<PAGE>
US Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the quarterly period ended June 30, 1999.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
Commission File Number 0-12365
MEDICAL DEVICE TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Utah 58-1475517
---------------- ---------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9191 Towne Centre Drive, Suite 420, San Diego, California 92122
(Address of principal executive offices)
Issuer's telephone number: (619) 455-7127
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
State issuer's revenues for its most recent fiscal year $1,869,374.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of July 30, 1999, was $9,001,910.
As of July 30, 1999, Registrant had outstanding 6,838,099 shares of common
stock, 0 shares of 6% cumulative convertible Series A preferred stock and 56,386
redeemable common stock purchase warrants.
Transitional Small Business Disclosure Format (check one): Yes ___ No. X
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1999 and
December 31, 1998 F-1
Consolidated Statements of Operations for the Three Months
and Six Months Ended June 30, 1999 and 1998 F-3
Consolidated Statements of Stockholders' Equity for the
Six Months Ended June 30, 1999 F-4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 F-6
Notes to Consolidated Financial Statements F-8
Item 2. Management's Discussion and Analysis and Plan of Operation 2
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................ 9
Item 2. Changes in Securities............................................ 9
Item 3. Defaults Upon Senior Securities.................................. 9
Item 4. Submission of Matters to a Vote of Security Holders.............. 10
Item 5. Other Information................................................ 10
Item 6. Exhibits and Reports on Form 8-K................................. 10
1
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PART I
PART I
ITEM 1. FINANCIAL STATEMENTS
See attached consolidated financial statements and notes thereto for the period
ended June 30, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the notes thereto appearing in Part I, Item 1 in this Form
10-QSB.
Forward-Looking Statements
- --------------------------
The following discussion contains forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: the impact of competition on the Company's revenues, changes
in law or regulatory requirements that adversely affect or preclude customers
from using the Company's services for certain applications; ability to acquire
additional medical diagnostic imaging centers; and failure by the Company to
keep pace with emerging technologies.
When used in this discussion, words such as "believes", "anticipates",
"expects", "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect the Company's business.
Description of the Business
- ---------------------------
From its incorporation in 1980 until June 1992, the Company was engaged
exclusively in oil and gas activities. In June 1992, the Company commenced
certain initial activities with respect to the medical device business.
Thereafter, the Company continued to increase its activities in the medical
device field while simultaneously decreasing its oil and gas activities.
Effective as of January 1, 1994, the Company having disposed of all its oil and
gas interests and ceased all activities related thereto, commenced on a
full-time basis its current medical device operations. The Company changed its
name in May 1995, from Cytoprobe Corporation, to reflect the change of focus. On
June 1, 1992, the Company was considered, for accounting purposes, to have
re-emerged as a development stage company. In third quarter 1998, the Company
narrowed its focus to medical diagnostic imaging centers. The Company has
emerged in 1998 from a development stage to an operating company through a
corporate acquisition of Vision Diagnostics and affiliates.
On July 14, 1998, the Company acquired either the stock or substantially all of
the assets and liabilities of Vision Diagnostics, Inc. and Affiliates (Vision).
Vision Diagnostics, Inc. and Affiliates is in the business of providing
radiologic diagnostic services. The affiliated group of companies includes
Vision Diagnostic, Inc., Regional MRI of Orlando, Inc., Regional MRI of
Jacksonville, Ltd. and Regional MRI of Toledo, Inc. In addition, Vision is the
general partner in West Regional MRI Limited Partnership located in Oak Brook,
Illinois.
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The Company consummated the acquisition of certain assets (primarily related to
accounts receivable and property and equipment) and the assumption of certain
liabilities (primarily accounts payable and debt) from Regional MRI of Orlando,
Inc., Regional MRI of Jacksonville, Ltd. and Regional MRI of Toledo, Inc. for a
purchase price of 1,893,356 shares of Restricted Rule 144 common stock. The
Company has accounted for the acquisition using the purchase method of
accounting with the assets acquired and the liabilities assumed recorded at fair
value, and the results of the acquired entities included in the Company's
consolidated financial statements from July 14,1998. Goodwill associated with
this transaction amounted to $2,170,550.
Additionally, on this date, the Company acquired 100% of the stock of Vision
Diagnostics, Inc. with the issuance of 1,568,000 shares of Restricted Rule 144
common stock. The Company has accounted for the acquisition using the purchase
method of accounting with the results of operations of the acquired entity
included in the Company's consolidated financial statement from the date of
acquisition. Goodwill associated with this transaction amounted to $1,577,477.
During the first quarter of 1999, an additional 200,000 shares of Restricted
Rule 144 common stock, valued at $87,500, were issued in connection with the
acquisition of Vision Diagnostics, Inc. Accordingly, goodwill associated with
this transaction was increased by $87,500.
Vision Diagnostics, Inc. is the 50% general partner in West Regional MRI Limited
Partnership. On April 7, 1999, the Company acquired the remaining 50% in West
Regional MRI Limited Partnership at a purchase price of $1,300,000 and recorded
goodwill associated with this transaction of $762,265. The consolidated
financial statements reflect all of the assets, liabilities, revenues and
expenses of the partnership. Prior to this acquisition, the limited partners'
share of the partner's capital had been reflected as a minority interest on the
accompanying consolidated balance sheet at December 31, 1998. The limited
partners' share of the partnership's net income has been presented as minority
partners share of income consolidated partnership interest in the accompanying
consolidated statement of operations for the six months ended June 30, 1999.
In the immediate future, the Company needs to obtain additional financing for
its working capital requirements associated with the costs of providing services
in its MRI centers.
Risks
- -----
As the Company acquires additional businesses including MRI centers with
existing revenue streams, the working capital requirements of the Company can be
expected to increase. The Company's ability to collect the accounts receivable
associated with providing MRI services will be a significant factor in meeting
its working capital needs.
