US Securities and Exchange Commission
Washington, DC 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1999.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
Commission File Number 0-12365
MIRACOR DIAGNOSTICS, INC.
(formerly known as 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: (858) 455-7127
Securities registered under Section 12(b) of the Exchange Act: None
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $0.15 Par Value Over-the-counter
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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year $3,924,987.
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 March 15, 2000, was $5,262,742.
As of March 15, 2000, Registrant had outstanding 10,686,410 shares of common
stock and 0 shares of 6% cumulative convertible Series A preferred stock.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
Portions of the Registrants definitive Proxy Statement relating to the 2000
Annual Meeting of the Stockholders are incorporated by reference into Part III
hereof.
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TABLE OF CONTENTS
PART I
Item 1. Description of the Business..................................1
Item 2. Description of Property......................................4
Item 3. Legal Proceedings............................................4
Item 4. Submission of Matters to a Vote of Security Holders..........4
PART II
Item 5. Market for Common Equity and Related Stockholder Matters ....5
Item 6. Management's Discussion and Analysis and Plan of Operation...6
Item 7. Financial Statements.........................................11
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure.....................................12
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act............12
Item 10. Executive Compensation.......................................14
Item 11. Security Ownership of Certain Beneficial Owners and
Management...................................................14
Item 12. Certain Relationships and Related Transactions...............14
PART IV
Item 13. Exhibits and Reports on Form 8-K.............................15
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PART I
ITEM 1. DESCRIPTION OF THE BUSINESS
The Company
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Miracor Diagnostics, Inc. (the "Company") was previously a development stage
medical device company. In the third quarter of 1998, the Company redefined its
business focus to medical diagnostic imaging services and emerged as an
operating company through the acquisition of medical resonance imaging (MRI)
centers in Orlando and Jacksonville, Florida, Toledo, Ohio, and the general
partnership interest of another center in Oak Brook, Illinois. In April 1999,
the Company acquired the remaining 50% limited partnership interest in the Oak
Brook center.
In its approximate fifteen-year history, the use of MRI has become the medical
imaging modality of choice for a rapidly increasing list of applications and
continues to exhibit rapid growth. Unlike x-ray and computer aided tomography
(CT), MRI is not a radiation-based imaging technology and thus safer to
patients. Manufacturers of MRI equipment are continuing investment in new
technology and upgrades to further improve MRI capabilities.
During 1999, the Company's activities focused on improvement of its capital
structure and operations of the acquired MRI centers. As a result, the acquired
debt from the MRI acquisitions was reduced, equity was increased $1 million and
used for working capital and quarterly losses of approximately $400,000 in the
first and second quarters were reduced to approximately $75,000 in the fourth
quarter. Additionally, the Company identified suitable acquisition targets to
position the Company for growth. On February 8, 2000, the Company closed the
acquisition of three centers located in Palm Harbor, St. Petersburg and Tampa,
Florida. These newly acquired centers have approximately $2,000,000 in annual
revenues.
The Company plans to seek, investigate and acquire additional controlling
interests in business opportunities that are similar in nature to its existing
medical diagnostic imaging centers in order to further grow the Company.
In the immediate future, the Company is seeking additional financing for its
working capital requirements, for expansion of it existing operations and
acquisition or more MRI centers.
Acquisitions
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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
Diagnostics, Inc. and Affiliates was in the business of providing medical
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.
Vision Diagnostics, Inc. is the 50% general partner in West Regional MRI Limited
Partnership. On April 7, 1999, the Company acquired the remaining 50% interest
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 years ended December 31, 1999 and
1998.
On February 8, 2000, the Company acquired 80% ownership in Ultra MRI &
Diagnostics Services ("Ultra") with a combination of 20% in the form of a
convertible note and 80% in Restricted Rule 144 common stock. Ultra is a
multi-site diagnostic imaging business with offices in Palm Harbor, St.
Petersburg and Tampa, Florida. Ultra had approximately $2.1 million in revenue
in 1999. Total assets were approximately $2.1 million and total liabilities were
approximately $1.3 million as of December 31, 1999. The convertible notes are
payable to the principals in an aggregate amount of $125,000 on August 9, 2000,
$125,000 on November 9, 2000 and any remaining amount due November 9, 2001.
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The Company plans to seek, investigate and, if such investigation warrants, to
acquire controlling interest in business opportunities that are similar in
nature to our existing medical diagnostic imaging centers. The Company plans to
concentrate its search to opportunities that are located near its existing MRI
centers, but will not restrict its search in other geographical location. The
Company may seek a business opportunity in the form of firms which have recently
commenced operations or are mature businesses.
In seeking business opportunities, the Company will base its decision upon the
objectives of seeking long-term appreciation in its market value. The analysis
of new business opportunities will be pursued under guidelines and objectives
established by the Company's officers and directors, and will attempt to analyze
all relevant factors and make a determination based upon reasonable
investigative measures and available data. Management of the Company will
utilize the services of its present attorney and accountants in the
investigation of prospective acquisitions. The Company may also utilize the
services of hired consultants.
Risks
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As the Company acquires additional MRI centers with existing revenue streams and
additional financing transactions, 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 may incur operating losses in the coming year. In the immediate
future, in order to fund its current working capital deficit, expansion of its
existing operations and acquire additional MRI centers, the Company intends to
complete additional private placements of debt and/or equity securities. The
Company's ability to obtain additional sources of financing cannot be assured.
Growth of the Company is dependent on its ability to obtain additional funding
to expand its existing operations and acquire other MRI centers.
Corporate History
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The Company was incorporated on February 6, 1980, under the laws of the State of
Utah, initially under the name of Gold Probe, Inc. In September 1981, the
Company and the Hailey Oil Company, Inc., a Mississippi corporation, entered
into an Agreement and Plan of Reorganization whereby the Company acquired Hailey
Oil Company, Inc. and exchanged 4,500,000 shares of its common stock for all the
issued and outstanding shares of Hailey Oil Company, Inc. Also, pursuant to the
reorganization in January 1982, the Company changed its name to Hailey Energy
Corporation, effected a one (1) for five (5) reverse split of its common stock,
and decreased its authorized number of shares to 25,000,000. In October 1986,
the number of authorized shares of the Company was increased to 100,000,000. In
November 1990, the Company effected a one (1) for thirty (30) reverse split of
its common stock and increased the par value of its common stock to $0.15 per
share. In November 1992, the Company changed its name from "Hailey Energy
Corporation" to "Cytoprobe Corporation". In January 1994, the Company effected a
one (1) for six (6) reverse split of its common stock. In April 1995, the
Company changed its name to Medical Device Technologies, Inc. to reflect the
Company's broadening base of medical products. In June 1996, the Company
effected a one (1) for two (2) reverse split of its common stock. On March 6,
1998, the Company effected a one (1) for thirty-five (35) reverse split of its
common stock. The par value of the Company's common stock remained at $0.15 per
share and the number of authorized shares of common stock (100,000,000) remained
unchanged. In October 1999, the Company changed its name to Miracor Diagnostics,
Inc. to reflect the Company's focus in medical diagnostic imaging services.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission can be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street NW,
Washington, DC 20549. Such material may also be accessed electronically by means
of the Commission's home page on the Internet at http://www.sec.gov. As of
December 31, 1999, the Company's common stock, par value $.15 per share, is
traded over-the-counter under the symbol "MRDG". The Company's Redeemable Common
Stock Purchase Warrants (the "Redeemable Warrants") and common stock, which
previously traded on the National Association of Securities Dealers Automated
Quotation (NASDAQ) SmallCap Market under the symbols MEDDW and MEDD were
delisted by NASDAQ on September 30, 1997 and March 26, 1998, respectively. The
Company's 6% Cumulative Convertible Series A Preferred Stock, par value $.01 per
share (the "Preferred Stock"), which previously traded on the NASDAQ SmallCap
Market under the symbol "MEDDP", converted to common stock at a ratio of 4/35
(four thirty-fifths) shares of common stock to 1 (one) share of Preferred Stock
on July 24, 1997. There were no shares of Preferred Stock outstanding at
December 31, 1999.
2
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Prior to 1992, the Company's business was the exploration and production of
hydrocarbons. As of June 1, 1992, the Company re-entered the development stage.
Effective January 1, 1994, the Company completed the divestiture of all oil and
gas properties and was no longer in the hydrocarbon business. Since that time,
the Company has been exclusively a medical based company.
