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 March 31, 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)
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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)
825 North 300 West
Salt Lake City Utah 84103
(Address of principal executive offices)
Registrant's telephone number:
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(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 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 [ ]
The number of shares outstanding of the registrant's only class of common stock,
par value $.001 per share, as of May 11, 1998 was 8,550,899 shares.
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PART I - FINANCIAL INFORMATION Page 1 of 2
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Item 1. Financial Statements
INMEDICA DEVELOPMENT CORPORATION ANDSUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
March 31,
1998
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(Unaudited)
CURRENT ASSETS:
Cash $ 77,676
Prepaid expenses 13,463
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Total current assets 91,139
EQUIPMENT AND FURNITURE,
at cost, less accumulated
depreciation of $250,771 2,218
OTHER ASSETS 2,196
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Total assets $ 95,553
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See notes to condensed consolidated financial statements.
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Page 2 of 2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31,
1998
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(Unaudited)
CURRENT LIABILITIES:
Consulting fee payable to
related party $ 34,664
Note payable to
related party 145,000
Accrued interest 3,214
Accounts payable 7,526
Accrued payroll 792
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Total current liabilities 191,196
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STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value;
20,000,000 shares authorized,
8,550,899 issued and outstanding 8,551
Preferred stock, 10,000,000
shares authorized; Series A
preferred stock, cumulative
and convertible, $4.50 par
value, 1,000,000 shares
designated, 25,356 shares
issued and outstanding 114,102
Additional paid-in capital 6,754,337
Accumulated deficit (6,972,633)
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Total stockholders'
deficit ( 95,643)
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Total liabilities and
stockholders' deficit $ 95,553
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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
For the Three
Months Ended
March 31,
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1998 1997
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(Unaudited)
TOTAL OPERATING REVENUES $ -0- -0-
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OPERATING EXPENSES:
General and
administrative 70,964 47,840
Research and
development 66,358 31,683
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Total operating expenses 137,322 79,523
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LOSS FROM OPERATIONS (137,322) (79,523)
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OTHER INCOME (EXPENSE):
Miscellaneous income 595 6
Interest expense (3,214) (9,503)
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Total other expense (2,619) (9,497)
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NET LOSS (139,941) (89,020)
PREFERRED STOCK DIVIDEND (2,282) (2,282)
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NET LOSS APPLICABLE TO
COMMON SHARES $(142,223) $ (91,302)
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Net loss per common share
(basic and diluted) $ (.02) $ (.01)
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Weighted average number
of common shares outstanding 8,550,899 7,997,612
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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 Three
Months Ended
March 31,
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1998 1997
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(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(139,941) $(89,020)
Adjustments to reconcile net
loss to net cash provided by
operating activities-
Depreciation 216 291
Expense related to stock options
issued as compensation for
services 22,250 -
Change in assets and liabilities-
Decrease in royalties receivable 67,200 209,280
Decrease in prepaid
expenses 5,000 7,297
Increase in consulting payable 12,999 -
Increase in accounts payable 6,495 1,003
Decrease in accrued payroll (6,152) (7,829)
Decrease in interest payable (1,538) (1,253)
Decrease in related-party
payable (25,000) (39,000)
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Net cash (used in) provided by
operating activities (58,471) 80,769
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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
INCREASE (DECREASE) IN CASH
For the Three
Months Ended
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March 31,
1998 1997
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(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividends (2,282) (2,282)
Principal payments on note payable - (17,500)
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Net cash used in financing activities (2,282) (19,782)
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NET (DECREASE) INCREASE IN CASH (60,753) 60,987
CASH AT BEGINNING OF PERIOD 138,429 177,586
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CASH AT END OF PERIOD $ 77,676 $238,573
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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 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 March 31, 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 $137,322 during the period ended
March 31, 1998 and as of March 31, 1998, the Company had an accumulated deficit
of $6,972,633. 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.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
For the years ended December 31, 1997 and 1996, liquidity was generated
from royalty income received from Johnson and Johnson Medical, Inc. ("JJMI").
This income source may not be sufficient to provide liquidity needs over time
and may be inadequate to retire debt when it comes due in August 1999 and fund
continued research and development.
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InMedica intends to continue to look for other funding sources as to which it
has no commitments. For the three months ended March 31, 1998, no operating
revenues were recognized due to the revenue recognition policy of the Company
which requires sales information to have been received from JJMI and that cash
receipts are assured.