The Company has not been profitable for the last 10 years and expects to incur
additional operating losses in the coming year. In the immediate future, in
order to fund its current negative working capital position and to continue to
operate, the Company currently intends to seek to complete additional private
placements of debt and/or equity. The Company's ability to obtain additional
sources of financing cannot be assured. The long-term viability of the Company
is dependent on its ability to obtain additional funding to acquire additional
MRI centers and to obtain the financing necessary to fund its operations.
Results of Operations
- ---------------------
The three months ended June 30, 1999 compared to the three months ended June 30,
1998.
Revenues
- --------
Net revenues for the three months ended June 30, 1999 were $852,639 compared to
$0 for the three months ended June 30, 1998. The increase is the result of the
acquisition of Vision Diagnostics, Inc. and affiliates which, as of April 7,
1999, consists of four wholly owned MRI centers. Revenue from the MRI centers
accounted for all of the net revenues in 1999. Such revenues were generated from
providing scanning and reading services for the medical industry.
3
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Operating Expenses
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Research and Development
Research and development costs in the second quarter of 1999 were $0 as compared
to $38,982 in the second quarter of 1998. In the second quarter of 1998,
research and development activities were postponed and the only costs were
associated with carrying costs for maintaining ownership of the Fluid Alarm
System (FAS) and Cell Recovery System (CRS) licenses. There were no current year
costs associated with research and development because in late 1998 all activity
related to the FAS and CRS ceased and the associated licenses were written-off
to reflect the Company's focus on medical diagnostic imaging centers.
Sales, General and Administrative
Sales, general and administrative costs were $1,211,429 for the second quarter
of 1999 as compared to $454,234 for the second quarter of 1998, representing an
increase of 3.7 fold. This increase was primarily the result of the activity
from operating the MRI centers which were acquired during the third quarter of
1998.
Losses
The Company's net loss for the three months ended June 30, 1999 was $(483,150)
as compared to $(513,781) for the three months ended June 30, 1998, representing
a 6.0% decrease in the net loss. The decrease in loss was primarily attributable
to the revenues from the acquired MRI centers offset by the costs associated
with providing services to the MRI centers coupled with the costs associated
with operating such centers. Loss per common share for the second quarter of
1999 was $(0.08) as compared to a $(0.82) loss per common share for the same
period in 1999. This reduction in loss per common share was attributable to the
reduced net loss in the second quarter of 1999 compared the same period in 1998
and to the increase in the weighted average number of common shares outstanding
for the second quarter of 1999 as compared to the second quarter of 1998.
The six months ended June 30, 1999 compared to the six months ended June 30,
1998.
Revenues
- --------
Net revenues for the six months ended June 30, 1999 were $1,656,325 compared to
$1,900 for the six months ended June 30, 1998. The increase of 871 fold is the
result of the acquisition of Vision Diagnostics, Inc. and affiliates which
consists of three wholly owned MRI centers and the general partnership with 50%
ownership of a fourth center. As of April 7, 1999, the Company acquired the
remaining 50% ownership of such center. Revenue from the MRI centers accounted
for all of the net revenues in 1999. The product sales from the FAS represented
$1,900 of the sales revenue in 1998.
Operating Expenses
- ------------------
Research and Development
Research and development costs in the first six months of 1999 were $0 as
compared to $35,589 in the first six months of 1998. In the first six months of
1998, research and development activities were postponed and the only costs were
associated with carrying costs for maintaining ownership of the FAS and CRS
licenses. There were no current year costs associated with research and
development because in late 1998 all activity related to the FAS and CRS ceased
and the associated licenses were written-off to reflect the Company's focus on
medical diagnostic imaging centers.
4
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Sales, General and Administrative
Sales, general and administrative costs were $2,380,255 for the six months ended
June 30, 1999 as compared to $745,922 for the same period in 1998, representing
an increase of 219%. This increase was primarily the result of the operating
activity from the MRI centers which were acquired during the third quarter of
1998.
Losses
The Company's net loss for the six months ended June 30, 1999 was $(900,970) as
compared to $(810,391) for the six months ended June 30, 1998, representing a
11.2% increase in the net loss. The increase in loss was primarily attributable
to the costs associated with providing services to the acquired MRI centers
coupled with the costs associated with operating such centers. Loss per common
share for the first six month of 1999 was $(0.17) as compared to a $(1.49) loss
per common share for the same period in 1998. This reduction in loss per common
share was attributable to the increase in the weighted average number of common
shares outstanding for the first six months of 1999 as compared to the first six
months of 1998.
Liquidity and Capital Resources
- -------------------------------
To date, the Company has funded its capital requirements for its current medical
diagnostic imaging operations from the public and private sale of debt and
equity securities and the issuance of common stock in exchange for services and
interest. The Company's cash position at June 30, 1999 was $70,613 as compared
to $108,452 at June 30, 1998, representing a 34.9% decrease.
During the first six months of 1999, $52,554 of net cash was used for operating
activities. The Company received $100,000 from the proceeds of a note payable
and $385,000 from the proceeds of the issuance of Restricted Rule 144 Common
Stock. Net cash used in operating activities during the first six months of 1999
consisted principally of a net loss of $900,970. This net loss was partially
offset by $665,802 in common stock paid for services and interest in lieu of
cash plus depreciation and amortization of $407,306. Contributing to net cash
used in operating activities was a decrease in other net assets (excluding cash)
of $205,043 and the change in minority interest of $19,649. Changes in current
assets and current liabilities resulted in a deficit in the Company's working
capital position of $1,306,624 at June 30, 1999 as compared to a negative
working capital of $1,258,564 at December 31, 1998. The Company's current
deficit in working capital requires the Company to obtain funds in the
short-term to be able to continue in business, and in the longer term to
continue to provide services in its' current MRI centers and to acquire
additional MRI centers and other related businesses. The Company is seeking to
fund these and other operating needs in the next 12 months from funds to be
obtained through the proceeds of additional private placements or public
offerings of debt or equity securities, or both.
