<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 June 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.
(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 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 July 31, 2000, was $2,010,230
As of July 31, 2000, Registrant had outstanding 12,719,250 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 June 30, 2000 and
December 31, 1999................................................ F-1
Consolidated Statements of Operations for the Three Months
and Six Months Ended June 30, 2000 and 1999...................... F-3
Consolidated Statements of Stockholders' Equity for the
Six Months Ended June 30, 2000................................... F-4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999..................................... F-5
Notes to Consolidated Financial Statements....................... F-8
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 June 30, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the notes thereto appearing in Part I, Item 1 in this Form
10-QSB.
Forward-Looking Statements
--------------------------
The following discussion 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. (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. Subsequently, the Company's activities focused on improvement of
its capital structure and operations of the acquired MRI centers. Additionally,
the Company identified 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. 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.
Results of Operations
---------------------
The three months ended June 30, 2000 compared to the three months ended June 30,
1999.
Revenues
--------
Patient service revenue for the three months ended June 30, 2000 were $2,128,668
compared to $852,639 for the three months ended June 30, 1999. The increase of
149.7% 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 from providing scanning, X-ray and reading
services for the medical industry accounted for all of the net revenues in the
second quarter of 2000 and 1999.
Operating Expenses
------------------
Sales, General and Administrative
Sales, general and administrative costs were $1,960,391 in the second quarter of
2000 as compared to $1,211,429 in the second quarter of 1999, representing an
increase of 61.8%. This increase was primarily attributed to the operating costs
resulting from the February 2000 acquisition of Ultra and increased operating
and marketing costs in the existing centers.
Net Income/Loss
---------------
The Company's net income for the three month period ended June 30, 2000 was
$58,790 as compared to the net loss of ($483,150) for the three month period
ended June 30, 1999. The change was primarily attributable to increased
revenues. The increase of 149.7% in revenue is primarily attributed to business
growth through increased marketing and to a lesser extent, the acquisition of
Ultra as of February 2000. Earnings per common share for the second quarter of
2000 was $0.01 as compared to a loss per common share of ($0.08) for the second
quarter of 1999. This change was attributable to net income in the three month
period ended June 30, 2000 compared to the same period in 1999 and to the
increase in the weighted average number of common shares outstanding as of June
30, 2000 as compared to June 30, 1999.
4
<PAGE>
The six months ended June 30, 2000 compared to the six months ended June 30,
1999.
Revenues
--------
Patient service revenue for the six months ended June 30, 2000 were $3,874,975
compared to $1,656,325 for the six months ended June 30, 1999. The increase of
134.0% 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 from providing scanning, X-ray and reading
services for the medical industry accounted for all of the net revenues in the
six month period ended June 30, 2000 and 1999.
Operating Expenses
------------------
Sales, General and Administrative
Sales, general and administrative costs were $3,601,335 for the first six months
of 2000 as compared to $2,380,255 for the first six months of 1999, representing
an increase of 51.3%. This increase was primarily attributed to the operating
costs resulting from the February 2000 acquisition of Ultra and increased
operating and marketing costs in the existing centers.
Net Income/Loss
---------------
The Company's net income for the six month period ended June 30, 2000 was
$13,633 as compared to the net loss of ($900,970) for the six month period ended
June 30, 1999. This change was primarily attributable to increased revenues. The
increase of 134% in revenue is primarily attributed to business growth through
increased marketing and to a lesser extent, the acquisition of Ultra as of
February 2000. Earnings per common share for the first six months of 2000 was
$0.01 as compared to a loss per common share of ($0.17) for the first months of
1999. This change was attributable to net income in the six month period ended
June 30, 2000 compared to the same period in 1999 and to the increase in the
weighted average number of common shares outstanding as of June 30, 2000 as
compared to June 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 and the issuance of common stock
in exchange for services. The Company's cash position at June 30, 2000 was
$192,482 as compared to $70,613 at June 30, 1999, representing a 172.6%
increase.
In the first six months of 2000, $291,036 of net cash was provided by operating
activities. The Company received $223,227 from increases in the lines of credit
and $191,016 from the proceeds from common stock issued during the first six
months of 2000. During the six month period ended June 30, 2000,the Company made
$188,733 of principal payments on notes payable, $389,340 of principal payment
on capital lease obligations, and purchased equipment of $42,324. Net cash
provided by operating activities in the six month period ended June 30, 2000
included net income of $13,633. Net income was offset by the change in other net
assets (excluding cash) of ($809,795), which was offset by $1,087,198 in common
stock paid for services and interest in lieu of cash, depreciation/amortization,
minority interest, bad debt expense, 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 $110,835 at June
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 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. The Company has not yet completed any transactions under this
agreement.
