMPANY WHICH ATTEMPT TO ADVISE
INTERESTED PARTIES OF
THE FACTORS WHICH AFFECT THE COMPANY'S BUSINESS, IN THIS REPORT, AS
WELL AS
THE COMPANY'S PERIODIC REPORTS ON FORMS 10-K, 10Q AND 8K FILED WITH
THE
SECURITIES AND EXCHANGE COMMISSION.
Overview
The Company has developed The MedCare Program, a non-surgical, non-drug,
non-invasive and cost effective treatment program for urinary incontinence,
as well as pelvic pain, chronic constipation, fecal incontinence, and
disordered defecation. The MedCare program is a multi-modality program based
primarily on behavioural techniques for treatment. These techniques include
biofeedback using electromyography (EMG), pelvic floor muscle exercises, and
bladder and bowel re-training. The program is designed to activate and strengten
the various sensory-response mechanisms that maintain bladder and bowel control.
The therapy is provided through computerized instrumental electromyography
biofeedback and is based on operant conditioning strategies whereby specific
physiological responses are progressively shaped, strengthened, and coordinated.
The Company currently has three recently opened MedCare Program centres in
Norman, OK (established November 1, 1996), Overland Park, KS (established
December 12, 1996), and Winter Park, FL (established March 10, 1997) which
are operated under the direct supervision of physicians. Since these centres
are all newly established, the Company expects revenues from these sites to
be modest during the first 12 months of operations and until public awareness
builds amongst incontinence sufferers and local area physicians through
advertising and word of mouth referrals from patients. The Company currently
advertises almost exclusively in local area news papers, however, the Company
plans to use additional mediums such radio, TV and local area seminars.
Additional sites are currently being planned for several other cities in the
United States, including Denver, CO, which is expected to open in late May,
1997. The majority of the Company's resources, both financial and managerial,
will be devoted to establishing these new sites and in operating existing
centres. Additionally, the Company may explore the introduction of the
MedCare Program to other medical providers such as nursing homes, hospitals
and other institutions.
Results of Operations
The Company had revenues of $37,236 for the three month period ending March
31, 1997 compared to $2,483 for the three month period ending March 31, 1996.
Of the $37,236 in first quarter revenues, $24,809
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were primarily from the Company's Norman, OK and Overland Park, KS sites.
Since these sites are recently established, the Company expects revenues to
be modest during the first 12 months of operations and until public awareness
builds amongst incontinence sufferers and local area physicians through
advertising and word of mouth referrals from patients. A portion of the first
quarter revenues, $12,427, was from a gain realized from the discontinuation
of the Company's Canadian developmental and research clinic in Calgary, Alberta.
This facility was closed because the majority of the Company's activities are
US-based, and the majority of the Company's future continued research and
development will be conducted at the Company's present locations and any
future potential centres. To date, the Company has not relied on any revenues
for funding its activities and it does not expect to receive significant
revenues from operation in the near future. During the next several years,
the Company expects to derive the majority of its potential revenues from the
opening of new MedCare Program centres in the United States.
For the three month period ending March 31, 1997, the Company's general and
administrative expenses increased to $197,731, compared to $56,516 for the
corresponding period in 1996. The 1997 amount represents an increase of 249%
due primarily to the hiring of additional staff, incurring greater advertising
and marketing expenses at newly opened MedCare centres, increased expenses
related to financial public relations and increased legal and accounting fees
related to the Company's Form 10-SB filing with the Securities and Exchange
Commission.
The Company's net loss was $158,564, or $0.02 per share, for the first quarter
of 1997, compared with a net loss of $53,896, or $0.01 per share, for the
corresponding period in 1996. This increase was primarily due to the increase
in general and administrative costs described above.
Liquidity and Capital Resources
As at March 31, 1997, the Company's cash balance was $1,202,631, compared to
$33,585 as at March 31, 1996. The Company has financed its operations primarily
through private placements of Common Shares and the exercise of Stock Options
totalling $1,187,000 for the three month period ending March 31, 1997.
The Company's future funding requirements will depend on numerous factors,
including the Company's ability to establish and operate profitably current
and future MedCare Program locations, recruiting and training qualified
management and clinical personnel, competing against any potential technological
advances in the treatment of urinary incontinence and other afflictions of the
pelvic floor area, and the Company's ability to compete against other, better
capitalized corporations who offer alternative or similar treatment options for
urinary incontinence and other afflictions of the pelvic floor area.
Due to the "start up" nature of the Company's business, the Company expects to
continue to incur losses for at least the next 12 months. As a result, the
Company will require additional funds, and the Company may seek additional
expansion funding, private or public equity investments, and possible future
collaborative agreements to meet such needs. Even if the Company does not have
an immediate need for additional cash, it may seek access to the public equity
markets if and when conditions are favourable. There is no assurance that such
additional funds will be available to the Company to finance its operations on
acceptable terms, if at all.
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PART II -- OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
As detailed in the financial statements, the Company issued 26,500 common shares
for the exercise of stock options ranging in prices from $3.00 to $4.50 and
176,000 common shares for a private placement completed at $6.25 per share. The
total shares issued during the three month period ending March 31, 1997 was
202,500 shares.
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Recent Sales of Unregistered Securities
On August 14, 1995, the Company acquired the MedCare UI system assets for
2,000,000 shares of the Company's common stock for a total value of $300,000. On
August 15, 1995, the Company authorized in a Regulation D, Rule 504 Disclosure
Memorandum the sale of 4,200,000 shares of its common stock at an offering price
of $0.15. On September 20, 1995, the offering was completed with all shares
being issued for a total value of $630,000, less offering costs of $30,000.
These sales were made to Canadian and American citizens and a Form D was filed.
On December 31, 1995, the Company issued 16,666 shares of its common stock for
$50,000 cash and 25,000 shares of its common stock in exchange for consulting
services to Cambridge Capital Corporation of Grand Turk, Turks & Caicos Islands,
British West Indies, for a total value of $75,000. Cambridge Capital provided
$75,000 of consulting services, paid by issuing 25,000 restricted common shares
of the Company at a deemed value of $3.00 per share. These consulting services
included advice, consultation and recommendations regarding European, Asian and
Middle Eastern markets for urinary and fecal incontinence. In addition,
Cambridge Capital made several introductions to potential joint venture
partnerships in Asia, as well as potential sources of clinical expansion
capital.
The Company has just completed, on August 15, 1996, an offering via a
Private Placement Memorandum pursuant to Regulation D, Rule 504. This offering
was for a total of 50,000 shares 4of common stock at an offering price of $4.75
per share for a total offering of $237,500.
The Company offered for sale a Private Placement Memorandum pursuant to
Regulation D, Rule 504 which was begun on November 18, 1996 and completed on
December 24, 1996. This offering was for 56,000 shares of common stock at $4.50
per share for a total offering of $252,000. The proceeds from this offering
were used for equipment purchases, advertising and marketing and working
capital.
Item 6 Other Information
None
Item 7 Exhibits and Reports on Form 8-K
None
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Signature Page
Pursuant to the requirements 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.
MEDCARE TECHNOLOGIES, INC.
Dated: May 5, 1997 /s/ Harmel S. Rayat
--------------------------
Harmel S. Rayat
Chairman of the Board
Chief Executive Officer, President,
Chief Financial Officer
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