U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10 - QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
Commission File No. 0-12968
INMEDICA DEVELOPMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
Utah 87-0397815
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation of organization) Number)
60 South 600 East, Suite 150, Salt Lake City, Utah 84102 (Address of
principal executive offices)
Registrant's telephone number including area code (801) 521-9300
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 August 6, 1996 was 7,745,570 shares.
<PAGE>
PART I - FINANCIAL INFORMATION Page 1 of 2
Item 1. Financial Statements
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996
ASSETS
June 30,
1996
------------
(Unaudited)
CURRENT ASSETS:
Cash $ 161,011
Prepaid expenses 13,362
------------
Total current assets 174,373
EQUIPMENT AND FURNITURE,
at cost, less accumulated
depreciation of $249,490 5,000
OTHER ASSETS 2,196
-----------
Total assets $ 181,569
============
See notes to condensed consolidated financial statements.
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Page 2 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
June 30,
1996
-----------
(Unaudited)
CURRENT LIABILITIES:
Current portion of note
payable $ 50,000
Accounts payable and
accrued interest 14,828
Related party notes
payable 87,526
----------
Total current liabilities 152,354
NOTE PAYABLE, less
current portion 397,500
----------
STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value;
20,000,000 shares authorized,
7,745,570 issued and outstanding 7,746
Preferred stock, 10,000,000 shares
authorized; Series A preferred
stock, cumulative and convertible,
$4.50 par value, 1,000,000 shares;
designated, 67,633 shares
issued and outstanding 304,349
Additional paid-in
capital 6,218,434
Accumulated deficit (6,898,814)
----------
Total stockholders'
deficit ( 368,285)
Total liabilities and
stockholders' deficit $ 181,569
==========
See notes to condensed consolidated financial statements.
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Page 1 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
--------------------- ----------------------
1996 1995 1996 1995
-------- --------- --------- ---------
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
OPERATING REVENUE:
Royalties $ 126,400 $ 141,214 $ 126,400 $ 141,214
---------- --------- ---------- ----------
OPERATING EXPENSES:
General and
administrative 75,698 54,939 112,414 100,471
Research and
development 42,764 -0- 64,793 -0-
---------- -------- ---------- ----------
Total operating expenses 118,462 54,939 177,207 100,471
INCOME FROM OPERATIONS 7,938 86,275 (50,807) 40,743
OTHER INCOME (EXPENSE):
Interest income 30 -0- 30 -0-
Miscellaneous income -0- -0- -0- 590
Interest expense (14,398) (39,004) (29,352) (81,210)
---------- ------- ---------- ---------
Total other expense (14,368) (39,004) (29,322) (80,620)
---------- ------- ---------- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY GAIN (6,430) 47,271 (80,129) (39,877)
EXTRAORDINARY GAIN FROM
DEBT EXTINGUISHMENT -0- 169,553 -0- 169,553
---------- -------- ---------- ---------
NET INCOME (LOSS) $ (6,430) $216,824 $ (80,129) $ 129,676
Less redeemable preferred
stock dividends (6,086) -0- (13,636) -0-
----------- --------- ---------- ---------
INCOME (LOSS) APPLICABLE
TO COMMON SHARES $ (12,516) $ 216,824 $ (93,756) $ 129,676
See notes to condensed consolidated financial statements.
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Page 2 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NET INCOME (LOSS) PER
COMMON SHARE:
(Loss) income before
extraordinary gain $ (.00) $ .01 $ (.01) $ (.01)
Extraordinary gain from
debt extinguishment $ (.00) .02 (.00) .02
---------- -------- -------- --------
$ (.00) $ .03 $ (.01) $ .01
Weighted average number
of common shares
outstanding 7,686,433 7,475,194 7,586,070 7,581,338
=========== ========== ========== ==========
See notes to condensed consolidated financial statements.
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Page 1 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
For the For the
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
--------------- ---------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (80,129) $ 129,676
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities-
Extraordinary gain from debt
restructuring - (169,553)
Depreciation 445 13,331
Change in assets and liabilities-
Decrease in royalties receivable 227,520 270,610
Decrease in prepaid expenses 13,354 13,010
(Decrease) increase in accounts
payable (3,143) 22,305
Increase (decrease) in accrued
liabilities 3,011 (123,466)
Decrease in related party
payable (51,000) -0-
----------- ----------
Net cash provided by
operating activities 110,058 155,913
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture (1,375) -0-
----------- ----------
Net cash used in investing
activities (1,375) -0-
See notes to condensed consolidated financial statements.
