<PAGE>
US Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the quarterly period ended September 30, 2000.
[ ] 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.
(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 400, San Diego, California 92122
(Address of principal executive offices)
Issuer's telephone number: (858) 455-7127
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
State issuer's revenues for its most recent fiscal year $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 October 31, 2000, was $1,903,837.
As of October 31, 2000, Registrant had outstanding 13,746,650 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]
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999................................................ F-1
Consolidated Statements of Operations for the Three Months
and Nine Months Ended September 30, 2000 and 1999................. F-3
Consolidated Statement of Stockholders' Equity for the
Nine Months Ended September 30, 2000.............................. F-4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999................................. F-5
Notes to Consolidated Financial Statements....................... F-9
Item 2. Management's Discussion and Analysis and Plan of Operation....... 3
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................ 8
Item 2. Changes in Securities............................................ 8
Item 3. Defaults Upon Senior Securities.................................. 8
Item 4. Submission of Matters to a Vote of Security Holders.............. 8
Item 5. Other Information................................................ 8
Item 6. Exhibits and Reports on Form 8-K................................. 8
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
See attached consolidated financial statements and notes thereto for the period
ended September 30, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of Miracor Diagnostics, Inc.'s (the "Company")
financial condition and results of operations should be read in conjunction with
the consolidated financial statements and the notes thereto appearing in Part I,
Item 1 in this Form 10-QSB.
Forward-Looking Statements
--------------------------
The following discussion as well as in other Items in this Form 10-QSB 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-QSB,
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.
The Company
-----------
Miracor Diagnostics, Inc. 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.
Subsequently, the Company's activities focused on improvement of its capital
structure and operations of the acquired MRI centers. Additionally, the Company
identifies suitable acquisition targets to position the Company for growth.
On February 9, 2000, the Company closed the acquisition of 80% of three centers
located in Palm Harbor, St. Petersburg and Tampa, Florida as well as the holding
company, Ultra Open MRI Holding Corporation ("Ultra"). These newly acquired
centers had approximately $2,500,000 in annual gross revenues in 1999.
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.
3
<PAGE>
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. Alternatively, should there be no
acceptable candidates in locations near certain of the Company's existing sites
which are enjoying substantial growth, the Company may choose to start-up an
alternate point of business which complements the existing site and allows
significant leveraging of management and marketing expertise.
In April 2000, the Company entered into an investment Agreement with Swartz
Private Equity LLC ("Swartz"). The investment agreement entitles the Company, at
the Company's option, to issue and sell its common stock for up to an aggregate
of $15 million from time-to-time during a three-year period through April 2003,
subject to certain conditions. As this equity financing agreement has not
provided the necessary resources to pursue the Company's acquisition strategy,
the agreement was terminated effective October 16, 2000.
Results of Operations
---------------------
The three months ended September 30, 2000 compared to the three months ended
September 30, 1999.
Net Revenue
-----------
Net patient service revenue for the three months ended September 30, 2000 was
$2,329,404 compared to $986,225 for the three months ended September 30, 1999.
The increase of 136.2% is primarily attributed to business growth through
increased marketing and to a lesser extent, the acquisition of Ultra as of
February 2000. Revenue from the MRI centers generated by providing scanning,
X-ray and reading services for the medical industry accounted for all of the net
revenue in the third quarter of 2000 and 1999.
Operating Expenses
------------------
Sales, General and Administrative
Sales, general and administrative costs were $2,053,357 in the third quarter of
2000 as compared to $1,179,045 in the third quarter of 1999, representing an
increase of 74.2%. This increase was primarily attributed to the operating costs
resulting from the February 2000 acquisition of Ultra as well as increased
marketing costs and costs associated with provided services in the existing
centers.
Net Income/Loss
---------------
The Company's net income for the three month period ended September 30, 2000 was
$75,659 as compared to the net loss of ($324,366) for the three month period
ended September 30, 1999. The change was primarily attributable to increased
revenues. The increase of 136.2% in net revenue is primarily attributed to
business growth through increased marketing and to a lesser extent, the
acquisition of Ultra as of February 2000. Basic and diluted earnings per common
share for the third quarter of 2000 were both $0.01 as compared to a basic and
diluted loss per common share of ($0.05) for the third quarter of 1999. This
change was attributable to net income in the three month period ended September
30, 2000 compared to the same period in 1999 and to the
increase in the weighted average number of common shares outstanding for the
quarter ended September 30, 2000 as compared to the quarter ended September 30,
1999.
4
<PAGE>
The nine months ended September 30, 2000 compared to the nine months ended
September 30, 1999.
Net Revenue
-----------
Net patient service revenue for the nine months ended September 30, 2000 was
$6,260,545 compared to $2,680,678 for the nine months ended September 30, 1999.
The increase of 133.5% is primarily attributed to business growth through
increased marketing and to a lesser extent, the acquisition of Ultra as of
February 2000. Revenue from the MRI centers generated by providing scanning,
X-ray and reading services for the medical industry accounted for all of the net
revenue in the nine month period ended September 30, 2000 and 1999.