In the immediate future, in order to fund its current negative working capital
position and to continue to operate, the Company intends to seek to complete
additional private placements of debt and/or equity. The Company's ability to
complete to obtain additional sources of financing cannot be assured. The
long-term viability of the Company is dependent on its ability to obtain
additional funding necessary to fund its operations surrounding the MRI centers.
On June 19, 1998, 164,096 shares of Restricted Rule 144 Common Stock were issued
in order to convert all of these 1997 notes including principal and accrued
interest payable. Cash paid to these individuals and to the directors for
interest was $0 at December 31, 1997 and December 31, 1998. Restricted Rule 144
Common Stock paid to these individuals and to the directors for interest was $0
at December 31, 1997 and $21,300 at December 31, 1998. Accrued interest amounted
to $4,400 for the year ended December 31, 1997 to $0 as of December 31, 1998.
All of the noteholders did not elect to exercise the related warrants, thus, all
such warrants expired on May 18, 1998.
5
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During the year ended December 31, 1998, the Company issued $240,020 in
principal amount of short-term convertible notes payable, due one year from the
date of the related note or the date the Company receives funding from any
offering or merger with another corporation, to four individuals to finance
operations until a corporate acquisition could be completed. Until payment in
full, the unpaid principal and accrued interest amounts of these notes, may be
converted, at the option of the noteholder, into common shares of the Company at
any time prior to repayment thereof at a conversion price per share of fifty
(50%) percent of the previous thirty day average trading bid price as of the
date of conversion. These notes accrue interest at a rate per annum equal to one
(1%) percent over the referenced prime lending rate announced from time to time
by Bank of America in San Francisco, California. As additional consideration for
these loans, the individual lenders were awarded 6,250 Restricted Rule 144
Common Stock for every $12,500 loaned to the Company.
During the second and third quarters of 1998, 391,858 shares (including the
additional consideration shares) of Restricted Rule 144 Common Stock were issued
in order to convert all of these 1998 short-term convertible notes, including
principal and accrued interest payable, except for one note for $15,000, which
was still outstanding at December 31, 1998. Cash paid to these individuals for
interest was $0 as of December 31, 1998. Restricted Rule 144 Common Stock paid
to these individuals for interest was $13,708 as of December 31, 1998. Accrued
interest amounted to $1,248 as of December 31, 1998.
During the first quarter of 1999, 55,119 shares (including the additional
consideration shares) of Restricted Rule 144 common stock were issued in order
to convert the remaining 1998 short-term convertible note, principal and accrued
interest payable. Cash paid to this individual for interest was $0 as of March
31, 1999. Restricted Rule 144 common stock paid to this individual for interest
was $1,408 as of March 31, 1999. Accrued interest related to these notes was $0
as of March 31, 1999.
Pursuant to an investment letter dated June 26, 1998 with an individual, the
Company received $55,000 for the purchase of 55,000 shares of Restricted Rule
144 Common Stock at a purchase price of $1.00 per share. As of December 31,
1998, all such shares had been issued.
Pursuant to an investment letter dated February 23, 1999 with an individual, the
Company received $25,000 for the purchase of 62,500 shares of Restricted Rule
144 Common Stock at a purchase price of $.40 per share. As of June 30, 1999,
such shares had been issued.
Pursuant to an investment letter dated March 8, 1999 with an individual, the
Company received $100,000 for the purchase of 250,000 shares of Restricted Rule
144 Common Stock at a purchase price of $.40 per share. As of June 30, 1999, all
such shares had been issued.
Pursuant to an investment letter dated March 12, 1999 with an individual, the
Company received $10,000 for the purchase of 25,000 shares of Restricted Rule
144 Common Stock at a purchase price of $.40 per share. As of June 30, 1999, all
such shares had been issued.
Pursuant to investment letters dated May 25, 1999 and June 7, 1999 with an
Limited Liability Company, the Company received $100,000 for the purchase of
250,000 shares and $50,000 for the purchase of 125,000 shares, respectively.
Both investment letters were to purchase shares of Restricted Rule 144 Common
Stock at a purchase price of $.40 per share. As of June 30, 1999, all such
shares had been issued.
Pursuant to an investment letter dated May 25, 1999 with a corporation, the
Company received $100,000 for the purchase of 250,000 shares of Restricted Rule
144 Common Stock at a purchase price of $.40 per share. As of June 30, 1999, all
such shares had been issued.
6
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PLAN OF OPERATION
Emergence from a Development Stage Company
- ------------------------------------------
The Company emerged in 1998 from a development stage to an operating company
through the corporate acquisition of Vision Diagnostics, Inc. and affiliates.
The Company's Capital Requirements
- ----------------------------------
The Company's greatest cash requirements during 1999 will be for funding, in the
immediate future, its deficit in working capital, and in the longer term,
obtaining the working capital necessary for future acquisitions of additional
medical diagnostic imaging centers and other related businesses.
The Company is seeking to fund these and other operating needs in the next 12
months from funds to be obtained through a corporate acquisition or merger with
another entity with greater financial resources or from the proceeds of
additional private placements or public offerings of debt or equity securities.
If a corporate acquisition or merger with another entity or private placement is
not completed, the Company will be required to reduce costs and seek alternative
financing sources which cannot be assured. Consequently, the Company's operating
outlook is not assured.
Subsequent to the next 12 months, the Company currently plans to finance its
long-term operations and capital requirements with the profits and funds
generated from the revenues of its MRI centers as well as through new private
financings and public offerings of debt and equity securities.