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Page 2 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the For the
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
------------- ---------------
(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on
convertible debentures $ (22,768) $ (61,059)
Preferred stock dividends paid (13,636) -0-
Principal payments on note
payable (25,000) -0-
Proceeds from issuance of
common stock -0- 338
---------- ---------
Net cash used in
financing activities (61,404) (60,721)
NET INCREASE IN CASH 47,279 95,192
CASH AT BEGINNING OF PERIOD 113,732 3,080
----------- ----------
CASH AT END OF PERIOD $ 161,011 $ 98,272
========== =========
See notes to condensed consolidated financial statements.
<PAGE>
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 and six month periods ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. For further information, refer to the consolidated
financial statements included in the Company's Form 10-KSB for the year ended
December 31, 1995.
Note B--Conversion of Preferred Stock
During April 1996, a preferred stockholder converted 5,243 Series A Preferred
shares to 31,458 shares of Common Stock of the Company. The conversion ratio was
six shares of Common Stock per share of Preferred Stock or $.75 per share of
Common Stock. During June 1996, another preferred stockholder converted 11,008
shares of Preferred Stock to 66,048 shares of common stock at the same
conversion ratio. Following the two conversions, the Company had outstanding
67,633 shares of Series A Preferred Stock.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
For the three months ended March 31, 1996, no operating revenues were
recognized due to the revenue recognition policy of the Company and the timing
of the receipt of revenues. Accordingly, total revenues for the first six months
of the year were $126,400 or $14,814 less than during the same period of the
prior year. The Company's sole source of revenue is a royalty payment received
from J & J Medical, Inc., which is paid to the Company on a quarterly basis.
Royalty revenues being received by the Company may be insufficient to sustain
research and development costs, fund operations and retire indebtedness when it
comes due. InMedica consequently continues to look for funding sources.
InMedica achieved profitable operations during the fiscal years ended
December 31, 1995 and 1994. Profitable operations resulted from increased
royalty receipts coupled with expense reductions and the suspension of research
and development efforts in 1994 and an extraordinary gain in 1995. However, the
Company has a total stockholders' deficit of $368,285 and an accumulated deficit
of $6,898,814 as of June 30, 1996. In order for InMedica to continue its
research and development activities and meet its obligations, it must secure
additional financing, for which it has no commitments. It is impossible to
estimate the amount of the J & J Medical, Inc. royalties which may be received
in the future. Such royalty income is dependent upon the continued sales of the
product line by J & J Medical Inc. which includes the Company's base technology
and upon which the royalty is paid.
Results of Operations
See "Liquidity and Capital Resources" for an explanation as to the lack of
revenues during the quarter ended March 31, 1996. The net loss from operations
of $80,129 for the six months ended June 30, 1996 resulted primarily due to
research and development expense not incurred in the comparable period of the
prior year.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
During late July 1996, the Company was contacted by an attorney
representing Dr. Allan Kaminsky, former Chief Executive Officer of the Company.
The attorney orally delivered certain demands to the Company from Dr. Kaminsky.
These demands included that Dr. Kaminsky be granted control of the Board of
Directors and that a substantial reduction be made in the 1,100,000 options
granted during the last ten months to the officers, directors, consultants and
employees of the Company. Dr. Kaminsky also asserted that he did not believe Mr.
Clark had the expertise to guide the development of the Company's hematocrit
technology. In connection with his demands, Dr. Kaminsky offered to obtain
refinancing of a bank loan owed by the Company to First Interstate Bank and to
obtain the release of collateral Larry E. Clark had placed with the bank to
secure the loan. The demands did not specify whether there would be any cost to
the Company for obtaining the refinancing. The Company's management was advised
that if Dr. Kaminsky's demands were not met that he was prepared to bring a
proxy contest to achieve control of the Board of Directors and possibly
litigation. The basis of any litigation claim was not specified.
At a board meeting held July 31, 1996, the Company considered Dr.