Operating Expenses
------------------
Sales, General and Administrative
Sales, general and administrative costs were $5,648,007 for the first nine
months of 2000 as compared to $3,559,300 for the first nine months of 1999,
representing an increase of 58.7%. This increase was primarily attributed to the
operating costs resulting from the February 2000 acquisition of Ultra as well as
increased marketing costs and costs associated with provided services to in the
existing centers.
Net Income/Loss
---------------
The Company's net income for the nine month period ended September 30, 2000 was
$89,292 as compared to the net loss of ($1,225,336) for the nine month period
ended September 30, 1999. This change was primarily attributable to increased
revenues. The increase of 133.5% in net revenue is primarily attributed to
business growth through increased marketing and to a lesser extent, the
acquisition of Ultra as of February 2000. Basic and diluted earnings per common
share for the first nine months of 2000 were both $0.01 as compared to a basic
and diluted loss per common share of ($0.21) for the first nine months of 1999.
This change was attributable to net income in the nine month period ended
September 30, 2000 compared to the same period in 1999 and to the increase in
the weighted average number of common shares outstanding as of September 30,
2000 as compared to September 30, 1999.
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 as well as the issuance of common
stock in exchange for services. The Company's cash position at September 30,
2000 was $171,786 as compared to $47,345 at September 30, 1999, representing a
262.8% increase.
In the first nine months of 2000, $405,115 of net cash was provided by operating
activities. The Company received $314,303 from increases in the lines of credit,
$150,000 from the proceeds from related party notes payable and $213,181 from
the proceeds from common stock issued during the first nine months of 2000.
During the nine month period ended September 30, 2000,the Company made $269,156
of principal payments on notes payable, $604,885 of principal payments on
capital lease obligations and purchased equipment of $76,872. Net cash provided
by operating activities in the nine month period ended September 30, 2000
included net income of $89,292. Net income was offset by the change in other net
assets (excluding cash) of ($964,037), which was offset by $1,279,860 in common
stock paid for services and interest in lieu of cash, depreciation/amortization,
minority interest, accrued compensation expense and the gain on the capital
lease refinance. Changes in current assets and current liabilities resulted in a
positive working capital position of $208,271 at September 30, 2000 as compared
to a negative working capital of ($592,045) at December 31, 1999. Any future
deficit in working capital would require 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.
5
<PAGE>
In April 2000, the Company entered into an investment Agreement with Swartz
Private Equity LLC ("Swartz"). The investment agreement entitled the Company, at
the Company's option, to issue and sell its common stock for up to an aggregate
of $15 million from time-to-time during a three-year period through April 2003,
subject to certain conditions including (1) an effective registration statement
must be on file with the SEC registering the resale of the common shares, and
(2) a limitation on the number of common shares which can be sold to Swartz
within a 30 day time period based on the trading volume of the stock, among
others. Swartz could purchase the common stock from the Company at a discount
ranging from 9% to 25% depending on the price of the common stock. In addition
to the common stock purchase, Swartz received warrants to purchase an additional
10% of the common stock equal to 110% of the market price as determined during
the pricing period, subject to further semi-annual adjustments if the price of
the common stock goes down. The registration statement went effective on July
12, 2000. As of September 30, 2000, the Company has sold 230,390 shares of
common stock pursuant to this agreement. This equity financing agreement did not
provide the necessary resources to pursue the Company's acquisition strategy;
therefore, the agreement was terminated effective October 16, 2000.
During the third quarter of 2000 in connection with the Swartz agreement, the
Company has issued a total of 765,087 warrants to purchase shares of the
Company's common stock at exercise prices ranging from $0.23 to $0.26 with
exercise periods of five years from date of grant. As of September 30, 2000,
none of the warrants have been exercised.
During the third quarter of 2000, the Company issued $150,000 of 12% convertible
notes payable, due January 15, 2002, to six officers and directors. Upon the
ninth month anniversary of the note, each noteholder may elect to convert all
(but not part) of the note into 83,333 shares of the Company's common stock. The
amount payable to the noteholders in aggregate is $37,500 plus accrued interest
due April 15, 2001, July 15, 2001, October 15, 2001, and January 15, 2002. As
additional consideration for these loans, the individual lenders were issued in
aggregate 112,500 shares of Restrictive Rule 144 common stock, valued at
$14,063. In connection with the issuance of these shares, the Company will
recognize additional interest expense of $14,063 amortized over the nine month
conversion period.