These financial statements have been prepared assuming that the Company will
continue as a going concern. The Company has recurring losses from operations,
negative working capital and is in default with respect to the terms of certain
obligations. Further, the continued viability of the Company is dependent on the
success of its MRI centers which were acquired in July 1998. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
The Company is seeking to fund its immediate and longer-term working capital
needs from funds to be obtained through a corporate acquisition or merger with
another entity with greater financial resources or from the proceeds of
additional private placements or public offerings of debt or equity securities.
However, neither the consummation nor the success of an acquisition or merger,
nor the receipt of additional funds can be assured. Therefore, the long-term
viability of the Company is dependent on its ability to profitably operate its
MRI centers and to obtain the financing necessary to fund its anticipated
growth.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amount of
liabilities that might be necessary should the Company be unable to continue in
existence.
7
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Year 2000 Compliance
- ---------------------
Background:
In the past, many computers, software programs, and other information technology
("IT systems"), as well as other equipment relying on microprocessors or similar
circuitry ("non-IT systems"), were written or designed using two digits, rather
than four, to define the applicable year. As a result, date-sensitive systems
(both IT systems and non-IT systems) may recognize a date identified with "00"
as the Year 1900, rather than the year 2000. This is generally described as the
Year 2000 issue. If this situation occurs, the potential exists for system
failures or miscalculations, which could impact business operations.
The Securities and Exchange Commission ("SEC") has asked public companies to
disclose four general types of information related to Year 2000 preparedness:
the Company's state of readiness, costs, risks, and contingency plans. See SEC
Release No. 33-7558 (July 29, 1998). Accordingly, the Company has included the
following discussion in this report, in addition to the Year 2000 disclosures
previously filed with the SEC.
State of Readiness:
The Company believes that it has identified all significant IT systems and
non-IT systems that require modification in connection with Year 2000 issues.
Internal and external resources have been used and are continuing to be used, to
make the required modifications and test Year 2000 readiness. The required
modifications are under way. The Company plans on completing the modifications
to and testing of all significant systems by September 1999.
In addition, the Company has been communicating with customers, suppliers,
banks, vendors and others with whom it does significant business (collectively)
its "business partners") to determine their Year 2000 readiness and the extent
to which the Company is vulnerable to any other organization's Year 2000 issues.
Based on these communications and related responses, the Company is monitoring
the Year 2000 preparations and state of readiness of its business partners.
Although the Company is not aware of any significant Year 2000 problems with its
business partners, there can be no guarantee that the systems of other
organizations on which the Company's system rely will be converted in a timely
manner, or that a failure to convert by another organization, or a conversion
that is incompatible with the Company's systems, would not have a material
adverse effect on the Company.
Costs:
The total cost to the Company of Year 2000 activities has not been and is not
anticipated to be material to its financial position or results of operations in
any given year. The total costs to the company of addressing Year 2000 issues
are estimated to be less than $40,000. These total costs, as well as the date on
which the Company plans to complete the Year 2000 modification and testing
processes, are based on management's best estimates. However, there can be no
guarantee that these estimates will be achieved, and actual results could differ
from those estimates.
Risks:
The company utilizes IT systems and non-IT systems in various aspects of its
business. Year 2000 problems in some of the Company's systems could possibly
disrupt operations, but the Company does not expect that any such disruption
would have a material adverse impact on the Company's operating results.
8
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The Company is also exposed to the risk that one or more of its customers,
suppliers or vendors could experience Year 2000 problems that could impact the
ability of such customers to transact business or such suppliers or vendors to
provide goods and services. Although this risk is lessened by the availability
of alternative suppliers, the disruption of certain services, such as utilities,
could, depending upon the extent of the disruption, potentially have a material
adverse impact on the Company's operations.
Contingency Plans:
The Company is in the process of developing contingency plans for the Company's
IT systems and non-IT systems requiring Year 2000 modification. In addition, the
Company is developing contingency plans to deal with the possibility that some
suppliers or vendors might fail to provide goods and services on a timely basis
as a result of Year 2000 problems. These contingency plans will include the
identification, acquisition and/or preparation of backup systems, suppliers and
vendors.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the Company's Form 10-KSB for the year ended December 31, 1998.
In March 1998, a lawsuit was filed against the Company for "false designation"
in connection with the use of the name Medical Device Technologies, Inc. During
the first quarter of 1999, the lawsuit was settled whereby the Company agreed to
cease using the name of Medical Device Technologies, Inc. effective on June 18,
1999. The Company has obtained approval from its shareholders to change its name
to Miracor Diagnostics, Inc. and has filed a voluntary surrender of registration
for cancellation with the United States Patent and Trademark Office.
Accordingly, once receiving final approval from the State of Utah, the Company
will do business solely as Miracor Diagnostics, Inc.
During June 1999, the Company reached a mutually agreeable settlement regarding
the January 1998 Superior Court of the State of California, County of Ventura
Lawsuit. The Company issued 250,000 shares of Restricted Rule 144 common stock
in full settlement of such lawsuit. Accordingly, the Company reclassified the
Related $93,000 Accrued Liability to Common Stock and Additional Paid-In Capital
on the accompanying 1999 Consolidated Balance Sheets.
There are no other legal proceedings to which the Company is a party, which
could have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 5, 1999, the Company held its Annual Meeting of Shareholders. A quorum
was present to consider the following three items:
1. To change the name of the Company to Miracor Diagnostics, Inc. or such
other name as may be approved by the State of Utah.
2. To elect each of Mr. Don L. Arnwine and Mr. Robert S. Muehlberg to the
Board of Directors until the annual meeting of shareholders to be held
in the year 2002 and until each of their respective successors shall
have been elected and qualified.
3. To ratify the Board of Director's appointment of Parks, Tschopp,
Whitcomb & Orr, PA to serve as the Company's independent certified
public accountants for the current calendar year.
All three items passed with the required vote.