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. 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 June 30, 2000, all 388,600 shares had
been issued.
6
<PAGE>
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 the investment agreement with
Swartz.
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 just recently become profitable in
the six months ended June 30, 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
Refer to the Company's Form 10-KSB for the year ended December 31, 1999.
There are no other legal proceedings to which the Company is a party which could
have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
See Part I, Item 2.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule
Reports on Form 8-K The Company filed current reports on Forms
8-K which were issued on February 24, 2000 and
May 4, 2000.
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, President, August 14, 2000
------------------------ and Chairman
M. Lee Hulsebus
/S/ Ross S. Seibert Chief Financial Officer August 14, 2000
------------------------
Ross S. Seibert
9
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------ June 30, December 31,
2000 1999
------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $ 192,482 $ 106,517
Accounts receivable (net of allowance
of $1,886,723 and $1,308,016) 4,059,961 2,723,306
Prepaid expenses and other assets 60,874 33,965
------------- -------------
Total current assets 4,313,317 2,863,788
------------- -------------
Property and equipment:
Equipment under capital leases 4,235,633 3,398,458
Machinery and equipment 266,674 211,706
Leasehold improvements 540,494 426,632
Furniture and fixtures 40,142 33,799
------------- -------------
5,082,943 4,070,595
Less accumulated depreciation (2,185,451) (1,866,309)
------------- -------------
Net property and equipment 2,897,492 2,204,286
Intangible assets:
Goodwill 6,310,944 4,788,143
Organization costs 160,930 160,930
Less accumulated amortization (415,200) (319,427)
------------- -------------
6,056,674 4,629,646
Other assets 260,080 231,015
------------- -------------
Total assets $ 13,527,563 $ 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
------------------------------------ June 30, December 31,
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 863,420 $ 849,560
Accrued expenses 509,863 491,470
Lines of credit 803,011 506,384
Due to Shareholders - current portion 250,000 -
Notes payable - current portion 906,476 939,112
Capital lease obligations - current portion 869,712 669,307
------------- -------------
Total current liabilities 4,202,482 3,455,833
------------- -------------
Other liabilities:
Due to Shareholders - long term 130,160 -
Notes payable - long term 524,994 683,656
Capital lease obligations - long term 2,964,539 2,683,535
------------- -------------
Total liabilities 7,822,175 6,823,024
------------- -------------
Minority interest 119,496 -
------------- -------------
Commitments and contingencies (note 6)
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; 12,372,500 and 7,980,956 outstanding) 1,855,875 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 29,505,918 27,705,952
Deferred stock compensation 38,449 30,599
Accumulated deficit (25,960,594) (25,974,227)
------------- -------------
Total stockholders' equity 5,585,892 3,105,711
------------- -------------
Total liabilities and stockholders' equity $ 13,527,563 $ 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 June 30, Six Months Ended June 30,
------------------------------- -------------------------------
2000 1999 2000 1999
===================================================================================================================
<S> <C> <C> <C> <C>
Net patient service revenue $ 2,128,668 $ 852,639 $ 3,874,975 $ 1,656,325
Operating expenses:
Sales, general and administrative 1,960,391 1,211,429 3,601,335 2,380,255
------------- ------------- ------------- -------------
Income/(Loss) from operations 168,277 (358,790) 273,640 (723,930)
Other income (expense):
Interest expense (165,029) (150,574) (333,388) (234,836)
Other income 53,131 26,214 80,654 38,147
------------- ------------- ------------- -------------
Income/(Loss) before minority interest 56,379 (483,150) 20,906 (920,619)
Minority interest 2,411 - (7,273) 19,649
------------- ------------- ------------- -------------
Net Income/(Loss) $ 58,790 $ (483,150) $ 13,633 $ (900,970)
============= ============= ============= =============
Earnings/(Loss) per share:
Basic earnings/(loss) per common share $ 0.01 $ (0.08) $ 0.01 $ (0.17)
============= ============= ============= =============
Weighted average common shares outstanding 10,984,573 5,759,180 9,499,499 5,273,497
============= ============= ============= =============
Diluted earnings/(loss) per common share $ 0.01 $ (0.08) $ 0.01 $ (0.17)
============= ============= ============= =============
Weighted average common shares outstanding,
assuming dilution 12,039,001 5,759,180 10,553,927 5,273,497