Prior to 1998, the Company engaged in the development of three innovative
medical devices. The Fluid Alarm System (FAS), formerly called the Personal
Alarm System (PAS), monitored the integrity of infection control barriers, such
as surgical gloves and gowns worn during medical procedures. The Cell Recovery
System (CRS), was a cell "brushing" and retrieval system that used an automated
biopsy brush for the collection of specimen cells for diagnostic purposes,
primarily (but not limited to) cancer detection. The Company received FDA
clearance for the FAS during the year ended December 31, 1995 and received FDA
clearance for the CRS in March 1996. The Company initiated further clinical
trials on the CRS in 1997. The Intracranial Pressure Monitoring System (ICP),
was intended to measure pressures within the skull non-invasively. The Company
determined that the licensed ICP technology was not effective. As a result, the
Company recorded an impairment loss on the ICP license in 1997 and deemed the
ICP license to have no future value. In 1998, coincident with the purchase of
Vision Diagnostics, Inc. and Affiliates, described in the next paragraph, the
Company wrote off the costs associated with the FAS and the CRS licenses,
including certain fixed assets and inventory costs, and recognized impairment
losses in the amount of $725,458, and $616,093, respectively. However, the
company continues to retain the rights to the use of the licenses through 2005
and 2008, respectively. Therefore, the Company may elect to reintroduce either
product at a later date.
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 medical
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.
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, at this date, the Company acquired of 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.
3
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On April 7, 1999, the Company acquired the remaining ownership of West Regional
MRI Limited Partnership at a purchase price of approximately $1,300,000.
Associated with this transaction, the Company recorded goodwill of $762,265,
warrants and the related deferred interest valued at $105,250, additional notes
payable for $500,000 due to the limited partners and refinanced a capital lease
agreement for an additional $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
an additional $100,000 representing the purchase option price of the equipment.
It has a revised sixty month payment of $27,119 with final payment due March
2004. Warrant amortization to interest expense related to the above note payable
amounted to $15,788 as of December 31, 1999.
The Company acquired 80% ownership in Ultra MRI & Diagnostics Services ("Ultra")
as of February 9, 2000 with a combination of 20% in the form of a convertible
note and 80% in Restricted Rule 144 common stock. Ultra is a multi-site
diagnostic imaging business with offices in Palm Harbor, St. Petersburg and
Tampa, Florida. Ultra had approximately $2 million in revenue in 1999. Total
assets were approximately $2.1 million and total liabilities were approximately
$1.3 million as of December 31, 1999. The acquisition will be accounted for as a
purchase in 2000.
Number of Employees
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As of December 31, 1999 the Company had five full-time corporate employees, and
twenty full-time and five part-times employees at its four MRI centers.
Following completion of the acquisition of Ultra MRI on February 8, 2000, the
Company had five full-time and two part-time corporate employees, and
thirty-three full-time and seven part-time employees at seven MRI centers.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases its MRI machines and offices in San Diego, CA, Jacksonville
FL, Orlando, FL, Toledo OH, and Oak Brook, IL. The Company's total lease
obligation is currently approximately $74,000 per month with certain leases
extending through 2006.
ITEM 3. LEGAL PROCEEDINGS
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 obtained approval from its shareholders to change its name to
Miracor Diagnostics, Inc. In October 1999, the Company completed the process of
changing its name to Miracor Diagnostics, Inc.
In 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 sheet.
In July 1999, the Company instituted suit for non-payment of fees. In August
1999, the defendant filed a cross-complaint for damages. The Company has no
serious financial exposure to this claim. The suit is presently before a
mediator for settlement.
Except as described above, the Company is not aware of any legal matter or claim
pending or threatened that would have a material adverse effect on its
consolidated financial position or results of operations. There are no other
legal proceedings, to which the Company is a party, which could have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
4
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter under the symbol MRDG. The
following table sets forth, for the periods indicated, the high and low bid
prices for the common stock, as reported by the OTC Bulletin Board during 1998
and 1999. Common stock prices have been adjusted to reflect the one for
thirty-five reverse split effective March 6, 1998.
Bid Price
High Low
----------------------------
1998
- ----
First Quarter $ 2.50 $ .55
Second Quarter $ 2.31 $ 1.14
Third Quarter $ 2.13 $ .94
Fourth Quarter $ 1.06 $ .56
1999
- ----
First Quarter $ 1.68 $ .68
Second Quarter $ 2.15 $ .65
Third Quarter $ 2.37 $ .94
Fourth Quarter $ 1.56 $ .59
On March 15, 2000, the closing bid and asked prices of the Company's Common
Stock, as reported by the OTC Bulletin Board, were $.875 and $.9375 per share,
respectively.
The Company received notice from NASDAQ, at the close of business on March 24,
1998, that the Company's stock, which had previously traded on the Small Cap
Market, was being delisted as of the date of notification for failure to meet
the minimum requirement for tangible net assets value.
On March 15, 2000, there were approximately 1,213 holders of record of Common
Stock.
The Company has not paid any cash dividends with respect to its common stock,
and it is unlikely that Company will pay any dividends on its common stock in
the foreseeable future. The Company was required to pay a 6% cumulative,
semi-annual dividend with respect to its Preferred Stock in shares of common
stock, and, through July 24, 1997, the date the Preferred Stock converted, by
its terms, to four/thirty-fifths (4/35 rounded to the nearest whole number of
shares) shares of common stock for each share of Preferred Stock, the Company
made each of such dividend payments. Earnings, if any, that the Company may
realize will be retained in the business for further development and expansion.
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ITEM 6. 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 Item 7 in this Form 10-KSB.
Forward-Looking Statements
- --------------------------
The following discussion as well as in other Items in this Form 10-KSB contain
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 as well as in other Items in this Form 10-KSB,
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.
General
- -------
From its incorporation in 1980 until June 1992, the Company engaged
exclusively in oil and gas activities. In June 1992, the Company commenced
certain initial activities with respect to the medical device business and in
November 1992, changed its name to "Cytoprobe Corporation to reflect this
business change. Thereafter, the Company continued to increase its activities in
the medical device field while simultaneously decreasing its oil and gas
activities. On 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, to "Medical Device Technologies, Inc., and at that time was
considered, for accounting purposes to have emerged as a development stage
company. In the third quarter of 1998, the Company redefined its business focus
to medical diagnostic imaging services and emerged as an operating company
through the acquisition of medical resonance imaging (MRI) centers in Orlando
and Jacksonville, Florida, Toledo, Ohio, and the general partnership interest of
another center in Oak Brook, Illinois. In April 1999, the Company acquired the
remaining 50% limited partnership interest in the Oak Brook Center. In October
1999, the Company changed its name to Miracor Diagnostics, Inc. to reflect the
Company's change in focus to diagnostic imaging services.
During 1999, the Company's activities focused on improvement of its capital
structure and operations of the acquired MRI centers. As a result, the acquired
debt from the MRI acquisitions was reduced, equity was increased $1 million and
used for ongoing working capital and quarterly losses of approximately $400,000
in the first and second quarters were reduced to approximately $75,000 in the
fourth quarter. Additionally, the Company identified suitable acquisition
targets to position the Company for growth. On February 8, 2000, the Company
closed the acquisition of three centers located in Palm Harbor, St. Petersburg
and Tampa, Florida. These newly acquired centers have approximately $2,000,000
in annual revenues.
On February 8, 2000, the Company acquired 80% ownership in Ultra MRI &
Diagnostics Services ("Ultra") with a combination of 20% in the form of a
convertible note and 80% in Restricted Rule 144 common stock. Ultra is a
multi-site diagnostic imaging business with offices in Palm Harbor, St.
Petersburg and Tampa, Florida. Ultra had approximately $2.1 million in revenue
in 1999. Total assets were approximately $2.7 million and total liabilities were
approximately $1.3 million as of December 31, 1999. The convertible notes are
payable to the principals in an aggregate amount of $125,000 on August 9, 2000,
$125,000 on November 9, 2000 and any remaining amount due November 9, 2001.
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The Company may incur operating losses in the coming year. In the immediate
future, in order to fund expansion of its existing operations and acquire
additional MRI centers, the Company intends to complete additional private
placements of debt and/or equity securities. The Company's ability to obtain
additional sources of financing cannot be assured. Growth of the Company is
dependent on its ability to obtain additional funding to expand its existing
operations and acquire other MRI centers.
The following management discussion and analysis and plan of operation should be
read in conjunction with the consolidated financial statements and notes thereto
referred to in Item 7.
Results of Operations
- ---------------------
Year ended December 31, 1999 compared to year ended December 31, 1998.
Revenues
- --------
Operating net revenues for the year ended December 31, 1999 were $3,924,987
compared to $1,869,374 for the year ended December 31, 1998. The increase of
110% is primarily attributed to revenues resulting from the July 1998
acquisition of Vision Diagnostics, Inc. and affiliates. The operations of which
were included for the entire year of 1999 as compared to only six months of
1998. Revenue from the MRI centers generated from providing scanning and reading
services for the medical industry accounted for all of the net revenues in 1999.
The product sales from the FAS represented $1,900 of the sales revenue in 1998
with the remaining revenues representing sales from the MRI centers.
Operating Expenses
- ------------------
Research and Development
Research and development costs in 1999 were $0 as compared to $102,293 in
1998, representing a decrease of 100%. In 1998, research
and development activities were postponed and the only costs were associated
with the carrying costs for maintaining ownership of the FAS and CRS licenses.
There were no current year costs associated with research and development due to
the cessation in late 1998 of all activity related to the FAS and CRS. The
ceased and the associated licenses were written-off at that time to reflect the
Company's focus on medical diagnostic imaging service centers.