ITEM 5. OTHER INFORMATION
Not Applicable
PART IV
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule
Reports on Form 8-K The company filed current reports on Forms 8-K which
were issued on February 3, 1999, April 15, 1999 and
June 29, 1999.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MEDICAL DEVICE TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ M. Lee Hulsebus Chief Executive Officer, President, August 16, 1999
- ------------------------ Chief Financial Officer,
M. Lee Hulsebus Chairman, Principal Accounting Officer
and Secretary
</TABLE>
11
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<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS June 30, December 31,
- ------ 1999 1998
--------------- ---------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 70,613 $ 77,906
Accounts receivable (net of allowance of $1,273,740
and $1,487,172 2,441,387 2,536,042
Prepaid expenses and other assets 141,322 72,180
--------------- ---------------
Total current assets 2,653,322 2,686,128
--------------- ---------------
Property and equipment:
Furniture and fixtures 33,799 33,799
Machinery and equipment 190,455 188,546
Equipment under capital leases 3,376,791 2,380,038
Leasehold improvements 406,082 406,082
--------------- ---------------
4,007,127 3,008,465
Less accumulated depreciation (1,516,597) (1,197,268)
--------------- ---------------
Net property and equipment 2,490,530 1,811,197
Intangible assets:
Goodwill (note 3) 4,788,143 3,938,378
Organization costs 160,930 160,930
Deferred Interest (note 7) 105,250 0
Less accumulated amortization (263,844) (175,867)
--------------- ---------------
4,790,479 3,923,441
Other assets 152,639 134,822
--------------- ---------------
Total assets $ 10,086,970 $ 8,555,588
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-1
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
- ------------------------------------ 1999 1998
--------------- ---------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 895,749 $ 917,368
Accrued expenses 1,065,429 1,256,549
Current obligation under capital lease obligations 1,072,025 897,629
Short-term notes payable and line of credit (note 4) 926,743 873,146
--------------- ---------------
Total current liabilities 3,959,946 3,944,692
--------------- ---------------
Other liabilities:
Convertible debt - 15,000
Note payable - limited partners (note 7) 468,960 -
Capital lease obligations, less current portion 2,796,484 1,552,378
--------------- ---------------
Total liabilities 7,225,390 5,512,070
--------------- ---------------
Minority interest - 643,252
--------------- ---------------
Commitments and contingencies (notes 4 and 6)
Stockholders' equity (note 6)
Series I convertible preferred stock (247,500 shares
authorized; 0 issued and outstanding) - -
6% cumulative convertible Series A preferred stock,
and $.01 par value (1,972,500 shares authorized;
0 shares issued and outstanding) - -
Preferred stock, $.01 par value (10,000,000 shares
authorized; 0 shares issued and outstanding) - -
Common stock, $.15 par value (100,000,000 shares
authorized; 6,789,007 and 4,370,905 outstanding) 1,018,351 655,636
Common stock to be issued (447,781 and 862,394 shares) 460,671 866,162
Warrants 105,250 -
Additional paid-in capital 26,821,855 25,607,914
Deferred stock compensation 25,443 25,443
Accumulated deficit (25,569,990) (24,754,889)
--------------- ---------------
Total stockholders' equity 2,861,580 2,400,266
--------------- ---------------
Total liabilities and stockholders' equity $ 10,086,970 $ 8,555,588
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
===============================================================================================================
<S> <C> <C> <C> <C>
PATIENT SERVICE REVENUE $ 1,157,317 $ - $ 2,250,878 $ -
PRODUCT SALES - - 1,900
DISCOUNTS AND ALLOWANCES (304,678) - (594,553) -
------------- -------------- ------------- -------------
NET REVENUES 852,639 - 1,656,325 1,900
COST OF SALES - - (619)
------------- -------------- ------------- -------------
GROSS PROFIT 852,639 - 1,656,325 1,281
OPERATING EXPENSES:
Research and development - 38,982 - 35,589
Sales, general and administrative 1,211,429 454,234 2,380,255 745,922
------------- -------------- ------------- -------------
TOTAL OPERATING EXPENSES 1,211,429 493,216 2,380,255 781,511
LOSS FROM OPERATIONS (358,790) (493,216) (723,930) (780,230)
OTHER INCOME (EXPENSE):
Other income 26,214 - 38,147 -
Interest income - - - -
Interest expense (150,574) (20,565) (234,836) (30,161)
------------- -------------- ------------- -------------
LOSS BEFORE MINORITY INTEREST (483,150) (513,781) (920,619) (810,391)
MINORITY INTEREST - - 19,649 -
============= ============== ============= =============
NET LOSS $ (483,150) $ (513,781) $ (900,970) $ (810,391)
============= ============== ============= =============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.08) $ (0.82) $ (0.17) $ (1.49)
============= ============== ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,759,180 628,253 5,273,497 543,677
============= ============== ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Note 6)
(unaudited)
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL COMMON
------------------------- ------------------------- PAID-IN STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL TO BE SSUED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999, as previously reported - $ - 4,370,905 $ 655,636 $ 25,607,914 $ 866,162
Add adjustment for prior period error (note 5) - - - - - -
------------ ------------ ------------ ----------- ------------ -----------
Balance, January 1, 1999, as restated - - 4,370,905 655,636 25,607,914 866,162
Common stock issued for compensation and services - - 178,700 26,805 187,627 -
Restricted Rule 144 common stock issued for the
conversion of principal and accrued interest
on convertible notes payable - - 55,119 8,268 8,140 -
Restricted Rule 144 common stock issued for
Compensation and services - - 58,400 8,760 29,946 -
Restricted Rule 144 common stock issued for acquisition
of Vision Diagnostics, Inc. & affiliates - - 200,000 30,000 57,500 -
Restricted Rule 144 common stock issued for cash - - 275,000 41,250 68,750 -
Restricted Rule 144 common stock to be issued - - - - - 25,000
Net loss for three months ended March 31, 1999 - - - - - -
------------ ------------ ------------ ------------ ------------- -----------
