<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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Form 10 - QSB
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Quarterly Report Under Section 13 or 15 (d)
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of the Securities Exchange Act of 1934
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For the Quarterly Period Ended June 30, 1995
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Commission File No. 0-12968
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INMEDICA DEVELOPMENT CORPORATION
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(Exact name of small business issuer as specified in its charter)
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Utah 87-0397815
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation of organization) Number)
P.O. Box 27557, Salt Lake City Utah 84127
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(Address of principal executive offices)
Registrant's telephone number including area code (801) 261-5657
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Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:
Yes X No
--- ---
The number of shares outstanding of the registrant's only class of common stock,
par value $.001 per share, as of July 31, 1995 was 7,478,903 shares.
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1
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PART I - FINANCIAL INFORMATION Page 1 of 2
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Item 1. Financial Statements
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1995
ASSETS
<TABLE>
<CAPTION>
June 30,
1995
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(Unaudited)
<S> <C>
CURRENT ASSETS:
Cash $ 98,272
Accounts Receivable 30,765
Prepaid expenses 12,014
--------
Total current assets 141,051
IDLE EQUIPMENT AND FURNITURE,
at cost, less accumulated
depreciation of $237,462 18,288
OTHER ASSETS 2,197
--------
Total assets $161,536
========
</TABLE>
See notes to condensed consolidated financial statements.
2
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Page 2 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE, 1, 1995
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
June 30,
1995
-----------
(Unaudited)
<S> <C>
CURRENT LIABILITIES:
Convertible debentures $1,012,503
Convertible debenture due
to related party 23,502
Accrued interest 43,104
Accrued payroll 12,667
Accounts payable 41,106
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Total current liabilities 1,132,882
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STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value;
authorized 20,000,000 shares,
issued and outstanding
7,478,903 at
June 30, 1995 7,479
Additional paid-in
capital 6,020,702
Accumulated deficit (6,999,527)
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Total stockholders'
deficit (971,346)
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Total liabilities and
stockholders' deficit $ 161,536
===========
</TABLE>
See notes to condensed consolidated financial statements.
3
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INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------------
1995 1994
-------- --------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING REVENUE:
Royalties $141,214 $249,250
Sales -0- -0-
-------- --------
Total operating revenue 141,214 249,250
-------- --------
OPERATING EXPENSES:
General and
administrative 99,881 92,554
Research and
development -0- -0-
-------- --------
Total operating expenses 99,881 92,554
-------- --------
INCOME FROM OPERATIONS 41,333 156,696
-------- --------
OTHER INCOME (EXPENSES):
Miscellaneous income - 1,510
Interest expense (Note B) (81,210) (95,775)
-------- --------
Total other expense (81,210) (94,265)
-------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY GAIN $(39,877) 62,431
EXTRAORDINARY GAIN FROM
DEBT EXTINGUISHMENT 169,553 -
-------- --------
NET INCOME $129,676 62,431
======== ========
NET INCOME PER COMMON SHARE:
Income (loss) before
extraordinary gain $ (.01) $ .01
Extraordinaray gain from
debt extinguishment .02 -
-------- --------
$ .01 $ .01
======== ========
Weighted average number
of common shares outstanding 7,475,194 7,581,338
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
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Page 1 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
For the For the
Six Months Six Months
Ended Ended
June 30, 1995 June 30, 1994
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 129,676 $ 62,431
Adjustments to reconcile net
income to net cash provided by
operating activities-
Depreciation 13,331 14,050
Extraordinary gain from debt
extinguishment (169,553) -
Change in assets and liabilities-
Decrease in
accounts receivable 270,610 -0-
Decrease in inventory -0- 1,200
Decrease in prepaid
expenses 13,010 16,142
Increase in
accounts payable 22,305 119
Decrease in
accrued payroll (17,276) (23,939)
Decrease in consulting
fees payable (4,260) -0-
Decrease in
interest payable (101,930) (153,368)
Decrease in royalties payable -0- (5,698)
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Net cash provided by (used
in) operating activities 155,913 (89,063)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from royalty interests -0- -0-
--------- ---------
Net cash provided by
investing activities -0- -0-
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
5
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Page 2 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the
Six Months Six Months
Ended Ended
June 30, 1995 June 30, 1994
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on
convertible debentures (61,059) (1,746)
Proceeds from issuance of
common stock 338 27,905
-------- --------
Net cash provided by
financing activities (60,721) 26,159
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NET INCREASE (DECREASE) IN CASH $ 95,192 $(62,904)
CASH AT BEGINNING OF PERIOD 3,080 81,669
--------- --------
CASH AT END OF PERIOD $ 98,272 $ 18,765
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
6
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INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310b of
Regulation SB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These consolidated statements include the accounts of
InMedica Development Corporation and its wholly owned subsidiary, MicroCor, Inc.
("MicroCor"). All material intercompany accounts and transactions have been
eliminated.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for fair presentation have been included.
Operating results for the three-month period ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995. For further information, refer to the consolidated financial
statements included in the Company's Form 10-KSB for the year ended December 31,
1994.
Note B--Default on Payment of Convertible Debentures
The Company sold $300,000 of Series A convertible debentures in 1990 and
$800,000 of Series C convertible debentures in 1991. Upon maturity, the Company
was required to redeem 100 percent of the original purchase amount of the
debentures plus any unpaid accrued interest. These unsecured debentures bore an
interest rate of ten percent through September 30, 1992. On March 3, 1993, the
Board of Directors authorized an increase in the interest rate on the debentures
to 15 percent effective October 1, 1992. The Series A debentures matured on
December 31, 1993 and the Series C debentures matured on June 30, 1994. At June
30, 1995, the Company was in default in payment of an aggregate principal amount
owing on the Series A and Series C debentures of $1,036,005.