Sales, General and Administrative
Sales, general and administrative costs were $4,977,308 in 1999 as compared to
$2,967,114 in 1998, representing an increase of 67.7%. This increase was
primarily the result of operating the MRI centers for a full year compared to
only six months in 1998. The increase was partially offset by the discontinued
royalties expense and amortization of licenses related to the FAS and CRS. There
were no current year costs associated with FAS and CRS licenses and royalties
due to the cessation in late 1998 of all activity related to the FAS and CRS.
Write-Off of License Agreements
In 1998, coincident with the purchase of Vision
Diagnostics, Inc. and Affiliates, the Company wrote-off the FAS and the CRS
licenses as well as other related assets and recorded an impairment loss of
$1,341,551.
Net Loss
The Company's net loss for the year ended December 31, 1999 was ($1,305,208) as
compared to ($2,833,850) for the year ended December 31, 1998, representing a
53.9% decline. The decrease in net loss was primarily attributable to increased
revenues as well as the discontinuance of research and development, royalties,
and license amortization related to the FAS and CRS products. This decrease was
partially offset by the increased costs associated with providing services and
operating the MRI centers for a full year. Loss per common share for 1999 was
($0.20) as compared to a ($0.93) loss per common share 1998. This reduction in
loss per common share was attributable to the reduced net loss in 1999 compared
to 1998 and to the increase in the weighted average number of common shares
outstanding in 1999 as compared to 1998.
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Liquidity and Capital Resources
- -------------------------------
To date, the Company has funded its capital requirements for its current medical
diagnostic imaging operations from cash flows from its operations and the public
and private sale of debt and equity securities and the issuance of common stock
in exchange for services. The Company's cash position at December 31, 1999 was
$106,517 as compared to $77,906 at December 31, 1998, representing a 36.7%
increase.
In 1999, $288,207 of net cash was provided by operating activities. The Company
received $150,000 from the proceeds of notes payable and $485,000 from the
proceeds of Restricted Rule 144 common stock issued during 1999. Net cash
provided by operating activities in 1999 consisted principally of a net loss of
($1,305,208). Contributing to this net loss was a decrease in other net assets
(excluding cash) of ($299,068), which was offset by $1,892,483 in common stock
paid for services and interest in lieu of cash, depreciation/amortization,
minority interest, bad debt expense, write-off of notes payable, Cancellation of
Restricted Rule 144 common stock and accrued compensation expense. Changes in
current assets and current liabilities resulted in a deficit in the Company's
working capital position of $544,186 at December 31, 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 , and in the longer term to continue to provide services in its'
current MRI centers and to acquire additional MRI centers. 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 working capital deficit,
expansion of its existing operations as well as acquire additional MRI sites for
growth, the Company intends to seek to complete additional private placements of
debt and/or equity securities. The Company's ability to obtain additional
sources of financing cannot be assured. Growth of the Company is dependent on
its ability to obtain such additional funding.
During the fourth quarter of 1997, the Company issued $100,000 ($50,000 to three
of the Company's directors) in principal amount of 36% short-term convertible
notes payable, due May 18, 1998, to five individuals to finance operations until
a corporate acquisition could be completed. Until payment in full, the unpaid
principal amount of these notes, or any portion may, at the election of the
noteholder at any time, be converted at the conversion price per share of fifty
(50%) percent of the previous thirty day average trading bid price as of the
date of conversion (as amended). As additional consideration for these loans,
the individual lenders, including the directors, were awarded an aggregate of
warrants to purchase 1,429 shares of common stock for every $12,500 loaned to
the Company at an exercise price of $4.20 per share. In connection with the
issuance of the warrants to the individuals, the Company did not recognize
additional interest expense, as the value of the warrants was deemed to be
immaterial. The interest rate and terms of these notes were made at arms length.
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. No cash was paid to these individuals nor to the directors for
interest. Restricted Rule 144 common stock paid to these individuals and to the
directors for interest was $21,300 at December 31, 1998 and $0 for the year
ended December 31, 1999. Accrued interest was $0 for the year ended December 31,
1998. All of the noteholders did not elect to exercise the related warrants,
thus, all such warrants expired on May 18, 1998.
8
<PAGE>
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 for the year ended December 31, 1998. Restricted Rule 144 common
stock paid to these individuals for interest was $13,708 during the year ended
December 31, 1998. Accrued interest amounted to $1,248 as of December 31, 1998.
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. 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. 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. 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. 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. Pursuant to an investment letter dated September 15,
1999 with a limited liability company, the Company received $50,000 for the
purchase of 66,667 shares of Restricted Rule 144 common stock at a purchase
price of $.75 per share. Pursuant to an investment letter dated December 4, 1999
with a limited liability company, the Company received $50,000 for the purchase
of 111,111 shares of Restricted Rule 144 common stock at a purchase price of
$.45 per share. As of December 31, 1999, all 1,140,278 shares had been issued.
In September 1999, the Company issued $50,000 in principal amount of 10%
Promissory notes payable, due March 31, 2000, to two directors and an individual
to finance operations. As additional consideration for these loans, the
individual lenders, including the directors, were awarded total warrants to
purchase 40,000 shares of common stock at an exercise price of $0.625 per share.
In connection with the issuance of the warrants to the individuals, the company
is recognizing additional interest expense of $10,938, which is being amortized
over the terms of the loans. Accrued interest expense and warrant amortization
to interest expense related to these loans amounted to $1,667 and $1,944,
respectively, as of December 31, 1999.
9
<PAGE>
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 2000 will be for funding growth
through expansion of its existing operations and for future acquisitions of
additional MRI centers.
The Company is seeking to fund activities and other operating needs in the next
twelve months from funds to be obtained through private placements or public
offerings of debt or equity securities.
Subsequent to the next 12 months, the Company plans to finance its long-term
operations and capital requirements with the profits and funds generated from
the revenues of its MRI centers. The Company may obtain future funding 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 never been and is not now
profitable, and has negative working capital. Growth of the Company is dependent
on the success of its MRI centers which were acquired in July 1998.
Year 2000 Compliance
- --------------------
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, if not addressed these
systems may not have been able to properly interpret dates beyond the Year 1999,
which may have led to business disruptions. Accordingly, the Company identified
and performed all needed material modifications and testing of significant
systems, and communicated with customers, suppliers, banks and others with whom
it does significant business to determine their Year 2000 readiness and the
extent to which the Company was vulnerable to any other organization's Year 2000
issues.
The Company considers the transition into the year 2000 successful from the
perspective of its systems. In addition to the changeover to January 1, 2000, it
has been shown that certain other dates may also present similar problems for
some systems. The Company continues to monitor the situation. To date, the
Company has not experienced any material Year 2000 issues with respect to its
systems, customers or suppliers.
The Company estimates that the total cost to the Company of Year 2000 activities
has been less than $10,000.
10
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX
-----
Page No.
--------
Independent Auditors' Report F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-2
Consolidated Statements of Operations for the
Years Ended December 31, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-9
11
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On January 27, 1999, the Registrant received notification that its accounting
firm, BDO Seidman, LLP, had resigned. The Company's decision to accept the
resignation of BDO Seidman was approved by the Company's Board of Directors. The
Registrant had no disagreements nor other events reportable under Item 304 of
Regulation S-B with the former accounting firm. The former auditors' report on
the financial statements for the past two fiscal years did not contain an
adverse opinion or a disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope, or accounting principles, except that their report
contained an explanatory paragraph regarding the substantial doubt about the
Company's ability to continue as a going concern.
The Board of Directors approved the engagement of Parks, Tschopp, Whitcomb &
Orr, PA as independent accountants for the Company and to advise the Company on
accounting matters. Prior to the appointment of Parks, Tschopp, Whitcomb & Orr,
PA, the Company had not consulted with Parks, Tschopp, Whitcomb & Orr, PA,
regarding the application of accounting principles.
The registrant has no disagreements with its current auditor Parks, Tschopp,
Whitcomb & Orr, PA.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Executive Officers, on December 31, 1999, and their ages,
positions held with the Company, length of time in such positions, and term of
office are set forth below:
Name and Age Current Position Director Since Officer Since
------------ ---------------- -------------- -------------
M. Lee Hulsebus Chairman of the Board, 11/11/94 8/31/94
Age 61 Chief Executive Officer,
President, Chief
Financial Officer
Richard E. Sloan Vice President of 3/15/96
Age 50 Operations and New
Business Development
Don L. Arnwine Director 3/6/95
Age 67
Arthur E. Bradley Director 9/26/86
Age 66
Thomas E. Glasgow Director 11/11/94
Age 46
Robert S. Muehlberg Director 3/11/99
Age 46
The principal occupations and positions for the past several years of each of
the executive officers and directors of the Company are as follows:
M. Lee Hulsebus has been in the health care field for 34 years. From January
1990 until he joined the Company in August 1994, he was the President and owner
of his own health care consulting firm. From 1990 to 1992, Mr. Hulsebus also
served as President and Chief Operating Officer of Sports Support, Inc., a
sports medicine company. From 1988 until 1990, he served as Medical Group
President (worldwide operations) for Teleflex, Inc. For 22 years prior to that,
Mr. Hulsebus was employed by Becton-Dickinson & Co. and C.R. Bard, Inc., both of
which are leading companies in the health care industry. Mr. Hulsebus has served
in the capacity of President/Chief Executive Officer for the past 20 years for
various companies.
