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, 1998
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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)
Utah 87-0397815
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
825 N. 300 West, Salt Lake City, Utah 84103
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(Address of principal executive offices)
Registrant's telephone number including area code (801) 521-9300
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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 August 1, 1998 was 8,550,899 shares.
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
As of June 30,
1998
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(Unaudited)
CURRENT ASSETS:
Cash $ 53,311
Prepaid expenses 8,464
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Total current assets 61,775
EQUIPMENT AND FURNITURE,
at cost, less accumulated
depreciation of $250,987 2,002
OTHER ASSETS 2,196
Total assets $ 65,973
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See notes to condensed consolidated financial statements.
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INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET(CONTINUED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
As of June 30,
1998
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(Unaudited)
CURRENT LIABILITIES:
Current portion of note
payable $ 145,000
Consulting fee payable to
related parties 47,633
Accounts payable 603
Accrued payroll 792
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Total current liabilities 194,058
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STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value;
20,000,000 shares authorized,
8,550,899 outstanding 8,551
Preferred shares, 10,000,000
shares authorized; Series A
preferred stock, cumulative
and convertible, $4.50 par
value, 1,000,000 shares
designated, 25,356 shares
outstanding 114,102
Additional paid-in capital 6,795,087
Accumulated deficit (7,045,825)
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Total stockholders'
deficit ( 128,085)
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Total liabilities and
stockholders' deficit $ 65,973
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See notes to condensed consolidated financial statements.
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INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
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1998 1997 1998 1997
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ROYALTY REVENUES $ 67,360 $ 108,000 $ 67,360 $ 108,000
----------- ----------- ----------- -----------
OPERATING EXPENSES:
General and
administrative 46,168 59,875 117,132 107,715
Research and
development 89,284 43,382 155,642 75,065
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Total operating expenses 135,452 103,257 272,774 182,780
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(LOSS) INCOME FROM OPERATIONS (68,092) 4,743 (205,414) (74,780)
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OTHER (EXPENSE) INCOME:
Interest income 388 134 983 140
Interest expense (3,207) (9,105) (6,421) (18,608)
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Total other expense (2,819) (8,971) (5,438) (18,468)
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NET LOSS (70,911) (4,228) (210,852) (93,248)
PREFERRED STOCK DIVIDENDS (2,281) (2,282) (4,563) (4,564)
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NET LOSS APPLICABLE
TO COMMON SHARES $ (73,192) $ (6,510) $ (215,415) $ (97,812)
=========== =========== =========== ===========
Net loss per common share
(basic and diluted) $ (.01) $ (.00) $ (.03) $ (.01)
=========== =========== =========== ===========
Weighted average number
of common shares
outstanding 8,550,899 7,999,232 8,550,899 7,999,232
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
DECREASE (INCREASE) IN CASH
For the Six Months Ended
June 30,
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1998 1997
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(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (215,415) $ (93,248)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating activities-
Depreciation 432 582
Expense related to stock options
issued as compensation for services 63,000
Change in assets and liabilities-
Decrease in royalties receivable 67,200 209,280
Decrease in prepaid expenses 9,999 12,962
Increase in consulting fees payable
to related party 25,998 -
(Decrease) increase in accounts
payable (428) 1,219
Decrease in accrued payroll (6,152) (7,829)
Decrease in interest payable (4,752) (8,362)
Decrease in related party payable (25,000) (39,000)
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Net cash provided by (used in)
operating activities (80,555) 75,604
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See notes to condensed consolidated financial statements.
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INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Six Months Ended
June 30,
1998 1997
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(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividends paid (4,563) (4,564)
Principal payments on note payable
to related party - (67,500)
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Net cash used in
financing activities (4,563) (72,064)
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NET (DECREASE) INCREASE IN CASH (85,118) 3,540
CASH AT BEGINNING OF THE PERIOD 138,429 177,586
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CASH AT END OF THE PERIOD $ 53,311 $ 181,126
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See notes to condensed consolidated financial statements.