Pursuant to an investment letter dated February 7, 2000 with an individual, the
Company received $50,000 for the purchase of 125,000 shares of Restricted Rule
144 common stock at a purchase price of $.40 per share. Pursuant to an
investment letter dated February 8, 2000 with an individual, the Company
received $50,000 for the purchase of 125,000 shares of Restricted Rule 144
common stock at a purchase price of $.40 per share. Pursuant to investment
letters dated March 10, 2000 with six individuals, the Company received $90,000
for the total purchase of 138,600 shares of Restricted Rule 144 common stock at
a purchase price of $.65 per share. As of June 30, 2000, all 388,600 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. During the second quarter of 2000, the
Company paid $45,000 of the $50,000 short-term promissory notes payable along
with accrued interest payable of $2,785 in the form of $5,000 cash and 120,000
shares of Restricted Rule 144 common stock.
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.
6
<PAGE>
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.
PLAN OF OPERATION
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 financings or public
offerings of debt and 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 recently become profitable during
the second quarter of 2000. Growth of the Company is dependent on the success of
its MRI centers which were acquired in July 1998 and February 2000.
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.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any legal proceedings to which the Company is a
party which could have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
See Part I, Item 2.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 25, 2000, the Company held its Annual Meeting of Shareholders. A
quorum was present to consider the following two items:
1. To elect each of Dr. Arthur E. Bradley and Mr. Thomas E.
Glasgow to the Board of Directors until the annual meeting of
shareholders to be held in the year 2003 and until each of
their respective successors shall have been elected and
qualified.
2. To ratify the Board of Directors' appointment of Parks,
Tschopp, Whitcomb & Orr, P.A. to serve as the Company's
independent auditors for the current calendar year.
Both items passed with the required vote.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not Applicable.
8
<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, November 13, 2000
------------------------ President, and Chairman
M. Lee Hulsebus
/S/ Ross S. Seibert Chief Financial Officer November 13, 2000
------------------------
Ross S. Seibert
9
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------ September 30, December 31,
2000 1999
------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $ 171,786 $ 106,517
Accounts receivable (net of allowance
of $2,017,463 and $1,308,016) 4,454,350 2,723,306
Prepaid expenses and other assets 54,074 33,965
------------- -------------
Total current assets 4,680,210 2,863,788
------------- -------------
Property and equipment:
Equipment under capital leases 4,925,692 3,398,458
Machinery and equipment 429,867 211,706
Leasehold improvements 559,290 426,632
Furniture and fixtures 72,494 33,799
------------- -------------
5,987,343 4,070,595
Less accumulated depreciation (2,377,704) (1,866,309)
------------- -------------
Net property and equipment 3,609,639 2,204,286
------------- -------------
Intangible assets:
Goodwill 6,332,696 4,788,143
Organization costs 160,930 160,930
Less accumulated amortization (465,036) (319,427)
------------- -------------
Net intangible assets 6,028,590 4,629,646
Other assets 244,881 231,015
------------- -------------
Total assets $ 14,563,320 $ 9,928,735
============= =============
See notes to consolidated financial statements.
F-1
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------ September 30, December 31,
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 984,891 $ 849,560
Accrued expenses 496,805 491,470
Lines of credit 894,087 506,384
Notes payable, related parties - current portion 205,160 -
Notes payable - current portion 854,289 939,112
Capital lease obligations - current portion 1,036,707 669,307
------------- -------------
Total current liabilities 4,471,939 3,455,833
------------- -------------
Long-term liabilities:
Notes payable, related parties 267,500 -
Notes payable 431,976 683,656
Capital lease obligations 3,451,051 2,683,535
------------- -------------
Total liabilities 8,622,466 6,823,024
------------- -------------
Minority interest 140,289 -
------------- -------------
Commitments and contingencies
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; 13,256,250 and 7,980,956 outstanding) 1,988,438 1,197,143
Common stock to be issued (770 and 770 shares) 23,494 23,494
Warrants 122,750 122,750
Additional paid-in capital 29,505,225 27,705,952
Deferred stock compensation 45,593 30,599
Accumulated deficit (25,884,935) (25,974,227)
------------- -------------
Total stockholders' equity 5,800,565 3,105,711
------------- -------------
Total liabilities and stockholders' equity $ 14,563,320 $ 9,928,735
============= =============
See notes to consolidated financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- -------------------------------
2000 1999 2000 1999
===================================================================================================================
<S> <C> <C> <C> <C>
Net patient service revenue $ 2,329,404 $ 986,225 $ 6,260,545 $ 2,680,678
Operating expenses:
Sales, general and administrative 2,053,357 1,179,045 5,648,007 3,559,300
------------- ------------- ------------- -------------
Income/(Loss) from operations 276,047 (192,820) 612,538 (878,622)
Other income (expense):
Interest expense (180,901) (129,546) (520,974) (364,382)
Other income (expense) 1,306 (2,000) 25,794 (1,981)
------------- ------------- ------------- -------------
Income/(Loss) before minority interest 96,452 (324,366) 117,358 (1,244,985)
Minority interest (20,793) - (28,066) 19,649