12
<PAGE>
Richard E. Sloan has been Vice President of New Business Development since March
1996 and Vice President of Operations since July 14, 1998. Mr. Sloan was also a
consultant to the Company from August 1995 to March 1996. From March 1995 to
July 1995, Mr. Sloan served as Chief Executive Officer of WorldWide Products,
Inc., a private Los Angeles based development and marketing firm that
distributes pharmaceutical products to plastic surgeons and dermatologists.
Prior thereto, from March 1992 to March 1995 he served as corporate marketing
director and general manager for Industrial Products of UniFET Incorporated, a
private company based in San Diego, California involved in the development of
solid-state sensor-based medical products. From December 1989 through March
1992, Mr. Sloan managed his own mergers and acquisition business with First
Pacific Group, located in Carlsbad, California, which provided investment and
financial services to privately-held companies in southern California. Prior to
that Mr. Sloan had held various management positions with Baxter International,
Deerfield, IL and IVAC Corporation, San Diego, CA.
Don L. Arnwine has been President of Arnwine Associates of Irving, Texas, a
company he founded to provide specialized advisory services to the health care
industry, since 1988. Mr. Arnwine served as Chairman and Chief Executive Officer
from 1985 until 1988 of Voluntary Hospitals of America (VHA), a company he
joined in 1982. Prior to joining VHA, Mr. Arnwine served as President and Chief
Executive Officer of Charleston Area Medical Center, a 1000-bed regional
facility care center in the State of West Virginia. Mr. Arnwine holds a BS
degree in Business Administration from Oklahoma Central State University and a
Masters degree in Hospital Management from Northwestern University.
Arthur E. Bradley, DDS has been a practicing dentist since 1961. Dr. Bradley has
been involved for his own account in real estate investments for twenty years
and has been active in oil and gas investments for fifteen years. Dr. Bradley
graduated from the University of Mississippi at Hattiesburg and obtained his
degree in Dentistry from Loyola University Dental School.
Thomas E. Glasgow has been President and co-owner of Integrated Trade Systems
("ITS"), a Chicago, Illinois company from April 1992 to the present. Mr. Glasgow
and another individual purchased ITS from its parent company in 1992. ITS is a
logistics management company specializing in the development and marketing of
import and export document generation systems. From 1989 through 1991, Mr.
Glasgow was a partner with Wharton Resource Group and a consultant with ITS.
Wharton Resource Group is a strategic management company specializing in the
development of early stage companies. Prior to these activities, he was a
director with Federal Express Corporation for 11 years in various senior
management capacities.
Robert S. Muehlberg has been President and Chief Executive Officer of Envision
Management, Inc. of Las Vegas, NV, a company that provides management and
consulting services to the health care industry since 1997. Mr. Muehlberg served
as Chairman and Chief Executive Officer from 1994 until 1997 of Medical Imaging
Centers of America, Inc. (MICA), a company he joined in 1985. Prior to joining
MICA, Mr. Muehlberg held various management positions at International Imaging,
Inc., Chicago, IL and American Medical International (AMI) Clearwater, FL. Mr.
Muehlberg holds a Bachelor's degree in Health Science from the University of
Missouri and a Masters degree in Business Administration from Nova Southeastern
University.
On February 21, 2000, the Company hired Ross S. Seibert, CPA as Chief Financial
Officer. Mr. Seibert was with Deloitte & Touche, a "Big 5" accounting firm,
since 1986 and served as Senior Manager. He received a BS in accounting from
Indiana University and a MBA in finance from San Diego State University.
The information required by this Item, which will be set forth under the
captions "Proposal No. 1- Election of Directors," "Executive Officers" and
"Compliance with Section 16(a) of the Exchange Act" in the Company's Proxy
Statement for its 2000 Annual Meeting of Shareholders, is incorporated herein by
reference.
13
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item, which will be set forth under the caption
"Executive Compensation" in the Company's Proxy Statement for its 2000 Annual
Meeting of Shareholders, is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item, which will be set forth under the caption
"Voting Securities and Principal Holders Thereof" in the Company's Proxy
Statement for its 2000 Annual Meeting of Shareholders, is incorporated herein by
reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1998, one director received compensation of $8,600 for general corporate
consulting services. Pursuant to the Vision acquisition agreement, another
director received $65,000 for corporate consulting fees in 1998. Per the terms
of such agreement, this director will continue to receive $13,000 per month
until July 15, 2000.
During the fourth quarter of 1997, the Company issued $100,000 in principal
amount of 36% short-term convertible notes payable, due April 18, 1998, to five
individuals, $50,000 of which was provided by three of the Company's directors,
to finance operations until a corporate acquisition could be completed. Until
payment in full, the unpaid principal amount of these notes, or any portion may,
at the election of the noteholder at any time before the due date, be converted
at the conversion price of $2.35 per share of common stock. Interest paid to
these individuals and to the directors was $0 in 1997 and accrued interest
amounted to $4,400 at December 31, 1997. As additional consideration for these
loans, the individual lenders, including the directors, were awarded an
aggregate of warrants to purchase 1,429 shares of common stock for every $12,500
loaned to the Company at an exercise price of $4.20 per share (see Note 7 to the
consolidated financial statements). In connection with the issuance of the
warrants, the Company did not recognize additional interest expense, as the
value of the warrants was deemed to be immaterial. The interest rate and terms
of these notes were made at arms length. All of these notes were converted in
1998.
In September 1999, the Company issued $50,000 in principal amount of 10%
Promissory notes payable, due March 31, 2000, to two directors and an individual
to finance operations. As additional consideration for these loans, the
individual lenders, including the directors, were awarded total warrants to
purchase 40,000 shares of common stock at an exercise price of $0.625 per share.
In connection with the issuance of the warrants to the individuals, the company
is recognizing additional interest expense of $10,938, which is being amortized
over the terms of the loans. Accrued interest expense and warrant amortization
to interest expense related to these loans amounted to $1,667 and $1,944,
respectively, as of December 31, 1999.
Pursuant to the Vision acquisition agreement and prior to resigning from the
board of directors on June 23, 1999, a director received $74,600 for corporate
consulting fees in 1999. After June 23, 1999, this individual received an
additional $40,000 in corporate consulting fees during 1999.
14
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K The Company filed current reports on Forms 8-K which
were issued on February 3, 1999, March 31, 1999, April
5, 1999, June 29, 1999, and October 12, 1999, and
February 24, 2000.
15
<PAGE>
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.
MIRACOR DIAGNOSTICS, INC.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ M. Lee Hulsebus Chief Executive Officer, President, March 30, 2000
- ------------------------ Chief Financial Officer,
M. Lee Hulsebus, Chairman, Principal Accounting
Officer and Secretary
/s/ Don L. Arnwine Director March 30, 2000
- ------------------------
Don L. Arnwine
/s/ Arthur E. Bradley Director March 30, 2000
- ------------------------
Arthur E. Bradley
/s/ Thomas E. Glasgow Director March 30, 2000
- ------------------------
Thomas E. Glasgow
/s/ Robert S. Muehlberg Director March 30, 2000
- ------------------------
Robert S. Muehlberg
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Miracor Diagnostics, Inc.