On December 11, 1992, certain debenture holders filed a complaint in the Third
Judicial District Court in Salt Lake County, in the State of Utah, demanding
unpaid principal and interest of $120,740 on the Series A debentures and
$177,260 on the Series C debentures. On March 3, 1993 the Board of Directors of
the Company passed a resolution that provides for 1) at least 50 percent of all
future Critikon royalties to be paid to all debenture holders proportionate to
the amount of debentures purchased, 2) an increase
7
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in the interest rate on the debentures to 15 percent (effective October 1,
1992), 3) improved communications with debenture holders and 4) completion of an
independent technical review of the Company's non-invasive hematocrit technology
by July 1, 1993. The Board has completed all but the fourth item. Based on the
Board's action, the debenture holders who filed the complaint stated their
intention in writing not to proceed further with the litigation at that time.
The Company understands that the complaint will be dismissed without prejudice,
although it remains pending at this time.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital
---------------------
For the six months ended June 30, 1995, operating revenues were generated solely
from royalty income received from J & J Medical, Inc. (successor to Critikon).
No operating revenues were recognized during the first quarter of 1995 due to
the revenue recognition policy of the Company and the timing of the receipt of
revenues. Consequently, revenues historically included in the first quarter,
were included in the last quarter of 1994. Royalty revenues being received by
the Company are insufficient to sustain research and development operations and
are inadequate to retire debenture indebtedness which is now due. InMedica is
presently committed to pay the debenture holders 50% of the J & J Medical
revenues received to be applied to the payment of interest and principal owing.
InMedica in unable to estimate whether royalty income would be adequate to
retire principal and accrued interest, over time. InMedica intends to continue
to look for other funding sources.
InMedica has not achieved profitable operations for any period since its
organization (except the last fiscal year due to expense reductions and the
suspension of further research and development efforts) and has a shareholders'
deficit of $971,346 as of June 30, 1995. In order for InMedica to continue its
research and development activities, it must secure additional financing, for
which it has no commitments. It is impossible to estimate the amount of the
J & J Medical royalties which may be received in the future due to uncertainties
regarding the future sales of the product being sold by J & J Medical upon which
InMedica's royalty is based.
InMedica holds a minor investment in another company, in the form of an
equity position. Should this investment be liquidated, available cash generated
for the use of InMedica's operations would be insignificant.
8
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Results of Operations
---------------------
See "Liquidity and Capital" for an explanation as to the absence of royalty
revenues during the first quarter of 1995, which caused the Company's revenues
for the six months ended June 30, 1995 to decline by $108,036 when compared to
the revenues for the six months ended June 30, 1994. Significant operating
revenues were derived only from royalty income during the six months ended June
30, 1995. Income from operations of $41,333 and the net income of $129,676 for
the six month period ended June 30, 1995 resulted notwithstanding the decline in
revenues for the period because the Company had an extraordinary gain during the
second quarter of $169,533 as a result of the settlement of payroll and
consulting fees for substantially less than face value.
9
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PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
Item 3. Defaults Upon Senior Securities:
See Note B to the Financial Statements for a description
of events of default under the Company's Series A and Series C
Convertible Debentures.
Item 4. Submission of Matters to a Vote of Security Holders: The Company had an
Annual Meeting of the Shareholders on June 16, 1995 which considered a
proposal to adopt an amendment to the Company's articles of
incorporation to allow the Company to issue up to 10,000,000 shares of
preferred stock, the terms and conditions of which are to be
determined by the board of directors. The shareholders approved the
amendment by a vote of 4,242,920 in favor, 92,320 against and 8,000
abstaining. The shareholders also elected a board of directors
consisting of Larry E. Clark, Henry A. Perry and John R. Merendino,
each of whom received 4,342,740 votes at the meeting. The shareholders
also considered and ratified the appointment of Arthur Andersen LLP to
serve as the Company's independent public accountants by a vote of
4,342,240 for, 500 against and 500 abstaining.
Item 5. Other Information:
None
Item 6. Exhibits and reports on Form 8-K:
The Company filed a report on Form 8-K dated June 30, 1995 reporting
the signing of an agreement with Johnson & Johnson Medical, Inc.
(formerly Critikon, Inc.) and an Office Building Lease.
Exhibit: (27) Financial Data Schedule
10
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SIGNATURES
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In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INMEDICA DEVELOPMENT CORPORATION
By Larry E. Clark, Chairman
Date: August 10, 1995 By Richard Bruggeman, Treasurer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
10QSB OF JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994
<CASH> 98,272 0
<SECURITIES> 0 0
<RECEIVABLES> 30,765 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 141,051 0
<PP&E> 255,750 0
<DEPRECIATION> 237,462 0
<TOTAL-ASSETS> 161,536 0
<CURRENT-LIABILITIES> 1,132,882 0
<BONDS> 0 0
<COMMON> 7,479 0
0 0
0 0
<OTHER-SE> (978,825)<F1> 0
<TOTAL-LIABILITY-AND-EQUITY> 161,536 0
<SALES> 0 0
<TOTAL-REVENUES> 141,214 249,250
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 99,881 91,044
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 81,210 95,775
<INCOME-PRETAX> 129,676 62,431
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (39,877) 62,431
<DISCONTINUED> 0 0
<EXTRAORDINARY> 169,553 0
<CHANGES> 0 0
<NET-INCOME> 129,676 62,431
<EPS-PRIMARY> .01 .01
<EPS-DILUTED> .01 .01
<FN>
<F1>ADDITIONAL PAID IN CAPITAL AND RETAINED EARNINGS COMBINED
</FN>
</TABLE>