Balance, March 31, 1999 - $ - 5,138,124 $ 770,719 $ 25,959,877 $ 891,162
============ ============ ============ ============ ============= ===========
</TABLE>
(continued below)
<TABLE>
<CAPTION>
WARRANTS DEFERRED ACCUMULATED
COMPENSATION DEFICIT TOTAL
------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Balance, January 1, 1999 as previously reported - $ 25,443 $ (24,754,889) $ 2,400,266
Add adjustment for prior period error (note 5) - - 85,870 85,870
------------- --------------- --------------- --------------
Balance, January 1, 1999, as restated - 25,443 (24,669,019) 2,486,136
Common stock issued for compensation and services - - - 214,432
Restricted Rule 144 common stock issued for the
conversion of principal and accrued interest
on convertible notes payable - - - 16,408
Restricted Rule 144 common stock issued for
compensation and services - - - 38,706
Restricted Rule 144 common stock issued for
acquisition of Vision Diagnostics, Inc. &
affiliates - - - 87,500
Restricted Rule 144 common stock issued for cash - - - 110,000
Restricted Rule 144 common stock to be issued - - - 25,000
Net loss for three months ended March 31, 1999 - - (417,821) (417,821)
-------------- --------------- --------------- ---------------
Balance, March 31, 1999 - $ 25,443 $ (25,086,840) $ 2,560,361
============== =============== =============== ===============
</TABLE>
F-4
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Note 6)
(unaudited)
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL COMMON
------------------------- ------------------------- PAID-IN STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL TO BE ISSUED
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1999 - $ - 5,138,124 $ 770,719 $ 25,959,877 $ 891,162
Common stock issued for compensation, interest
and services - - 209,820 31,473 243,544 -
Restricted Rule 144 common stock issued for the
conversion of principal and accrued interest
on convertible notes payable - - 13,900 2,085 14,371 -
Restricted Rule 144 common stock issued for
Compensation and services - - 325,050 48,757 88,889
- -Restricted Rule 144 common stock issued for acquisition
of Vision Diagnostics, Inc. & affiliates - - 414,613 62,192 343,299 (405,491)
Restricted Rule 144 common stock purchased - - 625,000 93,750 156,250 -
Restricted Rule 144 common stock to be issued - - 62,500 9,375 15,625 (25,000)
Warrants issued for the acquisition of West Regional
MRI Limited Partnership - - - - - -
Net loss for three months ended March 31, 1999 - - - - - -
------------ ------------ ------------ ------------ ------------- ----------
Balance, June 30, 1999 - $ - 6,789,007 $ 1,018,351 $ 26,821,855 $ 460,671
============ ============ ============ ============ ============= ===========
</TABLE>
(continued below)
<TABLE>
<CAPTION>
WARRANTS DEFERRED ACCUMULATED
COMPENSATION DEFICIT TOTAL
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Balance, April 1, 1999 - $ 25,443 $ (25,086,840) $ 2,560,361
Common stock issued for compensation, interest
and services - - - 275,017
Restricted Rule 144 common stock issued for the
conversion of principal and accrued interest
on convertible notes payable - - - 16,456
Restricted Rule 144 common stock issued for
compensation and services - - - 137,646
Restricted Rule 144 common stock issued for
acquisition of Vision Diagnostics, Inc. &
affiliates - - - -
Restricted Rule 144 common stock purchased - - - 250,000
Restricted Rule 144 common stock to be issued - - - -
Warrants issued for the acquisition of West Regional
MRI Limited Partnership 105,250 - - 105,250
Net loss for three months ended March 31, 1999 - - (483,150) (483,150)
-------------- --------------- --------------- --------------
Balance, June 30, 1999 105,250 $ 25,443 $ (25,569,990) $ 2,861,580
=============== =============== =============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Six months ended June 30,
1999 1998
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (900,970) $ (810,391)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock issued for services and interest 665,802 287,626
Compensation recognized relating to
accrued employee stock grants and warrants - 2,651
Minority interest (19,649)
Bad debt expense - -
Depreciation and amortization 407,306 130,408
Increase (decrease) from changes in assets and liabilities:
Accounts receivable 94,655 -
Inventory - 564
Prepaid Royalties (50,000)
Prepaid expenses and other assets (69,142) 30,453
Other assets (17,817) -
Accounts payable and accrued expenses (212,739) 191,616
-------------- ---------------
Net cash used in operating activities (52,554) $ (217,073)
-------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment $ (1,909) $ -
Purchase of West Regional MRI Limited Parnership (150,000) -
-------------- ---------------
Net cash used in investing activities (151,909) -
-------------- ---------------
Cash flows from financing activities:
Proceeds from notes payable 100,000 225,020
Principal payments on notes payable and line of credit (86,350) -
Proceeds from issuing common stock 385,000 55,000
Principal payments on capital lease obligations (201,480) -
-------------- ---------------
Net cash provided by financing activities 197,170 280,020
--------------- --------------
Net increase (decrease) in cash and cash equivalents (7,293) (62,947)
Cash and cash equivalents, beginning of period 77,906 45,505
--------------- --------------
Cash and cash equivalents, end of period $ 70,613 $ 108,452
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Six Months Ended June 30,
1999 1998
--------------- ---------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES:
PAYMENTS FOR:
Interest $ 194,958 $ -
Income taxes $ 800 $ 800
STOCK ISSUED FOR:
Research and development $ - $ 2,597
Public relations and marketing services 154,250 -
Legal, professional, and employee services 459,149 227,341
Directors' fees 24,900 21,469
Termination agreement - 1,875
Interest expense on Notes Payable 9,845 34,344
Prepaid severance pay 17,658 -
--------------- ---------------
$ 665,802 $ 287,626
--------------- ---------------
</TABLE>
NON-CASH FINANCING ACTIVITY:
During the first quarter of 1999 and 1998, deferred compensation expense of $0
and $2,657, respectively, were recorded relating to accrued employee stock
grants in order to value such shares at the estimated fair market value at the
date of grant.