San Diego, California
We have audited the accompanying consolidated balance sheet of Miracor
Diagnostics, Inc. and subsidiaries (the "Company") as of December 31, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Medical Device
Technologies, Inc. and subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's recurring losses from operations, negative
working capital and lack of long-term financing raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
By /s/ PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
----------------------------------------
PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
Maitland, Florida
March 7, 2000
F-1
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<CAPTION>
ASSETS
- ------
1999 1998
--------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 106,517 $ 77,906
Accounts receivable (net of allowance of $1,308,016
and $1,487,172) 2,723,306 2,536,042
Prepaid expenses and other assets 81,824 72,180
--------------- ---------------
Total current assets 2,911,647 2,686,128
--------------- ---------------
Property and equipment:
Furniture and fixtures 33,799 33,799
Machinery and equipment 211,706 188,546
Equipment under capital leases 3,398,458 2,380,038
Leasehold improvements 426,632 406,082
--------------- ---------------
4,070,595 3,008,465
Less accumulated depreciation (1,866,309) (1,197,268)
--------------- ---------------
Net property and equipment 2,204,286 1,811,197
Intangible assets:
Goodwill 4,788,143 3,938,378
Organization costs 160,930 160,930
Deferred Interest 122,750 -
Less accumulated amortization (337,159) (175,867)
--------------- ---------------
4,734,664 3,923,441
Other assets 78,138 134,822
--------------- ---------------
Total assets $ 9,928,735 $ 8,555,588
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 849,560 $ 817,368
Accrued expenses 491,470 563,472
Line of credit 506,384 562,538
Note payable - current portion 939,112 1,391,303
Capital lease obligations - current portion 669,307 610,011
--------------- ---------------
Total current liabilities 3,455,833 3,944,692
--------------- ---------------
Other liabilities:
Convertible debt - 15,000
Note payable - long term 683,656 -
Capital lease obligations - long term 2,683,535 1,552,378
--------------- ---------------
Total liabilities 6,823,024 5,512,070
--------------- ---------------
Minority interest - 643,252
--------------- ---------------
Commitments and contingencies (note 8)
Stockholders' equity
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; 7,980,956 and 4,370,905 outstanding) 1,197,143 655,636
Common stock to be issued (770 and 862,394 shares) 23,494 866,162
Warrants 122,750 -
Additional paid-in capital 27,705,952 25,607,914
Deferred stock compensation 30,599 25,443
Accumulated deficit (25,974,227) (24,754,889)
--------------- ---------------
Total stockholders' equity 3,105,711 2,400,266
--------------- ---------------
Total liabilities and stockholders' equity $ 9,928,735 $ 8,555,588
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1999 and 1998
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Patient service revenue $ 5,290,004 $ 2,670,534
Product sales - 1,900
Discounts and allowances (1,365,017) (803,060)
--------------- ---------------
Net revenues 3,924,987 1,869,374
--------------- ---------------
Cost of sales - (619)
--------------- ---------------
Gross profit 3,924,987 1,868,755
--------------- ---------------
Operating expenses:
Research and development - 102,293
Sales, general and administrative 4,977,308 2,967,114
Loss on impairment of license agreements - 1,341,551
--------------- ---------------
Total operating expenses 4,977,308 4,410,958
--------------- ---------------
Loss from operations (1,052,321) (2,542,203)
Other income (expense):
Other income 222,774 7,332
Interest income - 64
Interest expense (495,310) (269,851)
--------------- ---------------
Loss before minority interest (1,324,857) (2,804,658)
Minority interest 19,649 (29,192)
--------------- ---------------
Net loss (1,305,208) (2,833,850)
=============== ===============
Loss per share:
Basic and diluted loss per common share (0.20) (0.93)
=============== ===============
Weighted average common shares outstanding 6,395,241 3,038,968
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
<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, January 1, 1998 - $ - 436,262 $ 65,439 $ 22,603,053 $23,440
Common stock issued as a result of the rounding
of shares for the thirty-five to one
reverse stock split - - 839 126 - -
Common stock issued for research and
development, compensation, and services - - 345,311 51,797 344,883 -
Restricted Section 144 common stock issued for
the conversion of principal and accrued
interest on convertible notes payable - - 933,816 140,072 460,695 -
Common stock issued for cash - - 55,000 8,250 46,750 -
Restricted Section 144 common stock issued
for Acquisition of Vision Diagnostic,
Inc. & Affiliates - - 2,599,677 389,952 2,152,533 842,722
Accrued stock issuance - - - - - -
Net loss - - - - - -
------------ ------------ ------------ ------------ ------------- ------------
Balance, December 31, 1998 - $ - 4,370,905 $ 655,636 $ 25,607,914 $ 866,162
============ ============ ============ ============ ============= ============
</TABLE>
(continued below)
<TABLE>
<CAPTION>
DEFERRED ACCUMULATED
COMPENSATION DEFICIT TOTAL
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance, January 1, 1998 $ 22,792 $ (21,920,913) $ 793,811
Common stock issued as a result of the rounding
of shares for the thirty-five to one
reverse stock split - (126) -
Common stock issued for research and
development, compensation, and services - - 396,680
Restricted Section 144 common stock issued for
the conversion of principal and accrued
interest on convertible notes payable - - 600,767
Common stock issued for cash - - 55,000
Restricted Section 144 common stock issued for
Acquisition of Vision Diagnostic,
Inc. & Affiliates - - 3,385,207
Accrued stock issuance 2,651 2,651
Net loss - (2,833,850) (2,833,850)
--------------- --------------- ---------------
Balance, December 31, 1998 $ 25,443 $ (24,754,889) $ 2,400,266
=============== =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Years ended December 31, 1999 and 1998
<TABLE>
<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
Prior period adjustment (Note 3) - - - - - -
------------ ------------ ------------ ------------ ------------ -----------
Balance, January 1, 1999, as restated - - 4,370,905 655,636 25,607,914 866,162
Common stock issued for compensation, interest
principal of notes payable and services - - 1,386,363 207,954 1,050,015 -
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 cash - - 1,140,278 171,042 313,958 -
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 from the
escrow account related to the acquisition of
Vision Diagnostics, Inc. & affiliates - - 861,624 129,243 713,425 (842,668)
Restricted Rule 144 common stock cancelled
related to the acquisition of
Vision Diagnostics, Inc. & Affiliates - - (33,333) (5,000) (45,000) -
Warrants issued for notes payable - - - - - -
Accrued stock issuance - - - - - -
Net loss for the year ended December 31, 1999 - - - - - -
------------ ------------ ------------ ------------ ------------ -----------
Balance, December 31, 1999 - $ - 7,980,956 $ 1,197,143 $27,705,952 $ 23,494
============ ============ ============ ============ ============ ===========
</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
Prior period adjustment (Note 3) - - 85,870 85,870
-------------- -------------- -------------- --------------
Balance, January 1, 1999, as restated - 25,443 (24,669,019) 2,486,136
Common stock issued for compensation, interest,
principal of notes payable and services - - - 1,257,969
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 cash - - - 485,000
Restricted Rule 144 common stock issued for
acquisition of Vision Diagnostics, Inc. &
affiliates - - - 87,500
Restricted Rule 144 common stock issued from the
Escrow account related to the acquisition of
Vision Diagnostics, Inc. & affiliates - - - -
Restricted Rule 144 common stock cancelled
related to the acquisition of
Vision Diagnostics, Inc. & Affiliates - - - (50,000)
Warrants issued for notes payable 122,750 - - 122,750
Accrued stock issuance - 5,156 - 5,156
Net loss for the year ended December 31, 1999 - - (1,305,208) (1,305,208)
-------------- -------------- -------------- --------------
Balance, December 31, 1999 $ 122,750 $ 30,599 $ (25,974,227) $ 3,105,711
============== ============== ============== ==============
</TABLE>
F-6
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,305,208) $ (2,833,850)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Stock paid for services and inter 1,097,226 396,680
Compensation recognized relating to
accrued employee stock grants and warrants 5,156 2,651
Minority interest (19,647) 29,192
Bad debt expense 280,327 -
Depreciation and amortization 669,040 623,853
Loss on disposal of inventory - 189,638
Loss (gain) on disposal of fixed assets - 116,074
Loss on impairment of license agreement - 927,074
Write-off of notes payable (89,619) -
Cancellation of Restricted Rule 144 stock related to the
acquisition of Vision Diagnostics and Affiliates (50,000) -
Increase (decrease) from changes in assets and liabilities excluding
net assets acquired:
Accounts receivable (467,591) (14,348)
Prepaid expenses and other current assets (9,644) (27,789)
Other assets 217,977 61,531
Accounts payable and accrued expenses (39,810) 470,092
--------------- ---------------
Net cash provided by (used in) operating activities 288,207 (59,202)
--------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment (56,429) -
Purchase of an investment in limited partnership (150,000) -
--------------- ---------------
Net cash used in investing activities (206,429) -
--------------- ---------------
Cash flows from financing activities:
Proceeds from notes payable 150,000 240,020
Principal payments on notes payable and line of credit (222,920) (49,226)
Proceeds from issuing common stock 485,000 55,000
Principal payments on capital lease obligations (465,247) (154,191)
--------------- ---------------
Net cash provided by (used in) financing activities (53,167) 91,603
--------------- ---------------
Net increase in cash and cash equivalents 28,611 32,401
Cash and cash equivalents, beginning of period 77,906 45,505
--------------- ---------------
Cash and cash equivalents, end of period $ 106,517 $ 77,906
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
--------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<S> <C> <C>
PAYMENTS FOR:
Interest $ 365,958 $ 283,560
Income taxes $ 800 $ 800
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
STOCK ISSUED FOR:
SERVICES AND INTEREST:
Research and development $ - $ 170,675
Legal, professional and employee services and interest 993,201 178,610
Directors' fees 59,776 47,395
Repurchase of Restricted Rule 144 stock 44,249 -
--------------- ---------------
OTHER: 1,097,226 396,680
--------------- ---------------
Principal payments on notes payable 160,743 -
--------------- ---------------
$ 1,257,969 $ 396,680
=============== ===============
</TABLE>
During the year ended December 31 1998, the Company acquired the net assets of
other companies in exchange for 3,461,356 shares of common stock.
The net assets acquired were as follows:
Accounts receivable $ 2,506,532
Property and equipment 2,211,088
Other Assets 179,519
Accounts payable and other liabilities (2,846,114)
Capital lease obligations (2,604,196)
----------------
$ (553,171)
================
During 1998, short-term convertible notes payable in the amount of $494,229 were
converted along with accrued interest payable of $37,435 into 835,096 shares of
Restricted Rule 144 common stock.