------------- ------------- ------------- -------------
Net Income/(Loss) $ 75,659 $ (324,366) $ 89,292 $ (1,225,336)
============= ============= ============= =============
Earnings/(Loss) per share:
Earnings/(loss) per share-basic $ 0.01 $ (0.05) $ 0.01 $ (0.21)
Earnings/(loss) per share-diluted $ 0.01 $ (0.05) $ 0.01 $ (0.21)
Weighted average shares outstanding-basic 12,835,603 6,916,929 11,579,790 5,793,994
Weighted average shares outstanding-diluted 13,014,451 6,916,929 11,951,509 5,793,994
See notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months ended September, 2000
(unaudited)
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL COMMON
-------------------------- -------------------------- PAID-IN STOCK
Note 7 SHARES AMOUNT SHARES AMOUNT CAPITAL TO BE ISSUED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 - $ - 7,980,956 $ 1,197,143 27,705,952 $ 23,494
Common stock issued for compensation, interest,
services and principal of trade notes payable - - 1,868,154 280,223 517,697 -
Common stock sold, net of the associated offering costs - - 618,990 92,849 81,374 -
Restricted Rule 144 common stock issued for principal
and accrued interest on short-term notes payable - - 120,000 18,000 24,785 -
Restricted Rule 144 common stock issued for principal
and accrued interest on capital lease obligation - - 125,000 18,750 30,078 -
Restricted Rule 144 common stock issued
for acquisition of Ultra Open MRI Holding
Corporation - - 2,534,400 380,160 1,140,480 -
Common Stock issued from the Employee Incentive Stock
Option Plan and Deferred Stock Compensation Plan - - 8,750 1,313 4,859 -
Accrued stock compensation - - - - - -
Net income - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Balance, September 30, 2000 - $ - 13,256,250 $ 1,988,438 $29,505,225 $ 23,494
============ ============ ============ ============ ============ ============
</TABLE>
(continued below)
<TABLE>
<CAPTION>
DEFERRED ACCUMULATED
Note 7 WARRANTS COMPENSATION DEFICIT TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 2000 $ 122,750 $ 30,599 $(25,974,227) $ 3,105,711
Common stock issued for compensation, interest,
services and principal of trade notes payable - - - 797,920
Common stock sold, net of the associated offering costs - - - 174,223
Restricted Rule 144 common stock issued for principal
and accrued interest on short-term notes payable - - - 42,785
Restricted Rule 144 common stock issued for principal
and accrued interest on capital lease obligation - - - 48,828
Restricted Rule 144 common stock issued
for acquisition of Ultra Open MRI Holding Corporation - - - 1,520,640
Common Stock issued from the Employee Incentive Stock
Option Plan and Deferred Stock Compensation Plan - (5,156) - 1,016
Accrued stock compensation - 20,150 - 20,150
Net income - - 89,292 89,292
------------- ------------- ------------- -------------
Balance, September 30, 2000 $ 122,750 $ 45,593 $(25,884,935) $ 5,800,565
============= ============= ============= =============
See notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Nine Months ended September 30,
2000 1999
------------- ------------
<S> <C> <C>
Operating activities:
Net income/(loss) $ 89,292 $(1,225,336)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Stock paid for services and interest 598,997 985,062
Compensation recognized relating to accrued
employee stock grants and warrants 20,150 -
Minority interest 28,066 (19,649)
Depreciation and amortization 656,205 681,997
Gain on refinancing of capital lease obligation (23,558) -
Repurchase of Restricted Rule 144 stock related
to the acquisition of Vision Diagnostics, Inc.
and Affiliates - (50,000)
Changes in assets and liabilities excluding
net assets acquired:
Accounts receivable (916,128) (58,308)
Prepaid expenses and other current assets (20,109) (65,575)
Other assets 18,097 (11,752)
Accounts payable and accrued expenses (45,897) (111,602)
------------- ------------
Net cash provided by
operating activities 405,115 124,837
------------- ------------
Investing activities:
Purchase of property and equipment (76,872) (22,459)
Cash acquired in purchase of company 1,083 -
Purchase of West Regional MRI Limited Partnership - (150,000)
------------- ------------
Net cash used in investing activities (75,789) (172,459)
------------- ------------
Financing activities:
Increase in lines of credit 314,303 -
Proceeds from notes payable, related parties 150,000 50,000
Proceeds from notes payable - 100,000
Principal payments on notes payable, related parties (67,500) -
Principal payments on notes payable (269,156) (210,654)
Principal payments on capital lease obligations (604,885) (357,285)
Proceeds from issuing common stock 213,181 435,000
------------- ------------
Net cash provided by (used in)
financing activities (264,057) 17,061
------------- ------------
Net increase/(decrease) in cash and cash equivalents 65,269 (30,561)
Cash and cash equivalents, beginning of period 106,517 77,906
------------- ------------
Cash and cash equivalents, end of period $ 171,786 $ 47,345
============= ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Nine Months ended September 30,
2000 1999
---------- ----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
PAYMENTS FOR:
Interest $ 410,610 $ 243,371
Income Taxes 900 1,200
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
STOCK ISSUED FOR:
SERVICES:
Public relations and marketing expense $ 37,064 $ 187,375
Legal, professional and employee services 505,864 707,126
Directors' fees 20,146 46,650
Interest expenses on notes payable 35,923 11,253
Repurchase of Restricted Rule 144 Stock (note 6) - 32,658
-----------------------
598,997 985,062
-----------------------
OTHER:
Principal payments on notes payable 169,913 -
Capitalized costs - Ultra/Swartz Offering 29,010 -
-----------------------
$ 797,920 $ 985,062
=======================
</TABLE>
During the nine month period ended September 30, 2000, the Company acquired the
net assets of Ultra Open MRI Holding Corporation (`Ultra')in exchange for
2,534,400 shares of Restricted Rule 144 common stock and a note payable of
$380,160.