Kaminsky's demands and voluntarily reduced the number of options by 25%
effective August 1, 1996, bringing the total options granted down from 1,100,000
to 825,000. In addition, Mr. Clark has agreed for the present to continue to
work as President and Chief Executive Officer without cash compensation. The
Company is continuing to negotiate with Dr. Kaminksy in the hope of resolving
the differences without the disruption of litigation or a proxy contest. The
Board of Directors, however, is of the view that significant progress has been
made since Mr. Clark assumed office as President of the Company. Among other
things, the board considered the significantly improved financial condition of
the Company since Mr. Clark was appointed President and the progress that has
<PAGE>
been made in continuing research and development on the Company's non-invasive
hematocrit technology. The Company believes that Mr. Clark has proven management
capability and that the Company has the technical expertise to continue
aggressive research and development on its technology and that it is in the best
interests of the Company to continue its present course and progress.
Item 6. Exhibits and reports on Form 8-K:
Exhibits: (1) Conversion Agreement between InMedica
Development Corporation and J. Lynn Smith dated June 11,
1996.
(2) Financial Data Schedule
<PAGE>
SIGNATURES
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
/s/ Larry E. Clark
By Larry E. Clark, Chairman
/s/ Richard Burggeman
Date: August 15, 1996 By Richard Bruggeman, Treasurer
<PAGE>
EXHIBITS
Exhibits filed with the Form 10-QSB of InMedica Development
Corporation, SEC File No. 0-12968:
Exhibit No. SB Item No. Description
1 (10) Conversion Agreement between
InMedica Development Corporation
and J. Lynn Smith dated June 11,
1996.
2 (27) Financial Data Schedule
<PAGE>
Exhibit 1
CONVERSION AGREEMENT
AN AGREEMENT made the 11th day of June , 1996 by and between the Preferred
Stockholder (hereinafter "Holder") whose name is subscribed below and InMedica
Development Corporation, a Utah corporation, with its principal place of
business at 495 East 4500 South, Suite 230, Salt Lake City, Utah, (hereinafter,
"InMedica" or the "Company").
RECITALS
Whereas Holder owns 11,008 shares of the Series A Convertible Preferred
Stock, par value $4.50 per share, (the "Preferred Stock") of InMedica; and
Whereas the Preferred Stock by its terms is presently convertible to common
stock of the Company at the conversion rate of six shares of common stock per
one share of Preferred Stock; and
Whereas the undersigned Holder has given notice of conversion as required
by the Articles of Incorporation of the Company and is entitled to 66,048 shares
of the Common Stock of the Company (the "Shares") in exchange for the 11,008
Preferred shares presently held by him; and
Whereas the undersigned Holder is knowledgeable regarding the business, and
affairs of the Company, has had opportunity to ask and receive answers to
questions regarding the Company, and has reviewed or had opportunity to review
disclosure documents regarding the Company and now considers himself to be fully
informed and in possession of every material fact he deems necessary in order
consider the exercise of his conversion rights with respect to the Preferred
Stock;
NOW THEREFORE, in consideration of the mutual agreements contained herein,
the parties agree as follows:
1. Exchange. Holder hereby exchanges his 11,008
Preferred shares for 66,048 restricted common shares of InMedica as
permitted by the Articles of Incorporation of the Company. Holder
will deliver a signed copy of this agreement and his Preferred
Stock Certificate endorsed in blank to the Company.
2. Issuance of Shares. Upon receipt by the Company of
this signed Agreement and the Preferred Stock certificate of the
Holder, the Company will issue to Holder 66,048 restricted common
shares, $.001 par value, of the Company.
<PAGE>
3. Effective Date. Holder and the Company agree that
the exchange transaction contemplated by this Agreement, shall be
effective upon the acceptance by the Company of the Holders'
Agreement, notwithstanding the actual date of delivery of the stock
certificate representing the Shares.