The royalty agreement with JJMI has been pledged to secure repayment of the
$145,000 related party note payable. Funds invested in other potential assets of
the Company such as the hematocrit device have been expensed as incurred as
research and development. The ability of the Company to use the hematocrit
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
InMedica has a stockholders' deficit of $ 95,643 and an accumulated deficit
of $6,972,633 as of March 31, 1998. In order for InMedica to continue research
and development activities, it may require additional financing, for which it
has no commitments. It is impossible to estimate the amount of the JJMI
royalties which may be received in the future. See Liquidity and Capital
Resources for an explanation of why no revenues were recognized in the first
quarter of 1998.
The loss from operations of $137,322 for the quarter ended March 31, 1998
compared to $79,523 for the quarter ended March 31, 1997 was generated from
general and administrative expenses ($70,964) and research and development
($66,358). Research and development expense increased more than $30,000 due to
salary expense for a new employee engaged in research on the Company's
hematocrit project and legal expense related to patent work. General and
administrative expense included $22,250 of expense related to stock options
issued as non-cash compensation to a prior contractor which vested during the
first quarter of 1998. Interest expense decreased by approximately $6,000 for
the quarter ended March 31, 1998 when compared to the quarter ended March 31,
1997 due to the continuing reduction of indebtedness during the last year.
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
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Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information: The Company continues research and development of its
hematocrit technology, including some limited human testing of the equipment.
There can be no assurance that a viable commerical product or technology can be
developed by the Company. The Company has not demonstrated the technology (which
is in the developmental stage) to any potential buyer or potential partner and
has no agreements or committments for any merger or acquisition relating to the
Company or the technology.
Item 6. Exhibits and Reports on Form 8-K:
Exhibits: 1 Agreement among InMedica Development
Corporation, David Wheeler, Nevada Cancer Center and
Chris Bringhurst dated April 16, 1998. 2 Financial
Data Schedule
Form 8-K: None
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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
Dated: May 13, 1998
-- By /s/ Larry E. Clark
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Larry E. Clark, CEO
By /s/ Richard Bruggeman
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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 (10) Agreement among InMedica
Development Corporation, David
Wheeler, Nevada Cancer Center and
Chris Bringhurst dated April 16,
1998.
2 (27) Financial Data Schedule
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EXHIBIT 1
AGREEMENT
An Agreement and Assignment made the 16th day of April , 1998 among
David Wheeler ("Wheeler"), an individual residing in Las Vegas, Nevada, the
Nevada Cancer Center, of Las Vegas, Nevada, Dr. Chris B. Bringhurst ("Dr.
Bringhurst") an individual of Las Vegas, Nevada and InMedica Development
Corporation, a Utah corporation ("InMedica").
1. Assignment of Stock Options. Wheeler hereby assigns all his right,
title and interest in 37,500 options to purchase the common stock of InMedica to
Dr. Bringhurst which options are exercisable for a period of two years from the
date of this assignment for $1.22 per share. Exercise of the options shall be by
notice to InMedica and tender of the exercise price together with such
representations and disclosures as InMedica may require to comply with state and
federal securities laws regarding the issuance of its common stock.
2. Payment to Wheeler. InMedica agrees to pay Wheeler or his nominee,
$3,750 by check.
3. Acceptance of Assignment by Dr. Bringhurst. Dr. Bringhurst accepts
the assignment of the Options upon the terms and conditions found in the Option
Agreement in full satisfaction of any and all obligations of InMedica owing to
him on account of certain investigational testing done by InMedica at the Nevada
Cancer Center during the years 1996 and 1997.
4. Consent of Nevada Cancer Center and Release. The Nevada Cancer
Center hereby consents to the assignment of the options to Dr. Bringhurst in
lieu of any payment owing to it by InMedica and in full satisfaction of any and
all obligations of InMedica to the Nevada Cancer Center on account of all
investigational human testing done by InMedica at the Nevada Cancer Center
during the years 1996 and 1997. Further, Nevada Cancer Center releases and
forever discharges InMedica, its officers, directors, attorneys, agents,
employees and other representatives from any and all liability, costs, expenses,
attorneys fees and other charges on account of such investigational testing or
the costs and expenses thereof, whether such claim is presently existing or
subsequently discovered.