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INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1-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 only of normal
recurring adjustments) considered necessary for fair presentation have been
included. Operating results for the three and six month periods ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998. For further information, refer to the
consolidated financial statements included in the Company's Form 10-KSB for the
year ended December 31, 1997.
Royalties received from the Johnson and Johnson agreement are presently the
Company's sole source of revenue and the Company is not able to estimate the
duration or amount of future royalties from the Johnson and Johnson agreement.
Accordingly, there can be no assurance as to continuing royalty receipts. The
Company generated a net loss from operations of $205,414 during the period ended
June 30, 1998 and as of June 30, 1998, the Company had an accumulated deficit of
$7,045,825. These conditions raise substantial doubt as to the Company's ability
to continue as a going concern. The Company's continued existence is dependent
upon its ability to achieve a viable operating plan.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATION
Liquidity and Capital Resources
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For the three months ended March 31, 1998, no operating revenues were
recognized due to the revenue recognition policy of the Company and the timing
of the receipt of revenues. Total revenues for the six months ended June 30,
1998 were $67,360, or $40,640 less than the same period of the prior year. The
Company's sole source of revenue is royalties received from J & J Medical, Inc.
("JJMI"). These royalties are 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.
The royalty agreement with JJMI, has been pledged to secure repayment of
the $145,000 note payable to the Company's Chief Executive Officer. The note is
due on or before June 22, 1999. The Company is presently paying quarterly
interest payments on the note. InMedica intends to continue to look for funding
sources to retire the note as to which it has no commitments. Funds invested in
the development of the proposed hematocrit device have been expensed as research
and development and the ability of the Company to use the device as a means of
securing funding for the Company is totally dependent upon the success of
further research and development efforts in producing a viable device suitable
for commercialization.
Results of Operations
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See "Liquidity and Capital Resources" for an explanation as to the lack of
revenues during the quarter ended March 31, 1998. The net loss from operations
of $205,414 for the six months ended June 30, 1998 increased by $130,634
compared to the comparable period of the prior year as royalty revenues declined
by $40,640 and research and development expenses increased by $80,577 compared
to the prior year. The increase in research and development expenses was due to
payments made under an hematocrit research and development contract with Medical
Physics and to an employee and the expense of issuance of certain options
relating to research and development. Interest expense declined for the period
ended June 30, 1998 when compared to the same period in 1997 due to a
substantial reduction in the principal amount of the note owing to the Company's
Chief Executive Officer in September, 1997, resulting in lower interest payments
thereafter. General and administrative expenses increased due to expense
associated with the issuance of stock options.
The Company does not expect that its operations will be directly affected
by the Year 2000 issue, but is unable to forecast the indirect effect, if any,
of computer malfunction related to the issue, on its future operations in the
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medical technology markets. However, the Company has contacted JJMI and has been
assured that JJMI is aware of the issue and acting responsibly to avoid any
adverse impact on JJMI's ability to conduct its operations which presently
generate royalty income for the Company.
PART II - OTHER INFORMATION
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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: None
Item 6. Exhibits and reports on Form 8-K:
Exhibits: (1) Financial Data Schedule
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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
/s/ Larry E. Clark
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By Larry E. Clark, Chairman
/s/ Richard Bruggeman
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Date: August 13, 1998 By Richard Bruggeman, Treasurer
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EXHIBITS
Exhibits filed with the Form 10-QSB of InMedica Development
Corporation, SEC File No. 0-12968:
Exhibit No. SB Item No. Description
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1 (27) Financial Data Schedule
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 53311
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61775
<PP&E> 252989
<DEPRECIATION> 250987
<TOTAL-ASSETS> 65973
<CURRENT-LIABILITIES> 194058
<BONDS> 0
0
114102
<COMMON> 8551
<OTHER-SE> (250738)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 65973
<SALES> 0
<TOTAL-REVENUES> 67360
<CGS> 0
<TOTAL-COSTS> 272774
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6421
<INCOME-PRETAX> (210852)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210852)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
<FN>
<F1> Additional paid in capital less accumulated deficit
</FN>
</TABLE>