4. Conditions. The consummation of the exchange
transaction contemplated by this Agreement is expressly conditioned
upon the satisfaction or waiver of the following conditions
precedent and subsequent:
4.1 The full and due execution and delivery of this Agreement by
Holder and the Company;
4.2 The execution and delivery by Holder of the Questionnaire attached to this
Agreement as Exhibit "F" and made a part hereof;
4.3 The continued accuracy and validity of the representations and warranties of
Holder set forth in Section 5 and elsewhere in this Agreement;
4.4 The approval of this Agreement by InMedica;
5. Representations and Warranties of Holder. Holder hereby agrees,
represents and, to the extent the context shall require, warrants to the Company
as set forth below and agrees that such agreements, representations and
warranties shall expressly survive the consummation of the exchange transaction
contemplated hereby and shall be unaffected by any investigation made by any
party at any time:
5.1 Holder understands that the Preferred Stock is being exchanged and the
Shares are being issued without registration under the Federal Securities Act of
1933, as amended (the "Federal Act"), in reliance upon an exemption or
exemptions available under the Federal Act, including those available under
Section 3(a)(9) and/or Section 4(2) and/or Regulation D thereof. Holder further
understands that the Preferred Stock is being exchanged and the Shares are being
issued pursuant to an exemption from the registration provisions of the
applicable state laws and understands that the availability of the exemption or
exemptions from registration and qualification under the Federal Act and the
state laws depend in part upon the accuracy of certain of the representations,
declarations and warranties contained herein, and those which are made in the
Questionnaire attached as Exhibit "F" hereto, executed by Holder with the intent
that the same may be relied upon by the Company in determining Holder's
suitability as an investor in the Company. Holder further acknowledges that this
transaction has not been and will not be reviewed by the Securities and Exchange
Commission nor by the securities administrator of any state.
<PAGE>
5.2 Holder is a resident and domiciliary, not a temporary or transient resident,
of the State shown as part of Holder's address in Holder's Questionnaire.
5.3 Holder is acquiring the Shares to be issued for investment and not with a
view to the public resale or distribution thereof. The undersigned has no
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge to such person or anyone else the Shares or any portion
thereof or interest therein, and the undersigned has no present plans to enter
into such contract, undertaking, agreement or arrangement.
5.4 Holder acknowledges that the certificate evidencing the Shares, and any and
all replacements thereof, shall bear and be subject to legends in substantially
the following form affecting the transferability of the Shares and that the
Company will place appropriate stop transfer orders with its transfer agent:
"The shares of stock evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, and have been issued in reliance
upon one or more exemptions from the
requirements for such registration including an exemption for non-public
offerings. Accordingly, the sale, transfer, pledge,
hypothecation or other disposition of the shares evidenced hereby
or any portion thereof or interest therein may not be accomplished
in the absence of an effective registration statement under that
act, or an opinion of counsel satisfactory in form and substance to
the Company to the effect that such a registration is not
required."
5.5 Holder further understands and agrees that if he desires to make any
transfer of the Shares, the Company is in a position to impede such transfer
through prior stop orders placed with its transfer agent or otherwise and that
the Company will promptly remove such impediments placed by it only when:
(i)The Company has received a satisfactory opinion of counsel to the effect that
the proposed transfer does not require registration or qualification pursuant to
the Federal Act or the state laws by reason of an exemption provided thereunder
and a representation and agreement of the proposed transferee in form and
substance satisfactory to the Company, and the Company shall have advised Holder
that such opinion, representation and agreement are satisfactory to the Company;
or
(ii) The Company has received a satisfactory opinion of counsel to the effect
that the proposed transfer complies with the provisions of Rule 144 under the
Federal Act and the Company shall have advised the Holder that such counsel and
such opinion are satisfactory to the Company; or
<PAGE>
(iii) A Registration statement covering the proposed transfer has been filed
with the Securities and Exchange Commission and has been declared effective.
5.6 Holder agrees that, in any event, Holder will not attempt to dispose of the
Shares or any portion or interest therein, unless and until the Company has
determined to its satisfaction that the proposed disposition does not violate
the registration or qualification requirements of the Federal Act or applicable
state laws.
5.7 Holder understands that the Company has no obligation or intention to
register or qualify the Shares in order to permit sales thereof in accordance
with the registration or qualification provisions of the Federal Act or the
applicable state laws.
5.8 Holder hereby agrees to indemnify the Company and its officers, directors,
agents and attorneys and to hold the Company and such persons harmless from any
liability, costs or expenses (including reasonable attorneys' fees) arising as a
result of the sale or distribution of the Shares or any portion thereof or
interest therein by him in violation of the Federal Act or applicable state
laws.