============= ============= ============= =============
See notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Months ended June 30, 2000
(unaudited)
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL COMMON
-------------------------- -------------------------- PAID-IN STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL TO BE ISSUED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, 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 - - 1,214,794 182,219 468,054 -
Restricted Rule 144 common stock sold - - 388,600 58,290 131,710 -
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, June 30, 2000 - $ - 12,372,500 $ 1,855,875 $29,505,918 $ 23,494
============ ============ ============ ============ ============ ============
</TABLE>
(continued below)
<TABLE>
<CAPTION>
DEFERRED ACCUMULATED
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 - - - 650,273
Restricted Rule 144 common stock sold - - - 190,000
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 - 13,006 - 13,006
Net income - - 13,633 13,633
------------- ------------- ------------- -------------
Balance, June 30, 2000 $ 122,750 $ 38,449 $(25,960,594) $ 5,585,892
============= ============= ============= =============
See notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Six Months ended June 30,
2000 1999
---------- ----------
<S> <C> <C>
Operating activities:
Net income/(loss) $ 13,633 $(900,970)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Stock paid for services and interest 544,073 665,802
Compensation recognized relating to accrued
employee stock grants and warrants 13,006 -
Minority interest 7,273 (19,649)
Provision for doubtful accounts 131,489 -
Depreciation and amortization 414,915 407,306
Gain on refinancing of capital lease obligation (23,558) -
Changes in assets and liabilities excluding
net assets acquired:
Accounts receivable (653,227) 94,655
Prepaid expenses and other current assets (26,909) (69,142)
Other assets 2,898 (17,817)
Accounts payable and accrued expenses (132,557) (212,739)
---------- ----------
Net cash provided by (used in)
operating activities 291,036 (52,554)
---------- ----------
Investing activities:
Purchase of property and equipment (42,324) (1,909)
Cash acquired in purchase of company 1,083 -
Purchase of West Regional MRI Limited Partnership - (150,000)
---------- ----------
Net cash used in investing activities (41,241) (151,909)
---------- ----------
Financing activities:
Proceeds from notes payable - 100,000
Principal payments on notes payable (188,733) (86,350)
Increase in lines of credit 223,227 -
Proceeds from issuing common stock 191,016 385,000
Principal payments on capital lease obligations (389,340) (201,480)
---------- ----------
Net cash provided by (used in)
financing activities (163,830) 197,170
---------- ----------
Net increase/(decrease) in cash and cash equivalents 85,965 (7,293)
Cash and cash equivalents, beginning of period 106,517 77,906
---------- ----------
Cash and cash equivalents, end of period $ 192,482 $ 70,613
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months ended June 30,
2000 1999
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
PAYMENTS FOR:
Interest $ 256,870 $ 194,958
Income Taxes 800 800
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
STOCK ISSUED FOR:
SERVICES:
Public relations and marketing expense $ 29,064 $ 154,250
Legal, professional and employee services 468,212 476,807
Directors' fees 17,026 24,900
Interest expenses on notes payable 29,771 9,845
-----------------------
544,073 665,802
-----------------------
OTHER:
Principal payments on notes payable 106,200 -
-----------------------
$ 650,273 $ 665,802
=======================
During the six month period ended June 30, 2000, the Company acquired the net
assets of Ultra Open MRI Holding Corporation in exchange for 2,534,400 shares of
Restricted Rule 144 common stock and a 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 70,894
Other assets 31,963 Minority interest 112,223
Accounts payable and other liabilities (93,916) Goodwill (1,522,801)
Capital lease obligations (943,135)
Notes payable (146,421)
Lines of credit (73,400)
------------- -------------
$ 561,116 $ 561,116
============= =============
</TABLE>
During the first six months of 2000 and 1999, deferred compensation expense of
$13,006 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 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.
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 $10,525 for the six
months ended June 30, 2000.
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 $708 and $2,917,
respectively, as of June 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.
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 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.
Pursuant to an employee agreement, in May 2000 7,500 shares of accrued employee
common stock grants were issued. Accordingly, deferred stock compensation of
$5,156 was reclassified to common stock and additional paid-in capital in the
second quarter of 2000.