<TABLE>
The net assets acquired were as follows:
<CAPTION>
<S> <C> <C> <C>
Cash $ 1,083 Common stock issued $ 1,520,640
Accounts receivable 814,917 Due to shareholders 380,160
Property and equipment 970,025 Direct costs of acquisition 92,646
Other assets 31,963 Minority interest 112,223
Accounts payable and other liabilities (93,916) Goodwill (1,544,553)
Capital lease obligations (943,135)
Notes payable (146,421)
Lines of credit (73,400)
------------- -------------
$ 561,116 $ 561,116
============= =============
</TABLE>
During the first nine months of 2000 and 1999, deferred compensation expense of
$20,150 and $0, 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.
F-6
<PAGE>
During the third quarter of 2000, the Company issued $150,000 of 12% convertible
notes payable, due January 15, 2002, to six officers and directors. Upon the
nine month anniversary of the note, each noteholder may elect to convert all
(but not part) of the note into 83,333 shares of the Company's common stock. The
amount payable to the noteholders in aggregate is $37,500 plus accrued interest
due April 15, 2001, July 15, 2001, October 15, 2001, and January 15, 2002. As
additional consideration for these loans, the individual lenders were issued in
aggregate 112,500 shares of Restrictive Rule 144 common stock, valued at
$14,063. In connection with the issuance of these shares, the Company will
recognize additional interest expense of $14,063 amortized over the nine month
conversion period.
In 2000, the Company entered into a capital lease agreement with a financing
company. Such agreement finances MRI equipment with a purchase price of $835,134
over a sixty-month period with interest of 10% and monthly payment of $18,174.
Pursuant to an employee agreement, 7,500 shares of accrued employee
common stock grants were issued in May 2000. Accordingly, deferred stock
compensation of $5,156 was reclassified to common stock and additional paid-in
capital in the second quarter of 2000.
During the first quarter of 2000, the Company refinanced a capital lease
obligation in which the Company issued 125,000 shares of Restricted Rule 144
common stock valued at $48,828, recognized a gain of $23,558 and obtained a new
capital lease payable of $425,258. The new capital lease obligation has an
annual interest rate of 12.5% and monthly payments of $11,303 for 48 months.
On February 9, 2000, the Company acquired 80% ownership in Ultra Open MRI
Holding Corporation with a combination of 20% in the form of a payable and 80%
in Restricted Rule 144 common stock. The purchase price was $1,900,800 and
goodwill associated with this transaction was recorded at $1,505,209 which
included direct costs associated with the purchase. Total assets were
approximately $1.8 million and total liabilities were approximately $1.3 million
as of February 9, 2000. The note payable to the principals is due in variable
payments totaling $250,000 plus accrued interest through March 9, 2001 with a
final payment of $130,160 plus accrued interest on November 9, 2001. During the
third quarter of 2000, the company paid $62,500 of th amount due along with
accrued interest payable of $7,603.
In September 1999, the Company issued $50,000 in principal amount of 10%
short-term 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, the Company is recognizing
additional interest expense of $10,938, which is being amortized over the terms
of the loans. Accrued interest payable and warrant amortization to interest
expense related to these loans amounted to $1,667 and $1,944, respectively, as
of December 31, 1999. Accrued interest payable and warrant amortization to
interest expense related to these loans amounted to $1,952 and $4,375,
respectively, as of September 30, 2000. During the second quarter of 2000, the
Company paid $45,000 of the $50,000 short-term promissory notes payable along
with accrued interest payable of $2,785 in the form of $5,000 cash and 120,000
shares of Restricted Rule 144 common stock.
See notes to consolidated financial statements.
F-7
<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 for the year ended December 31, 1999 and $15,788 for the
nine months ended September 30, 2000.
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.
During 1999, the Company was required to repurchase 33,333 shares of Restricted
Rule 144 common stock for $1.50 per share pursuant to a severance agreement
related to the July 1998 acquisition of Vision Diagnostics, Inc. and affiliates.
In July 1999, the Company received and cancelled the 33,333 shares.
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.
See notes to consolidated financial statements.