5.9 Holder agrees to indemnify the Company and its officers and directors,
agents and attorneys and to hold the Company and such persons harmless from and
against any and all loss, damage, liabilities, costs or expenses (including
reasonable attorneys' fees) to which they may be put or which they may have
incurred by reason of or in connection with any misrepresentation made by
Holder, for any breach of any of Holder's warranties or Holder's failure to
fulfill any of Holder's covenants or agreements under this Agreement.
5.10 Holder hereby confirms that all statements in the Holder's Questionnaire
attached as Exhibit "F" hereto were and remain true and correct and undertakes
to immediately notify the Company of any material changes occurring thereto
prior to consummation of this exchange transaction.
5.11 Holder acknowledges that Holder and/or Holder's professional advisor have
had the opportunity to ask questions of, and receive answers from the Company,
and has/have had access to all information concerning the terms and conditions
of this exchange and the financial and operating condition of the Company and to
obtain additional information to verify the accuracy of such information.
Further, Holder has reviewed the disclosure materials included herewith,
including the financial statements contained therein and is familiar with their
contents and further acknowledges that Holder has had the opportunity and access
to obtain further information from the Company regarding such financial,
business and management information. Disclosure materials attached hereto are as
follows:
<PAGE>
Form 10-KSB for the Year Ended 12/31/95 ..........Exhibit A
Articles of Incorporation of InMedica Development
Corporation, including Series "A" Preferred Stock
Amendment.........................................Exhibit B
Bylaws of InMedica Development Corporation........Exhibit C
Additional Material Information...................Exhibit D
Risk Factors......................................Exhibit E
Questionnaire.....................................Exhibit F
Form 10-QSB for the Quarter Ended 3/31/96.........Exhibit G
5.12 Holder understands that, as indicated above, the Shares to be issued will
be restricted securities and, as such, and in addition to the other restrictions
described above, the Shares may be subsequently transferred only in accordance
with the provisions of Rule 144 under the Federal Act which requires, among
other things, that the Shares be held for not less than two years, known as the
"holding period", including the tacking of any prior holding period permitted by
Rule 144.
5.13 Holder understands that by its terms, this exchange is made at the option
of the Holder, and the Holder, is free to accept or reject this Conversion
Agreement.
5.14 The number of shares of the Preferred Stock held by Holder as of the date
shown, is accurate and represents the full number of shares of the Preferred
Stock held by the Holder and that all dividends owning on the Preferred Stock
have been paid in full and Holder waives and forever relinquishes any dividends
on the Preferred Stock accruing during the second quarter of 1996 and
thereafter.
5.15 Holder understands that Larry E. Clark, the Company's Chief Executive
Officer, purchased from Allan L. Kaminsky, then CEO of the Company, 1,000,000
shares of the Company's common stock for $100,000 ($.10 per share) during April,
1995 and that other transactions or exchanges in the securities of the Company
have occurred in which the common stock of the Company was valued at
substantially less than the arbitrary $.75 per share conversion ratio utilized
in this transaction (see Exhibit A, Form 10-KSB for the year ended December 31,
1995, "Preferred Stock," "Debentures" and "Price Range for Common Stock").
5.16 Holder acknowledges that the Company makes no representations or assurances
as to the federal or state income tax implications, either to the Holder or the
Company, of this Exchange Agreement. The Company has offered no opinion or
<PAGE>
advice in this respect and Holder acknowledges that the Company and its
management have urged Holder to consult with his professional advisors with
respect to any such tax implications.
5.17 Holder acknowledges that no representations or assurances have been given
to Holder by the Company or anyone acting in its behalf as to the continued
operations of the Company or the financial or other success thereof and Holder
recognizes that the Shares represent a speculative investment and involve risk
factors including, but not limited to, those set forth in the Exhibits hereto
including the risk of loss of Holder's entire investment in the Company.
5.18 Holder has not assigned or transferred the Preferred Stock or any interest
therein and the exchange thereof by Holder under this Agreement, to the
knowledge of Holder, will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any lien, charge or encumbrance on, the Preferred Stock or the
Shares pursuant to any agreement, contract or other instrument to which the
Holder or the Preferred Stock is or may be bound.
5.19 Holder acknowledges that the conversion ratio for the Exchange of the
Preferred Stock for the Shares has been arbitrarily determined by the Company
and bears no relationship to book value, present or future tangible or
intangible assets of the Company or earnings of the Company or any usual
investment criteria.