During the years ended 1999 and 1998, deferred compensation expense of $5,156
and $2,651, 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 first quarter of 1999, short-term convertible notes payable in the
amount of $15,000 were converted along with accrued interest payable of $1,608
into 55,119 shares of Restricted Rule 144 common stock.
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.
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 at December 31, 1998 by $85,870.
F-8
<PAGE>
On April 7, 1999, the Company acquired the remaining ownership of West Regional
MRI Limited Partnership at a purchase price of approximately $1,300,000.
Associated with this transaction, the Company recorded goodwill of $762,265,
warrants and the related deferred interest valued at $105,250, additional notes
payable for $500,000 due to the limited partners and refinanced a capital lease
agreement for an additional $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
an additional $100,000 representing the purchase option price of the equipment.
It has a revised sixty month payment of $27,119 with final payment due March
2004. Warrant amortization to interest expense related to the above note payable
amounted to $15,788 as of December 31, 1999.
In September 1999, the Company issued $50,000 in principal amount of 10%
Promissory notes payable, due March 31, 2000, to two directors and an individual
to finance operations. As additional consideration for these loans, the
individual lenders, including the directors, were awarded total warrants to
purchase 40,000 shares of common stock at an exercise price of $0.625 per share.
In connection with the issuance of the warrants to the individuals, the company
is recognizing additional interest expense of $10,938, which is being amortized
over the terms of the loans. Accrued interest expense and warrant amortization
to interest expense related to these loans amounted to $1,667 and $1,944,
respectively, as of December 31, 1999.
In 1999, the Company entered into a capital lease agreement with a financing
company. Such agreement finances MRI equipment with a purchase price of $905,700
over a sixty-month period with interest of 3.9% and monthly payment of $16,747.
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
a) DESCRIPTION OF BUSINESS
The Company, previously a development stage medical device company operating
under the name Medical Device Technologies, Inc., is a public company
incorporated in Utah on February 6, 1980 and headquartered in San Diego,
California. In the third quarter of 1998, the Company redefined its business
focus to medical diagnostic imaging services and emerged as an operating company
through the acquisition of medical resonance imaging (MRI) centers in Orlando
and Jacksonville, Florida, Toledo, Ohio, and the general partnership interest of
another center in Oak Brook, Illinois. In April 1999, the Company acquired the
remaining 50% limited partnership interest in the Oak Brook Center. In April
1999, the Company acquired the remaining 50% limited partnership interest in the
Oak Brook Center.
During 1999, the Company's activities focused on improvement of its capital
structure and operations of the acquired MRI centers. As a result, the acquired
debt from the MRI acquisitions was reduced, approximately $1 million in equity
financing was raised for ongoing working capital and quarterly losses of
approximately $400,000 in the first and second quarters were reduced to
breakeven by year-end. Additionally, the Company identified suitable acquisition
targets to position the Company for growth. On February 8, 2000, the Company
closed the acquisition of three centers located in Palm Harbor, St. Petersburg
and Tampa, Florida. These newly acquired centers have approximately $2,000,000
in annual revenues.
Prior to 1998, the Company engaged in the development of three innovative
medical devices. The Fluid Alarm System (FAS), formerly called the Personal
Alarm System (PAS), monitored the integrity of infection control barriers, such
as surgical gloves and gowns worn during medical procedures. The Cell Recovery
System (CRS), was a cell "brushing" and retrieval system that used an automated
biopsy brush for the collection of specimen cells for diagnostic purposes,
primarily (but not limited to) cancer detection. The Company received FDA
clearance for the FAS during the year ended December 31, 1995 and received FDA
clearance for the CRS in March 1996. The Company initiated further clinical
trials on the CRS in 1997. The Intracranial Pressure Monitoring System (ICP),
was intended to measure pressures within the skull non-invasively. The Company
determined that the licensed ICP technology was not effective. As a result, the
Company recorded an impairment loss on the ICP license in 1997 and deemed the
ICP license to have no future value. In 1998, coincident with the purchase of
Vision Diagnostics, Inc. and Affiliates, described in the next paragraph, the
Company wrote off the costs associated with the FAS and the CRS licenses,
including certain fixed assets and inventory costs, and recognized impairment
losses in the amount of $725,458, and $616,093, respectively. However, the
company continues to retain the rights to the use of the licenses through 2005
and 2008, respectively.
F-10
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(1) CONTINUED
---------
(a) DESCRIPTION OF BUSINESS - CONTINUED
Additionally, at this date, the Company acquired of 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 statements 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. was the 50% general partner in West Regional MRI
Limited Partnership. On April 7, 1999, the Company acquired the remaining 50%
interest 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 year ended December
31, 1999.
(b) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is being provided on a
straight line basis over the estimated useful lives of the related assets which
range from three to nine years.
(c) LICENSE AGREEMENTS
The Company has entered into various license agreements whereby the Company has
acquired the exclusive worldwide rights to develop, commercialize, manufacture,
and sell its products. In addition, the Company paid finder's fees relating to
two of its products. These costs, along with legal costs to register the related
patents, had been capitalized and were being amortized over the estimated useful
life of the license agreements, prior to writing off the licenses in 1998 and
1997.
In 1998, coincident with the purchase of Vision Diagnostics, Inc. and
Affiliates, the Company has concentrated its efforts in the MRI centers, and
accordingly has written off the costs associated with the FAS and the CRS
licenses, including certain fixed assets and inventory costs, and recognized
impairment losses in the amount of $725,458, and $616,093, respectively.
However, the company continues to retain the rights to the use of the licenses
through 2005 and 2008, respectively.
The Intracranial Pressure Monitoring System (ICP), was intended to measure
pressures within the skull non-invasively. During 1997, the Company determined
that the licensed ICP technology was not effective. As a result, the Company
recorded an impairment loss on the ICP license in the amount of $487,784 in
1997. The Company deemed the ICP license to have no future value.
F-11
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(1) CONTINUED
---------
(d) INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No.109, "Accounting for Income Taxes", (SFAS No. 109). This
statement employs an asset and liability approach for financial accounting and
reporting of deferred income taxes. Generally, SFAS No. 109 allows for
recognition of deferred tax assets in the current period for the future benefit
of net operating loss carryforwards and items for which expenses have been
recognized for financial statement purposes but will be deductible in future
periods. A valuation allowance is recognized if, on the weight of available
evidence, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
(e) CASH FLOWS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
(f) REVENUE RECOGNITION
During 1999 and 1998, the principal sources of revenues are from magnetic
resonance imaging which are recognized as performed. The Company is presently
operating in this one business segment and only in the United States.
(g) FINANCIAL INSTRUMENTS FAIR VALUE, CONCENTRATION OF BUSINESS AND CREDIT RISKS
The carrying amount reported in the balance sheet for cash, accounts receivable,
accounts payable and accrued expenses approximates fair value because of the
immediate or short-term maturity of these financial instruments. The carrying
amount reported in the accompanying balance sheet for notes payable approximates
fair value because the actual interest rate do not significantly differ from
current rates offered for instruments with similar characteristics. Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist principally of accounts receivable. The Company operates and
grants credit to customers in Central Florida, Oak Brook, Illinois, Toledo, Ohio
and Jacksonville, Florida. In addition, the Company files claims with numerous
insurance carriers, managed care groups, Medicare and Medicaid located
throughout the United States.
Consequently, the Company's ability to collect the amounts due from customers,
managed care groups, insurance companies and government agencies may be affected
by economic fluctuation and governmental regulations in the healthcare industry.
F-12
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(1) CONTINUED
---------
(h) USE OF ESTIMATES
Management of the Company has made certain estimates and assumptions relating to
the reporting of assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
(i) LOSS PER COMMON SHARE
Loss per common share have been computed based upon the weighted average number
of common shares outstanding during the years 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.
(j) RECLASSIFICATION
Certain amounts in the 1998 Financial Statements have been reclassified to
conform with the 1999 presentation.
F-13
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(2) GOING CONCERN
-------------
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.
(3) 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 at December 31, 1998 by $85,870.
(4) INTANGIBLE ASSETS
-----------------
LICENSE AGREEMENTS
In 1998, coincident with the purchase of Vision Diagnostics, Inc. and
Affiliates, the Company has concentrated its efforts in the MRI centers, and
accordingly has written off the costs associated with the FAS and the CRS
licenses, including certain fixed assets and inventory costs, and recognized
impairment losses in the amount of $725,458, and $616,093, respectively.
However, the company continues to retain the rights to the use of the licenses
through 2005 and 2008, respectively.
Amortization expense related to license agreements written off in 1998 was
$152,168 for the year ended December 31, 1998.