F-8
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
(1) STATEMENT OF INFORMATION FURNISHED
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal and recurring
accruals) necessary to present fairly the Company's financial position for the
interim reporting period as of September 30, 2000, and the results of operations
for the three month and nine month periods ended September 30, 2000 and 1999 and
cash flows for the nine month period ended September 30, 2000 and 1999. These
results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's 1999 Annual Report on Form 10-KSB.
The results of operations for the three month and nine month periods ended
September 30, 2000 are not necessarily indicative of the results to be expected
for any other period or for the full year.
Certain amounts in the 1999 financial statements have been reclassified to
conform with the 2000 presentation.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1999.
F-9
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
2) EARNINGS/LOSS PER COMMON SHARE
The following table sets forth the computations of basic and diluted
earnings/(loss) per share for the three month and the nine month periods ended
September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- -------------------------------
2000 1999 2000 1999
====================================================================================================================
<S> <C> <C> <C> <C>
Basic earnings/(loss) per share:
Net income (loss) available to common shareholders $ 75,659 $ (324,366) $ 89,292 $ (1,225,336)
------------- ------------- ------------- -------------
Weighted average shares outstanding 12,835,603 6,916,929 11,579,790 5,793,994
Basic earnings/(loss) per share $ 0.01 $ (0.05) $ 0.01 $ (0.21)
============= ============= ============= =============
Diluted earnings/(loss) per share:
Net income (loss) available to common shareholders $ 75,659 $ (324,366) $ 89,292 $ (1,225,336)
------------- ------------- ------------- -------------
Adjusted net income (loss) available to common
shareholders assuming conversion 75,659 (324,366) 89,292 (1,225,336)
------------- ------------- ------------- -------------
Weighted average shares outstanding 12,835,603 6,916,929 11,579,790 5,793,994
Effect of dilutive securities:
Warrants 96,352 - 339,328 -
Employee stock options - - 9,407 -
Employee stock-based compensation awards 82,496 - 22,984 -
------------- ------------- ------------- -------------
Adjusted weighted average shares outstanding
And assumed conversions 13,014,451 6,916,929 11,951,509 5,793,994
============= ============= ============= =============
Diluted earnings/(loss) per share $ 0.01 $ (0.05) $ 0.01 $ (0.21)
============= ============= ============= =============
</TABLE>
Options and warrants to purchase 1,784,961 shares of common stock, at prices
ranging from $28.00 to $0.26 per share, were outstanding during the three month
period but not included in the September 30, 2000 computation of diluted
earnings per share, because the exercise prices were greater than the average
market price of the common shares. Options and warrants to purchase 875,287
shares of common stock, at prices ranging from $28.00 to $0.63 per share, were
outstanding during the nine month period but not included in the September 30,
2000 computations of diluted earnings per share, because the exercise prices
were greater than the average market price of the common shares. The options and
warrants, which expire on dates ranging from August 30, 2001 to August 30, 2010,
were still outstanding at September 30, 2000.
Options and warrants to purchase 501,091 shares of common stock, at prices
ranging from $70.00 to $0.01 per share, were outstanding during the three month
period and nine month periods but not included in the September 30, 1999
computations of diluted earnings (loss) per share, because inclusion of
securities would have an antidilutive effect on earnings (loss) per share.
F-10
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
(3) GOODWILL
In connection with the Vision and Ultra acquisitions, consideration paid
exceeded the estimated fair value of the assets acquired (including estimated
liabilities assumed as part of the transaction) by approximately $6,100,000. 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.
(4) LINES 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 June 2001, renewable for consecutive one-year periods. At
September 30, 2000 and December 31, 1999, the outstanding balance was $824,384
and $506,384, respectively.
The Company has a line of credit with a bank at prime plus 1.75% under which the
Company may borrow up to $50,000. At September 30, 2000, the outstanding balance
was $50,000.
The Company has a line of credit with a bank at 10.5% under which the Company
may borrow up to $25,000. At September 30, 2000, the outstanding balance was
$19,703.
F-11
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
(5) NOTES PAYABLE
-------------
Notes payable consisted of the following:
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Note payable to individuals, interest at 8.5%, quarterly payments of
$41,665, due March 2003. $ 334,245 $ 447,376
Note payable to an individual, interest at 10%, monthly principal payments
of $9,809 plus accrued interest with a balloon payment due November 2000.