6. Loss of Priority. Holder acknowledges that under the terms of the
Preferred Stock, conversion is at the option of the Preferred Stockholder. If
the Holder does not convert and execute this Exchange Agreement, then the
Preferred Stock will continue to pay or accrue dividends at the rate of 8% per
annum and the Preferred Stock would have a preference in any liquidation of the
Company over the common stockholders. If the Holder exchanges the Holder's
Preferred Stock, the Holder forever relinquishes any priority the Holder would
have had as compared to the common shareholders in a liquidation of the Company.
7. Further Assurances. Each party shall, at any time and
from time to time, at the other's request, execute, acknowledge and
deliver any instrument that may be necessary or proper to carry out
the provisions of this Agreement.
8. Time of the Essence. Time shall be of the essence in
satisfying the terms and conditions of this Agreement.
9. Attorneys' Fees. In the event a dispute arises with respect to this
Agreement, and such dispute is not resolved prior to final judicial
determination, the party prevailing in such dispute shall be entitled to recover
all expenses, including, without limitation, reasonable attorneys' fees and
expenses.
<PAGE>
10. Complete Agreement of the Parties. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
the subject matter hereof and contains all of the covenants and agreements
between the parties with respect to such subject matter in any manner
whatsoever. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone herein, and that no other agreement, statement or promise not
contained in this Agreement shall be valid or binding. This Agreement may be
changed or amended only by an amendment in writing signed by all of the parties
or their respective successors in interest.
11. Assignment. This Agreement and the rights and obligations
of Holder hereunder are personal to Holder and may not be
transferred or assigned without the prior written consent of the
Company.
12. Binding. Subject to the provisions of Section 11 hereof,
this Agreement shall be binding upon and inure to the benefit of
the successors in interest, assigns and personal representatives of
the respective parties.
13. Number and Gender. Whenever the singular number is used in this
Agreement and when required by the context, the same shall include the plural,
and the masculine gender shall include the feminine and neuter genders and the
word "person" shall include corporation, firm, partnership or other form of
association.
14. Failure to Object Not a Waiver. The failure of either party to this
Agreement to object to, or to take affirmative action with respect to, any
conduct of the other which is in violation of the terms of this Agreement, shall
not be construed as a waiver of the violation or breach or of any future
violation, breach or wrongful conduct.
15. Unenforceable Terms. Any provision hereof prohibited by law or
unenforceable under any applicable law of any jurisdiction shall as to such
jurisdiction be ineffective without affecting any other provision of this
Agreement. To the full extent, however, that the provisions of such applicable
law may be waived, they are hereby waived to the end that this Agreement be
deemed to be a valid and binding enforceable agreement in accordance with its
terms.
16. Miscellaneous Provisions. The various headings and numbers herein and
the groupings of provisions of this Agreement into separate articles and
paragraphs are for the purpose of convenience only and shall not be considered a
part hereof. The language in all parts of this Agreement shall in all cases be
construed in accordance to its fair meaning as if prepared by all parties to the
Agreement and not strictly for or against any of the parties.
<PAGE>
EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN
/s/ J. Lynn Smith INMEDICA DEVELOPMENT CORPORATION
(Holder Signature)
J. Lynn Smith /s/ Larry E. Clark
(Print Name) By Larry E. Clark, President
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<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 161,011 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 174,373 0
<PP&E> 254,490 0
<DEPRECIATION> 249,490 0
<TOTAL-ASSETS> 181,569 0
<CURRENT-LIABILITIES> 152,354 0
<BONDS> 0 0
0 0
304,349 0
<COMMON> 7,746 0
<OTHER-SE> (680,380) <F1> 0
<TOTAL-LIABILITY-AND-EQUITY> 181,569 0
<SALES> 0 0
<TOTAL-REVENUES> 126,400 141,214
<CGS> 0 0
<TOTAL-COSTS> 177,207 100,471
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 29,352 81,210
<INCOME-PRETAX> (80,129) (39,877)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (80,129) (39,877)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (80,129) (39,877)
<EPS-PRIMARY> (.01) .01
<EPS-DILUTED> (.01) .01
<FN>
<F1>ADDITIONAL PAID IN CAPITAL AND RETAINED EARNINGS
</FN>
</TABLE>