GOODWILL
In connection with the Vision acquisitions, consideration paid exceeded the
estimated fair value of the assets acquired (including estimated liabilities
assumed as part of the transaction) by approximately $4,600,000. 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-14
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(5) LINE OF CREDIT
--------------
The Company has a line of credit with a 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 2000, renewable for consecutive one-year periods. At
December 31, 1999 and 1998, the outstanding balance was $506,384 and $562,538,
Respectively.
(6) NOTES PAYABLE
-------------
<TABLE>
Notes payable consisted of the following at December 31:
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Note payable to individuals, interest at 8.5%, quarterly payments of
$41,665, due March 2003. $ 447,376 -
Note payable to an individual, interest at 10%, monthly principal payments
of $9,809 plus accrued interest with a final balloon payment October 2000. 313,873 $ 487,732
Note payable to a finance company, interest at 10%, monthly payments of
$10,000, due March 2002. 234,059 287,618
Note payable to an individual, monthly payments of $15,000 beginning March
2000 through September 2000. 114,019 103,249
Note payable to bank, with interest at prime plus 2%. Balance was due
August 1998. 100,047 94,129
Note payable to a finance company, interest at 10.5%, monthly payments of
$2,150, Due March 2004. 88,121 -
Note payable to an individual, interest at 2.79%, monthly payments of $2,500,
Due December 2002. 86,250 100,000
Note payable to bank, with interest at 9.75%, monthly payments of $3,027
beginning May 2000, due October 2002. 81,239 79,689
Note payable to bank, interest at 4% above discount rate, quarterly
principal payments of $9,311 plus accrued interest beginning April 2000,
due January 2002. 75,060 77,171
Notes payable to directors, interest at 10% due March 2000(see note 13). 50,000 -
Note payable originally due June 1997 with interest at 12.5%, written
off in 1999. - 59,619
Other, interest ranging from 6% to 10%. 32,724 102,096
--------------- ---------------
$ 1,622,768 $ 1,391,303
Less current portion 939,112 $ 1,391,303
--------------- ---------------
Long-term portion $ 683,656 $ -
=============== ===============
</TABLE>
F-15
<PAGE>
At December 31, 1999, future minimum annual principal payments on the notes
payable are as follows:
Year-ending December 31,
------------------------
2000 $ 939,112
2001 372,686
2002 267,293
2003 37,341
2004 6,336
---------------
$ 1,622,768
===============
On April 7, 1999, the Company acquired the remaining ownership of West Regional
MRI Limited Partnership at a purchase price of approximately $1,300,000.
Associated with this transaction, the Company recorded goodwill of $762,265,
warrants and the related deferred interest valued at $105,250, additional notes
payable for $500,000 due to the limited partners and refinanced a capital lease
agreement for an additional $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
an additional $100,000 representing the purchase option price of the equipment.
It has a revised sixty month payment of $27,119 with final payment due March
2004. Warrant amortization to interest expense related to the above note payable
amounted to $15,788 as of December 31, 1999.
F-16
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(7) LEASES
------
The Company is currently leasing its MRI machines under capital lease agreements
and its offices under operating leases which expire at various dates.
At December 31, 1999, future minimum annual rental commitments under
noncancellable lease obligations are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year-ending December 31, Leases Leases
------------------------ ----------- -----------
<S> <C> <C>
2000 $ 923,845 $ 252,599
2001 871,366 188,004
2002 861,798 188,004
2003 848,065 184,354
2004 395,897 108,609
Thereafter 217,000 107,353
----------- -----------
Total minimum lease payments 4,117,972 $1,028,923
Less amounts representing interest (at rates of 3.9% to
12.92%) 765,130
-----------
Present value of net minimum lease payments 3,352,842
Less current portion 669,307
-----------
Capital lease obligations $2,683,535
===========
</TABLE>
Rent expense for operating leases, including month to month leases, was $279,470
and $154,449 for the years ended December 31, 1999 and 1998, respectively.
F-17
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(8) COMMITMENTS AND CONTINGENCIES
-----------------------------
LICENSE AGREEMENTS
In prior years, the Company entered into license agreements in connection with
the acquisition of the FAS and CRS devices. Through December 31, 1997, the
Company had paid $620,000 and issued 6,514 shares of common stock pursuant to
the original CRS license agreement.
In connection with the 1998 write-off of the FAS and CRS licenses, the
associated license agreements were terminated. License expense associated with
the CRS license amounted to $90,212 in 1998.
EMPLOYEE AGREEMENTS
In August 1994, the Company entered into a severance agreement with the Chief
Executive Officer. The severance agreement provides, among other things, that in
the event a change in control of the Company occurs or the Chief Executive
Officer is involuntarily terminated, suffers a disability while employed by the
Company or dies while employed by the Company, then the Chief Executive Officer
is entitled to receive certain benefits from the Company. Such benefits may
include some or all of the following: an amount based on the base salary as
provided for in the employment agreement; an amount based on the bonus paid or
payable to the Chief Executive Officer as provided for in the employment
agreement; the right to receive common stock that shall vest immediately; and
the right to exercise any warrants or stock options held by or granted to the
Chief Executive Officer under the employment agreement or any stock option plan
of the Company or both, health insurance and disability insurance. The Chief
Executive Officer will not receive any benefits upon voluntarily termination of
employment with the Company or if the Company terminates the Chief Executive
Officer "for cause", which is defined as the conviction of the Chief Executive
Officer after appeal of a felony.
On August 2, 1999, the Board of Directors extended the Employment and Severance
Agreements with the Chief Executive Officer through August 31, 2002.
In March 1996, the Company entered into an exclusive employment agreement with
the Vice President of New Business Development for a three-year term providing
for a base salary of $108,000 per annum. In March 1998, the term of this
agreement was extended to March 2001. In 1999, the base salary was increased to
$117,000 per annum.
LEGAL MATTERS
From time to time the Company has been named as a defendant in a lawsuit. As of
December 31, 1999, all such lawsuits have been dismissed or settled through
agreed upon payment terms. The Company is not aware of any legal matter or claim
pending or threatened that would have a material adverse effect on its
consolidated financial position or results of operations. There are no other
legal proceedings, to which the Company is a party, which could have a material
adverse effect on the Company.
F-18
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(9) 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.
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
On June 20, 1996, the directors of the Company approved a one-for-two reverse
split of the common stock. On March 6, 1998, the directors of the Company
approved an additional one-for-thirty-five reverse split of the common stock of
the Company. There was no change in the common stock voting rights, par value or
authorized shares. All share balances have been retroactively restated in the
accompanying consolidated financial statements to reflect the reverse stock
splits.
F-19
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(9) CONTINUED
---------
COMMON STOCK - CONTINUED
On September 9, 1996, the Company issued 2,047 shares of common stock as a
dividend for the period through August 31, 1996 for the Preferred Stockholders
of record as of August 12, 1996. On November 11, 1996, the Company declared a
common stock dividend of 3,186 shares to Preferred Stockholders of record as of
December 10, 1996. On June 12, 1997 the Company declared a common stock dividend
of 4,345 shares to Preferred Stockholders of record as of June 27, 1997 and on
July 24, 1997 declared a common stock dividend of 571 shares to Preferred
Stockholders of record as of July 24, 1997. The shares for November 1996
dividend and for the June 1997 dividend were issued in January 1997 and July
1997, respectively and, accordingly, were recorded as common stock dividend
distributable and additional paid-in capital at December 31, 1996 and at June
20, 1997, respectively. The number of shares paid on the Preferred Stock as a
dividend was calculated based on the 10 day moving average price of the common
stock during the 30 days prior to the declaration date, subject to a maximum
price of $105.00 and minimum price of $42.00 per share. Fractional shares were
rounded up.
During the year ended December 31, 1996, as a result of individuals exercising
4,643 private warrants, the Company issued 4,643 shares of common stock for
$275,000. No warrants were exercised in 1999, 1998 or 1997.
Pursuant to certain employment agreements in January and September 1997, 7,856
and 536 shares of accrued employee common stock grants were issued,
respectively. Accordingly, deferred stock compensation of $247,500 and $25,444
was reclassified to common stock and additional paid-in capital in the first and
third quarters of 1997, respectively.
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.
F-20
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(9) CONTINUED
---------
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. As of December 31, 1999, 861,624 of the
escrow shares have been issued.
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. 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. 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. 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. 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. Pursuant to an investment letter dated September 15,
1999 with a limited liability company, the Company received $50,000 for the
purchase of 66,667 shares of Restricted Rule 144 common stock at a purchase
price of $.75 per share. Pursuant to an investment letter dated December 4, 1999
with a limited liability company, the Company received $50,000 for the purchase
of 111,111 shares of Restricted Rule 144 common stock at a purchase price of
$.45 per share. As of December 31, 1999, all 1,140,278 shares had been issued.
F-21
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(10) OPTIONS AND WARRANTS
--------------------
The Company has issued options and warrants in connection with various private
placements, the public offering in 1996, certain debt securities and certain
other agreements with compensation to employees and consultants. The Company's
options and private warrants allow the holder to purchase one share of the
Company's common stock at a specified price.