See notes to consolidated financial statements.
F-7
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 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 June 30, 2000, and the results of operations for
the three month and six month periods ended June 30, 2000 and 1999 and cash
flows for the six month period ended June 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 six month periods ended June
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.
(2) EARNINGS/LOSS PER COMMON SHARE
Earnings/Loss per common share has 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
been included in the earnings per share calculations but have not been included
in the loss per share calculations because such inclusion would be antidilutive.
(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) 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.
Management anticipates renewing the line of credit in August 2000. At June 30,
2000 and December 31, 1999, the outstanding balance was $731,823 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 June 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 June 30, 2000, the outstanding balance was $21,187.
F-8
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2000 and 1999
(5) NOTES PAYABLE
-------------
<TABLE>
Notes payable consisted of the following:
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Note payable to individuals, interest at 8.5%, quarterly payments of
$41,665, due March 2003. $ 358,726 $ 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. 255,021 313,873
Note payable to a finance company, interest at 10%, monthly payments of
$10,000, due March 2002. 193,130 234,059
Note payable to bank, with interest at prime plus 2%. Balance was due
August 1998 and new terms are currently being negotiated. 104,868 100,047
Note payable to an individual. Terms are currently being negotiated. 99,874 114,019
Note payable to a finance company, interest at 10.5%, monthly payments of
$2,150, Due March 2004. 79,668 88,121
Note payable to a bank, with interest at 9.75%, monthly payments of $3,027,
due October 2002. 74,747 81,239
Note payable to an individual, interest at 2.79%, monthly payments of $2,500,
due December 2002. 72,370 86,250
Note payable to a bank, interest at 4% above discount rate, quarterly
principal payments of $9,311 plus accrued interest beginning April 2000,
due January 2002. 65,177 75,060
Note payable to a bank, interest at 8.5%, monthly payments of $1,819, due
June 2002. 39,969 -
Note payable to a bank, interest at 8%, monthly payments of $1,429, due
December 2001. 24,166 -
Note payable to a bank, interest at 13.9%, monthly payments of
$1,249, due May 2002. 20,316 -
Note payable to a bank, interest at prime plus 3% at June 30, 2000, monthly
payments of $1,629, due May 2001. 15,757 -
Note payable to a bank, interest at 12.25%, monthly payments of $796,
due October 2001. 13,015 -
Note payable to a bank, interest at 10%, monthly payments of $372,
due October 2001. 5,596 -
Other, interest ranging from 6% to 10%. 9,070 82,724
------------- -------------
$ 1,431,470 $ 1,622,768
Less current portion (906,476) $ (939,112)
------------- -------------
Long-term portion $ 524,994 $ 683,656
============= =============
</TABLE>
F-9
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 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 $10,525 for the six
months ended June 30, 2000.
(6) 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 June 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.
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.
F-10
<PAGE>
MIRACOR DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2000 and 1999
(6) Continued
---------
On February 9, 2000, the Company acquired 80% ownership in Ultra Open MRI
Holding Corporation ("Ultra") with a payment combination of a $380,160 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. The Company has not yet completed any transactions under this
agreement.
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, the most recent which registered
500,000 shares of common stock under Form S-8 on May 5, 2000, 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. During the six months
ended June 30, 2000 and 1999, 653,489 and 395,720 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.
(7) 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 amount payable to the principals is due in variable
payments totaling $250,000 through March 9, 2001 with a final payment of
$130,160 on November 9, 2001. The principals' share of the shareholders' capital
had been reflected as a minority interest on the accompanying consolidated
balance sheet at June 30, 2000. The principals' share of the corporation's net
income has been presented as minority interest share of income in the
accompanying consolidated statement of operations for the three month and six
month periods ended June 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 quarter of 2000, the Company recorded $17,592 of additional
direct costs associated with the Ultra acquisition. Accordingly, goodwill
associated with this transaction was increased by $17,592.
Had the acquisition occurred January 1, 1999, consolidated revenues for the six
months ended June 30, 1999 would have been approximately $2.6 million, net loss
would have been approximately ($731,000) and loss per share would have been
($0.09).
Had the acquisition occurred January 1, 2000, consolidated revenues for the six
months ended June 30, 2000 would have been approximately $4.2 million, net
income would have been approximately $93,000 and earnings per share would have
been $0.01.
F-11