5. Future Testing and Use of Nevada Cancer Center. Nevada Cancer
Center agrees that InMedica may conduct additional investigational human testing
of its non-invasive hematocrit device in its facilities during 1998 including
clinical trials for FDA purposes for the following consideration: $250 per day
for the use of facilities and $30 per patient tested during the initial
investigational testing during April, 1998. If testing proceeds to clinical
trials for FDA purposes, InMedica shall pay $30 per patient tested and Nevada
Cancer Center agrees to waive the $250 per day fee. In addition, InMedica agrees
to pay each patient tested $20 cash whether in investigational trials or FDA
clinical trials. Nevada Cancer Center and Dr. Bringhurst agree to obtain all
necessary Nevada IRB approvals to conduct such testing. Following satisfactory
completion of initial investigational trials during April, 1998, InMedica
intends to continue use of the Nevada Cancer Center facilities to complete
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clinical trials for FDA purposes. However InMedica may conduct additional or
other trials or studies at such times and places and for such purposes as it may
determine.
6. Additional Options to be granted to Dr. Bringhurst. InMedica agrees
to grant to Dr. Bringhurst the following additional options which shall become
exercisable at the times and prices shown below:12,500 options following the
successful completion of initial testing during April, 1998, exercisable for
$.73 per share for a period of two years.
InMedica further agrees that if Clinical trials are warranted and are held at
the Nevada Cancer Center, and if FDA approval of the hematocrit measuring device
is granted by the FDA, that it will grant the following additional options to
Dr. Bringhurst, which amount shall depend upon the time which was required to
complete clinical trials for FDA purposes:
-25,000 options if clinical trials required 0-4 months to complete
-10,000 additional options if clinical trials required more than 4 but less
than 6 months to complete (making 35,000 total options)
-20,000 additional options if clincial trials required more than 6 months to
complete (making 45,000 total options)
Any and all such options shall be exerciseable for $1.22 per share for a period
of one year after FDA approval is obtained.
In consideration of the obligation of InMedica to grant the forgoing
options, Dr. Bringhurst agrees to use his best efforts (consistent with his
other professional commitments) to assist InMedica and consult with InMedica
researchers during initial testing and, if warranted, follow up clinical trials
and FDA testing and approval. Dr. Bringhurst also agrees to assist InMedica with
the submission of any federal grant applications on InMedica's non-invasive
hematocrit device and to allow the inclusion of his resume for such purposes.
7. General.
(a) This agreement contains the entire agreement between the parties
on the subject matter hereof and may only be changed or modified by written
agreement between the parties.
(b) In the event any provision or any part of any provision of this
agreement shall be held invalid, illegal or unenforceable, such holding shall
not affect any other provision or any part of the same provision which can be
given effect without the invalid provision or any part thereof.
(c) This agreement may be executed in one or more counterparts each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(d) This agreement may not be assigned without the prior written
consent of the parties hereto.
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(e) This agreement shall terminate upon the earliest to occur the
following: (1) by mutual agreement of InMedica and Dr. Bringhurst; (2) December
31, 1998; (3) upon InMedica's determination that the results of testing at any
stage are sufficiently unsatisfactory to require additional research and
development expected to continue beyond December 31, 1998. This agreement may be
extended by mutual written agreement of the parties.
IN WITNESS WHEREOF, the parties hereof have
executed this agreement this 16th day of April , 1998.
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/s/ Larry E. Clark
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Larry E. Clark, President
/s/ Chris B. Bringhurst
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Chris B. Bringhurst, M.D.
Nevada Cancer Center
/s/ Fredrick P. Waid
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By Fredrick P. Waid
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Its Executive Director, Counsel
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/s/ David Wheeler
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David Wheeler
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INMEDICA DEVELOPMENT CORPORATION FOR THE PERIOD ENDED
MARCH 31, 1998.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 77676 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 91139 0
<PP&E> 252989 0
<DEPRECIATION> 250771 0
<TOTAL-ASSETS> 95553 0
<CURRENT-LIABILITIES> 191196 0
<BONDS> 0 0
0 0
114102 0
<COMMON> 8551 0
<OTHER-SE> (218296) <F1> 0
<TOTAL-LIABILITY-AND-EQUITY> 95553 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
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<LOSS-PROVISION> (137322) 79523
<INTEREST-EXPENSE> 3214 9503
<INCOME-PRETAX> (139941) (89020)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (139941) (89020)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (139941) (89020)
<EPS-PRIMARY> (.02) (.01)
<EPS-DILUTED> (.02) (.01)
<FN>
<F1> Additional paid in capital and retained earnings.
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</TABLE>