During the second quarter of 1998 short-term convertible notes payable in the
amount of $262,520 were converted along with accrued interest payable of $34,344
into 473,469 shares of Restricted Rule 144 common stock. (See note 6).
On April 7, 1999, the Company acquired the remaining ownership of West Regional
MRI Limited Partnership at a purchase price of $1,300,000. Associated with this
transaction, the Company recorded goodwill of $762,265 (note 3), warrants and
the related deferred interest valued at $105,250 and additional notes payable
for $500,000 due to the limited partners and $650,000 due to a finance company.
The deferred interest is being amortized over sixty months which is the term of
the associated note payable. The $500,000 limited partnership note payable has
an interest rate of 8.5%, payable in quarterly installments of $41,665, final
payment due June 15, 2002. The $650,000 note payable to a finance company has an
interest rate of 12.92% and was added to the refinance of a capital lease with a
revised sixty month payment of $27,119, final payment due March 2004. (Note 7)
During the second quarter of 1999, deferred interest expense of $5,263 was
amortized.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(1) STATEMENT OF INFORMATION FURNISHED
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal and recurring
accruals) necessary to present fairly the Company's financial position for the
interim reporting period as of June 30, 1999, and the results of operations for
the three month and six month periods ended June 30, 1999 and 1998 and cash
flows for the six month period June 30, 1999 and 1998. These results have been
determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the
Company's 1998 Annual Report on Form 10-KSB.
The results of operations for the three month and six month periods ended June
30, 1999 are not necessarily indicative of the results to be expected for any
other period or for the full year.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1998.
(2) LOSS PER COMMON SHARE
Loss per common share have been computed based upon the weighted average number
of common shares outstanding during the periods presented. Common stock
equivalents resulting from the issuance of the stock options and warrants have
not been included in the per share calculations because such inclusion would be
antidilutive.
(3) GOODWILL
In connection with the Vision acquisition, consideration paid exceeded the
estimated fair value of the assets acquired (including estimated liabilities
assumed as part of the transaction) by approximately $3,800,000. The excess of
the consideration paid over the fair value of the net assets acquired has been
recorded as goodwill and is being amortized on a straight line basis over 40
years.
In connection with the West Regional MRI Limited Partnership acquisition,
consideration paid exceeded the estimated fair value of the assets acquired
including estimated liabilities assumed as part of the transaction by
approximately $762,000. The excess of the consideration paid over the fair value
of the net assets acquired has been recorded as goodwill and is being amortized
on a straight line basis over 40 years.
F-8
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(4) SHORT-TERM NOTES PAYABLE AND LINE OF CREDIT
<TABLE>
Notes payable and line of credit consist of the following at June 30:
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Line of credit with finance company at prime plus 3% under which the Company
may borrow up to $1,500,000 or the "borrowing base" as defined.
Balance due August 1999, renewable for consecutive one-year periods. $ 516,450 $ 562,538
Note payable originally due June 1997. Outstanding balance currently due
with interest at 12.5%. 63,441 59,619
Note payable to bank, with interest at 9.95%, originally due August 1998,
extended to January 2000. 81,288 79,689
Note payable to bank, with interest at prime plus 2%. Outstanding balance
currently due. 95,616 94,129
Note payable to bank, with interest due quarterly at 4% above discount
rate, originally due June 1999, extended to December 1999. 75,113 77,171
Note payable to finance company, with interest at 10.5%, payable in sixty
Consecutive monthly installments of $2,149.39, final payment due February 2004. 94,835
---------- ----------
$ 926,743 $ 873,146
========== ==========
</TABLE>
(5) PRIOR PERIOD ADJUSTMENT
-----------------------
During the second quarter of 1999, management discovered additional 1998
expenses that should have been allocated to the limited partners of the West
Regional MRI Limited Partnership. Therefore, the net effect of this adjustment
is to reduce the 1998 Accumulated Deficit by $85,870.
(6) STOCKHOLDERS' EQUITY
--------------------
PREFERRED STOCK
In April 1995, the Company amended its Articles of Incorporation to authorize
10,000,000 shares of $.01 par value preferred stock. In December 1995, the
Company further amended its Articles of Incorporation to authorize 187,500 of
Series I convertible preferred stock in conjunction with its private placement
offering, the Company issued 153,750 shares of Series I convertible preferred
stock with an assigned value of $384,375 (see note 3). On January 19, 1996, the
Company again amended its Articles of Incorporation to increase the authorized
shares of Series I convertible preferred stock from 187,500 to 247,500. On
January 24, 1996, the Company issued an additional 93,750 shares of Series I
convertible preferred stock. These preferred shares were considered an original
issue discount associated with the notes payable and were amortized over
approximately the first five months of 1996.
On June 24, 1996, the Company completed a public offering of 1,500,000 shares of
6% cumulative convertible Series A preferred stock (the "Preferred Stock") and
1,500,000 redeemable common stock purchase warrants (the "Redeemable Warrants")
resulting in gross proceeds of $7.65 million. The Company received approximately
$4 million after repayment of short-term debt and costs associated with the
offering. The Preferred Stock is convertible into four thirty-fifths (4/35)
share of common stock $43.75 per share and for a total of $131.25. As part of
the terms of this offering, the holders of the Series I convertible preferred
stock exchanged their preferred stock for the Preferred Stock on a one for one
basis at no cost. Each share of Preferred Stock, by its terms, automatically
converted into four thirty-fifths (4/35) share of common stock on July 24, 1997.
F-9
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(6) CONTINUED
---------
During the first quarter of 1997, 94,920 shares of Preferred Stock were
converted into 10,848 shares of common stock; and during the second quarter of
1997, 31,927 shares of Preferred Stock were converted into 3,649 shares of
common stock. On July 24, 1997, each of the then-outstanding shares of Preferred
Stock, by their terms, automatically converted into four thirty-fifths (4/35)
share of common stock.