Options and private and public warrants granted and issued by the Company
consisted of:
Weighted
Average
Number Price
----------- -----------
Balance outstanding, January 1, 1998 97,850 49.08
Options granted - -
Options expired (2,285) 20.65
Warrants granted - -
Warrants expired (12,286) 5.86
-----------
Balance outstanding, December 31, 1998 83,279 56.12
Options granted 490,000 0.81
Options expired (118,286) 2.20
Warrants granted 140,000 0.19
Warrants expired (62,563) 64.48
-----------
Balance outstanding, December 31, 1999 532,430 1.50
===========
Options and warrants exercisable 152,161 3.20
Compensation expense was not recorded for any issuance of options and warrants
to officers or employees in 1999 and 1998 as the fair market value of the
options and warrants was at or below the exercise price on their respective
dates of issuance.
F-22
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(10) CONTINUED
---------
Information relating to options and warrants at December 31, 1999 summarized by
exercise price is as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
Weighted Average Weighted Average
Exercise Price Equiv. Life Exercise Equiv. Exercise
Per Share Shares (Year) Price Shares Price
<S> <C> <C> <C> <C> <C>
$ 0.01 100,000 5.0 0.01 100,000 0.01
0.63 40,000 3.0 0.63 40,000 0.63
0.69 25,000 9.3 0.69 0 0.69
0.81 355,000 9.0 0.81 0 0.81
28.00 9,573 4.0 28.00 9,304 28.00
70.00 2,857 2.6 70.00 2,857 70.00
------- -------
532,430 8.0 1.50 152,161 3.20
</TABLE>
Had compensation cost for stock-based compensation been determined based on the
fair value at the grant dates consistent with the method of SFAS No. 123, the
Company's net loss and loss per share for the years ended December 31, 1999 and
1998 would have been increased to the pro forma amounts presented below:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Net loss:
As reported $ (1,305,208) $ (2,833,850)
Pro forma (1,324,722) (2,924,708)
Loss attributable to common stockholders
As reported (1,305,208) (2,833,850)
Pro forma (1,324,722) (2,924,708)
Basic and diluted loss per share
As reported (.20) (.93)
Pro forma (.21) (.96)
</TABLE>
F-23
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(10) CONTINUED
---------
The fair value of options and warrants is estimated on the date of grants
utilizing the Black-Scholes option pricing model with the following weighted
average assumptions for years ended December 31, 1999 and 1998: expected life of
10 years; expected volatility of 90%; risk-free interest rate of 5.25%; and a 0%
dividend yield. The weighted average fair value at the date of grant of the
options and warrants granted during 1999 approximated $1.05 per option and
warrant.
Due to the fact that the Company's warrants vest over several years and
additional awards are made each year, the above pro forma numbers are not
indicative of the financial impact had the disclosure provisions of SFAS No. 123
been applicable to all years of previous warrant grants. The above numbers do
not include the effect of warrants granted prior to 1996 that vested in 1998 and
1999.
(11) EMPLOYEE BENEFIT PLANS - COMPENSATORY STOCK BENEFIT PLANS
---------------------------------------------------------
In each of the four most current years, the Company's board of directors has
annually approved a stock compensation plan, the most recent which registered
500,000 shares of common stock under Form S-8 on October 29, 1999, whereby
services are obtained in exchange for issuance of free trading stock of the
Company. Shares may be awarded under this plan until October 1, 2004. During
1999 and 1998, 778,095 and 345,311 shares, respectively, of common stock under
Form S-8 registrations were issued for directors fees, research and development,
employee bonus, compensation, interest and legal and professional
services provided to the Company.
Compensation recognized relating to accrued employee stock grants and warrants
is based on the pro-rata common stock and warrants earned and the market value
of the Company's stock at the time of issuance (fair value method) and amortized
over the applicable period.
F-24
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(12) DEFINED CONTRIBUTION PLAN
-------------------------
In August 1996, the Company adopted the Medical Device Technologies, Inc.
Employee Retirement Savings and Profit Sharing Plan (the "Plan"). The Plan is a
defined contribution profit sharing plan which allows the employee to
participate once hired. Total expense for its full time employees amounted to $0
and $3,077 for the years ended December 31, 1999 and 1998, respectively. In
1998, the Plan was terminated and no contributions were made to the Plan by the
Company during 1998.
(13) RELATED PARTY TRANSACTIONS
--------------------------
During the fourth quarter of 1997, the Company issued $100,000 in principal
amount of 36% short-term convertible notes payable, due April 18, 1998, to five
individuals, including three directors, to finance operations until a corporate
acquisition could be completed. Until payment in full, the unpaid principal
amount of these notes, or any portion may, at the election of the noteholder at
any time before the due date, be converted at the conversion price of $2.35 per
share of common stock. As additional consideration for these loans, the
individual lenders, including the directors, were awarded an aggregate of
warrants to purchase 1,429 shares of common stock for every $12,500 loaned to
the Company at an exercise price of $4.20 per share. In connection with the
issuance of the warrants, the Company did not recognize additional interest
expense, as the value of the warrants was deemed to be immaterial. The interest
rate and terms of these notes were made at arms length. The notes were converted
to common stock in 1998.
In 1998, one director received compensation of $8,600 for general corporate
consulting services. Pursuant to the Vision acquisition agreement, another
director received $65,000 for corporate consulting fees in 1998. Per the terms
of such agreement, this director will continue to receive $13,000 per month
until July 15, 2000.
In September 1999, the Company issued $50,000 in principal amount of 10%
Promissory notes payable, due March 31, 2000, to two directors and an individual
to finance operations. As additional consideration for these loans, the
individual lenders, including the directors, were awarded total warrants to
purchase 40,000 shares of common stock at an exercise price of $0.625 per share.
In connection with the issuance of the warrants to the individuals, the company
is recognizing additional interest expense of $10,938, which is being amortized
over the terms of the loans. Accrued interest expense and warrant amortization
to interest expense related to these loans amounted to $1,667 and $1,944,
respectively, as of December 31, 1999.
Pursuant to the Vision acquisition agreement and prior to resigning from the
board of directors on June 23, 1999, a director received $74,600 for corporate
consulting fees in 1999. After June 23, 1999, this individual received an
additional $40,000 in corporate consulting fees during 1999.
F-25
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(12) INCOME TAXES
------------
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to the net
deferred tax asset and liability, and their approximate tax effects, are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
--------------- ---------------
<S> <C> <C>
Bad debt reserve 492,000 559,623
Net operating loss carryforwards 8,836,000 8,654,900
--------------- ---------------
9,328,000 9,214,523
Valuation allowance (9,328,000) (9,214,523)
--------------- ---------------
Total $ - -
=============== ===============
</TABLE>
At December 31, 1999, the Company had approximately $23,500,000 in net operating
loss carryovers to offset future taxable income. These carryovers will expire in
various years through 2019. As a result of a change in ownership, federal tax
rules impose limitations on the use of net operating losses. The limitations
will reduce the amount of these benefits that will be available to offset future
taxable income each year, starting with the year of an ownership change, for
which the issuance of the preferred stock in the Company's June 1996 public
offering was deemed to be. The dollar amount of these limitations is
indeterminable at this time. In addition, the Company provides a valuation
allowance for deferred tax assets when it is more likely than not, based on
available evidence, that some portion or all of the deferred tax assets will not
be realized. In management's opinion, it cannot determine if it is more likely
than not that the Company will generate sufficient future taxable income before
2019, the year after which all current available net operating loss
carryforwards expire, to utilize all of the Company's deferred assets. A
valuation allowance has been recognized for the full amount of the deferred tax
asset at December 31, 1999 and 1998.
F-26
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(14) SUBSEQUENT EVENTS
-----------------
The Company acquired 80% ownership in Ultra MRI & Diagnostics Services ("Ultra")
as of February 9, 2000 with a combination of 20% in the form of a convertible
note and 80% in Restricted Rule 144 common stock. Ultra is a multi-site
diagnostic imaging business with offices in Palm Harbor, St. Petersburg and
Tampa, Florida. Ultra had approximately $2 million in revenue in 1999. Total
assets were approximately $2.1 million and total liabilities were approximately
$1.3 million as of December 31, 1999. The acquisition will be accounted for as a
purchase in 2000.
The convertible notes are payable to the principals in an aggregate amount of
$125,000 on August 9, 2000, $125,000 on November 9, 2000 and any remaining
amount due November 9, 2001.
F-27
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 106517
<SECURITIES> 0
<RECEIVABLES> 4031322
<ALLOWANCES> 1308016
<INVENTORY> 0
<CURRENT-ASSETS> 2911647
<PP&E> 4070595
<DEPRECIATION> (1866309)
<TOTAL-ASSETS> 9928735
<CURRENT-LIABILITIES> 3455833
<BONDS> 0
0
0
<COMMON> 1197143
<OTHER-SE> 1908568
<TOTAL-LIABILITY-AND-EQUITY> 9928735
<SALES> 3924987
<TOTAL-REVENUES> 3924987
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4754534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 495310
<INCOME-PRETAX> (1305208)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1305208)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1305208)
<EPS-BASIC> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