Management is currently negotiating the terms of this balloon payment. 225,596 313,873
Note payable to a finance company, interest at 10%, monthly payments of
$10,000, due March 2002. 167,735 234,059
Note payable to bank, interest at prime plus 2%, monthly payments of
$5,283, due April 2002. 107,386 100,047
Note payable to an individual. Terms are currently being negotiated. 87,387 114,019
Note payable to a finance company, interest at 10.5%, monthly payments of
$2,150, due March 2004. 75,273 88,121
Note payable to a bank, interest at 9.75%, monthly payments of $3,027,
due October 2002. 67,608 81,239
Note payable to an individual, interest at 2.79%, monthly payments of $2,500,
due December 2002. 65,357 86,250
Note payable to a bank, interest at 4% above discount rate, quarterly
principal payments of $9,311 plus accrued interest, due January 2002. 55,866 75,060
Note payable to a bank, interest at 8.5%, monthly payments of $1,819, due
June 2002. 35,339 -
Note payable to a bank, interest at 8%, monthly payments of $1,429, due
December 2001. 20,336 -
Note payable to a bank, interest at 13.9%, monthly payments of
$1,249, due May 2002. 17,240 -
Note payable to a bank, interest at prime plus 3% at June 30, 2000, monthly
payments of $1,629, due May 2001. 11,269 -
Note payable to a bank, interest at 12.25%, monthly payments of $796,
due October 2001. 11,013 -
Note payable to a bank, interest at 10%, monthly payments of $372,
due October 2001. 4,615 -
Other, interest ranging from 6% to 10%. - 82,724
------------- -------------
$ 1,286,265 $ 1,622,768
Less current portion (854,289) $ (939,112)
------------- -------------
Long-term portion $ 431,976 $ 683,656
============= =============
</TABLE>
F-12
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
(5) Continued
---------
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 for the year ended December 31, 1999 and $15,788 for the
nine months ended September 30, 2000.
(6) NOTES PAYABLE TO RELATED PARTIES
--------------------------------
During the third quarter of 2000, the Company issued $150,000 of 12% convertible
notes payable, due January 15, 2002, to six officers and directors. Upon the
nine month anniversary of the note, each noteholder may elect to convert all
(but not part) of the note into 83,333 shares of the Company's common stock. The
amount payable to the noteholders in aggregate is $37,500 plus accrued interest
due April 15, 2001, July 15, 2001, October 15, 2001, and January 15, 2002. As
additional consideration for these loans, the individual lenders were issued in
aggregate 112,500 shares of Restrictive Rule 144 common stock, valued at
$14,063. In connection with the issuance of these shares, the Company will
recognize additional interest expense of $14,063 amortized over the nine month
conversion period.
In September 1999, the Company issued $50,000 in principal amount of 10%
short-term 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, the Company is recognizing
additional interest expense of $10,938, which is being amortized over the terms
of the loans. Accrued interest payable and warrant amortization to interest
expense related to these loans amounted to $1,667 and $1,944, respectively, as
of December 31, 1999. Accrued interest payable and warrant amortization to
interest expense related to these loans amounted to $1,952 and $4,375,
respectively, as of September 30, 2000.
During the second quarter of 2000, the Company paid $45,000 of these $50,000
related party short-term promissory notes payable along with accrued interest
payable of $2,785 in the form of $5,000 cash and 120,000 shares of Restricted
Rule 144 common stock. The balance of these notes was $5,000 at September 30,
2000.
Related to the February 2000 acquisition of Ultra, the Company issued notes
payable to the principals and is due in variable payments totaling $250,000 plus
accrued interest through March 9, 2001 with a final payment of $130,160 plus
accrued interest on November 9, 2001. Each noteholder may elect to convert all
or part of the note shares of the Company's common stock at a conversion price
of $0.60. During the third quarter of 2000, the company paid $62,500 of the
amount due along with accrued interest payable of $7,603. The balance of these
notes was $317,660 at September 30, 2000.(See Note 8.)
F-13
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
(7) STOCKHOLDERS' EQUITY
--------------------
COMMON STOCK
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 September 30, 2000, 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.
During 1999, the Company was required to repurchase 33,333 shares of Restricted
Rule 144 common stock for $1.50 per share pursuant to a severance agreement
related to the July 1998 acquisition of Vision Diagnostics, Inc. and affiliates.
In July 1999, the Company received and cancelled the 33,333 shares. As of
December 31, 1999, the Company has paid the $50,000 liability by issuing common
stock.
F-14
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
(7) Continued
---------
In September 1999, the Company issued $50,000 in principal amount of 10%
short-term 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, the Company is recognizing
additional interest expense of $10,938, which is being amortized over the terms
of the loans. Accrued interest payable and warrant amortization to interest
expense related to these loans amounted to $1,667 and $1,944, respectively, as
of December 31, 1999. Accrued interest payable and warrant amortization to
interest expense related to these loans amounted to $1,952 and $4,375,
respectively, as of September 30, 2000. During the second quarter of 2000, the
Company paid $45,000 of the $50,000 short-term promissory notes payable along
with accrued interest payable of $2,785 in the form of $5,000 cash and 120,000
shares of Restricted Rule 144 common stock.
Pursuant to an investment letter dated February 7, 2000 with an individual, the
Company received $50,000 for the purchase of 125,000 shares of Restricted Rule
144 common stock at a purchase price of $.40 per share. Pursuant to an
investment letter dated February 8, 2000 with an individual, the Company
received $50,000 for the purchase of 125,000 shares of Restricted Rule 144
common stock at a purchase price of $.40 per share. Pursuant to investment
letters dated March 10, 2000 with six individuals, the Company received $90,000
for the total purchase of 138,600 shares of Restricted Rule 144 common stock at
a purchase price of $.65 per share. As of March 31, 2000, all 388,6000 shares
had been issued.