COMMON STOCK
Effective March 6, 1998, the Directors of the Company approved a one (1) for
thirty-five (35) reverse split of the common stock. There was no change in the
common stock voting rights, par value or authorized shares. All share balances
have been retroactively adjusted to reflect the reverse stock split.
Pursuant to an investment letter dated June 26, 1998 with an individual, the
Company received $55,000 for the purchase of 55,000 shares of Restricted Rule
144 Common Stock at a purchase price of $1.00 per share. As of December 31,
1998, all such shares had been issued.
On July 14, 1998, the Company acquired either the stock or substantially all of
the assets and liabilities of Vision Diagnostics, Inc. and Affiliates for a
total of 3,461,356 Restricted Rule 144 common shares. At December 31, 1998,
2,599,677 shares have been issued and 861,679 are to be issued upon the
completion of escrow requirements.
During the first quarter of 1999, an additional 200,000 shares of Restricted
Rule 144 common stock, valued at $87,500, were issued in connection with the
acquisition of Vision Diagnostics, Inc. Accordingly, goodwill associated with
this transaction was increased by $87,500.
Pursuant to an investment letter dated February 23, 1999 with an individual, the
Company received $25,000 for the purchase of 62,500 shares of Restricted Rule
144 Common Stock at a purchase price of $.40 per share. As of June 30, 1999,
such shares had been issued.
Pursuant to an investment letter dated March 8, 1999 with an individual, the
Company received $100,000 for the purchase of 250,000 shares of Restricted Rule
144 Common Stock at a purchase price of $.40 per share. As of June 30, 1999, all
such shares had been issued.
Pursuant to an investment letter dated March 12, 1999 with an individual, the
Company received $10,000 for the purchase of 25,000 shares of Restricted Rule
144 Common Stock at a purchase price of $.40 per share. As of June 30, 1999, all
such shares had been issued.
Pursuant to investment letters dated May 25, 1999 and June 7, 1999 with a
limited liability company, the Company received $100,000 for the purchase of
250,000 shares and $50,000 for the purchase of 125,000 shares, respectively.
Both investment letters were to purchase shares of Restricted Rule 144 Common
Stock at a purchase price of $.40 per share. As of June 30, 1999, all such
shares had been issued.
Pursuant to an investment letter dated May 25, 1999 with a corporation, the
Company received $100,000 for the purchase of 250,000 shares of Restricted Rule
144 Common Stock at a purchase price of $.40 per share. As of June 30, 1999, all
such shares had been issued.
In each of the five most current years, the Company's board of directors have
annually approved a stock compensation plan, the most recent which registered
500,000 shares of common stock under Form S-8 on March 17, 1999, whereby
services are obtained in exchange for issuance of free trading stock of the
Company. Shares may be awarded under this plan until February 1, 2004. During
the three months ended March 31, 1999 and 1998, 178,700 and 80,381 shares,
respectively, of common stock under Form S-8 registrations were issued for
directors fees, research and development, advertising and public relations,
compensation and legal and professional services provided to the Company.
F-10
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 199
(7) ACQUISITION OF WEST REGIONAL MRI LIMITED PARTNERSHIP
On April 7, 1999, the Company acquired the remaining ownership of West Regional
MRI Limited Partnership at a purchase price of $1,300,000. Associated with this
transaction, the Company recorded goodwill of $762,265 (note 3), warrants and
the related deferred interest valued at $105,250 and additional notes payable
for $500,000 due to the limited partners and $650,000 due to a finance company.
The deferred interest is being amortized over sixty months which is the term of
the associated note payable. The $500,000 limited partnership note payable has
an interest rate of 8.5%, payable in quarterly installments of $41,665, final
payment due June 15, 2002. The $650,000 note payable to a finance company has an
interest rate of 12.92% and was added to the refinance of a capital lease with a
revised sixty month payment of $27,119, final payment due March 2004.
(8) SUBSEQUENT EVENTS
In August 1999, the Company entered into a Letter of Intent to acquire the
equity/assets in Ultra MRI & Diagnostic Services in exchange for Common Stock of
the Company and other consideration to be finalized in a definitive agreement.
This Letter of Intent, which is non-binding, is subject to due diligence by both
parties, completion of a funding by the Company and final approval by both
Boards of Directors.
In July 1999, the Company entered into a Letter of Intent to acquire up to a 40%
equity/asset interest in Total Medical Information Management Systems in
exchange for Common Stock of the Company and other consideration to be finalized
in a definitive agreement. This Letter of Intent, which is non-binding, is
subject to due diligence by both parties, completion of a funding by the Company
and final approval by both Boards of Directors.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10QSB
06/30/99 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JAN-01-1999 APR-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 70,613 70,613
<SECURITIES> 0 0
<RECEIVABLES> 3,715,127 3,715,127
<ALLOWANCES> 1,273,740 1,273,740
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,653,322 2,653,322
<PP&E> 4,007,127 4,007,127
<DEPRECIATION> 1,516,597 1,516,597
<TOTAL-ASSETS> 10,086,970 10,086,970
<CURRENT-LIABILITIES> 3,959,946 3,959,946
<BONDS> 0 0
0 0
0 0
<COMMON> 1,018,351 1,018,351
<OTHER-SE> 1,843,229 1,843,229
<TOTAL-LIABILITY-AND-EQUITY> 10,086,970 10,086,970
<SALES> 2,250,878 1,157,317
<TOTAL-REVENUES> 1,656,325 852,639
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,380,255 1,211,429
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 234,836 150,574
<INCOME-PRETAX> (900,970) (483,150)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (900,970) (483,150)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (900,970) (483,150)
<EPS-BASIC> (.08) (.17)
<EPS-DILUTED> (.08) (.17)
</TABLE>