On February 9, 2000, the Company acquired 80% ownership in Ultra Open MRI
Holding Corporation ("Ultra") with a payment combination of a $380,160 note
payable and 2,534,400 shares of Restricted Rule 144 common stock. At June 30,
2000, all shares have been issued.
In April 2000, the Company entered into an investment Agreement with Swartz
Private Equity LLC ("Swartz"). The investment agreement entitles the Company, at
the Company's option, to issue and sell its common stock for up to an aggregate
of $15 million from time-to-time during a three-year period through April 2003,
subject to certain conditions including (1) an effective registration statement
must be on file with the SEC registering the resale of the common shares, and
(2) a limitation on the number of common shares which can be sold to Swartz
within a 30 day time period based on the trading volume of the stock, among
others. Swartz can purchase the common stock from the Company at a discount
ranging from 9% to 25% depending on the price of the common stock. In addition
to the common stock purchase, Swartz received warrants to purchase an additional
10% of the common stock equal to 110% of the market price as determined during
the pricing period, subject to further semi-annual adjustments if the price of
the common stock goes down. The registration statement went effective on July
12, 2000. As of September 30, 2000, the Company has sold 230,390 shares of
common stock pursuant to this agreement. This equity financing agreement did not
provide the necessary resources to pursue the Company's acquisition strategy;
therefore, the agreement was terminated effective October 16, 2000.
During the third quarter of 2000 in connection with the Swartz agreement, the
Company has issued a total 765,087 warrants to purchase shares of the Company's
common stock at exercise prices ranging from $0.23 to $0.26 with exercise
periods of five years from date of grant. As of September 30, 2000, none of the
warrants have been exercised.
F-15
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000 and 1999
(7) Continued
---------
In May 2000, 7,500 shares of accrued employee common stock grants were issued
pursuant to an employee agreement. Accordingly, deferred stock compensation of
$5,156 was reclassified to common stock and additional paid-in capital in the
second quarter of 2000.
In each of the four most current years, the Company's board of directors has
annually approved a stock compensation plan. On May 5, 2000, the Company's board
of directors approved the registration of 500,000 shares of common stock under
Form S-8, whereby services are obtained in exchange for issuance of free trading
stock of the Company. Shares may be awarded under this plan until May 1, 2005.
On August 28, 2000, the Company's board of directors approved the registration
of 2,500,000 shares of common stock to be issued pursuant to the Company's 2000
Stock Compensation Plan II and the 1997 Stock Option Plan. Shares may be awarded
under these plans until August 28, 2005.
During the nine months ended September 30, 2000 and 1999, 1,134,849 and 565,795
shares, respectively, of common stock under Form S-8 registrations were issued
for directors fees, employee bonus, compensation, interest, legal and
professional services provided to the Company.
(8) ULTRA ACQUISITION
-----------------
On February 9, 2000, the Company acquired 80% ownership in Ultra Open MRI
Holding Corporation with a combination of 20% in the form of a payable and 80%
in Restricted Rule 144 common stock. The purchase price was $1,900,800 and
goodwill associated with this transaction was recorded at $1,505,209 which
included direct costs associated with the purchase. Total assets were
approximately $1.8 million and total liabilities were approximately $1.3 million
as of February 9, 2000. The notes payable to the principals are due in variable
payments totaling $250,000 plus accrued interest through March 9, 2001 with a
final payment of $130,160 plus accrued interest on November 9, 2001. During the
third quarter of 2000, the company paid $62,500 of the amount due along with
accrued interest payable of $7,603. The principals' share of the shareholders'
capital had been reflected as a minority interest on the accompanying
consolidated balance sheet at September 30, 2000. The principals' share of the
corporation's net income has been presented as minority interest share of income
in the accompanying consolidated statements of operations for the three month
and nine month periods ended September 30, 2000. Ultra is a multi-site
diagnostic imaging business with offices in Palm Harbor, St. Petersburg and
Tampa, Florida. Ultra had approximately $2.5 million in gross revenue in 1999.
During the second and third quarters of 2000, the Company recorded $39,344 of
additional direct costs associated with the Ultra acquisition. Accordingly,
goodwill associated with this transaction was increased by $39,344.
Had the acquisition occurred January 1, 1999, consolidated revenues for the nine
months ended September 30, 1999 would have been approximately $4.1 million, net
loss would have been approximately ($970,000) and loss per share would have been
($0.12).
Had the acquisition occurred January 1, 2000, consolidated revenues for the nine
months ended September 30, 2000 would have been approximately $6.55 million, net
income would have been approximately $169,000 and earnings per share would have
been $0.01.
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