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 September 30, 1998
-------------------------------------------------
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)
825 N. 300 West, Salt Lake City, Utah 84103
-------------------------------------------
(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 October 25, 1998 was 8,550,899 shares.
1
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
September 30,
1998
-----------
(Unaudited)
CURRENT ASSETS:
Cash $ 82,607
Prepaid expenses 3,464
------------
Total current assets 86,071
EQUIPMENT AND FURNITURE,
at cost, less accumulated
depreciation of $251,203 1,786
OTHER ASSETS 2,196
------------
Total assets $ 90,053
============
See notes to condensed consolidated financial statements.
2
<PAGE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
September 30,
1998
-----------
(Unaudited)
CURRENT LIABILITIES:
Note payable to related party $ 145,000
Consulting fee payable
to related party 38,997
Accrued payroll 22,792
Accounts payable 20,189
----------
Total current liabilities 226,978
----------
STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value;
20,000,000 shares authorized,
8,550,899 shares 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
outstanding 114,102
Additional paid-in
capital 6,809,922
Accumulated deficit (7,069,500)
----------
Total stockholders'
deficit (136,925)
----------
Total liabilities and
stockholders' deficit $ 90,053
==========
See notes to condensed consolidated financial statements.
3
<PAGE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ROYALTY REVENUES $ 99,680 $ 131,520 $ 167,040 $ 239,520
----------- ----------- ----------- -----------
OPERATING EXPENSES:
General and administrative 30,502 81,867 147,634 189,582
Research and development 87,495 46,188 243,137 121,253
----------- ----------- ----------- -----------
Total operating expenses 117,997 128,055 390,771 310,835
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (18,317) 3,465 (223,731) (71,315)
----------- ----------- ----------- -----------
OTHER (EXPENSE) INCOME:
Interest income 167 633 1,150 773
Interest expense (3,242) (6,358) (9,663) (24,966)
----------- ----------- ----------- -----------
Total other expense, net (3,075) (5,725) (8,513) (24,193)
----------- ----------- ----------- -----------
NET LOSS (21,392) (2,260) (232,244) (95,508)
PREFERRED STOCK DIVIDENDS (2,283) (2,282) (6,846) (6,846)
----------- ----------- ----------- -----------
NET LOSS APPLICABLE
TO COMMON SHARES $ (23,675) $ (4,542) $ (239,090) $ (102,354)
=========== =========== =========== ===========
NET LOSS PER
COMMON SHARE (BASIC AND
DILUTED) $ (.00) $ (.00) $ (.03) $ (.01)
=========== =========== =========== ===========
Weighted average number
of common shares outstanding 8,550,899 8,051,772 8,550,899 8,155,138
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE)IN CASH
For the Nine Months Ended
September 30,
-------------------------
1998 1997
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (232,244) $ (95,508)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating activities-
Depreciation 648 873
Expense related to stock options
issued as compensation for services 77,835 --
Change in assets and liabilities-
Decrease in royalties receivable 67,200 209,280
Decrease in prepaid expenses 14,999 18,627
Increase in consulting fees payable
to related party 17,332 --
Increase in accounts payable 19,158 14,481
Increase (decrease) in accrued
payroll 15,848 (7,829)
Decrease in interest payable (4,752) (8,262)
------------- ------------
Net cash (used in) provided by
operating activities (23,976) 131,662
------------- ------------
See notes to condensed consolidated financial statements.
5
<PAGE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Nine Months Ended
September 30,
-------------------------
1998 1997
---- ----
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock $ -- $ 146,876
Preferred stock dividends paid (6,846) (6,846)
Principal payments on related party
note payable (25,000) (39,000)
Principal payments on note payable -- (252,500)
------------ ----------
Net cash used in financing
activities (31,846) (151,470)
----------- -----------
NET DECREASE IN CASH (55,822) (19,808)
CASH AT BEGINNING OF THE PERIOD 138,429 177,586
----------- ----------
CASH AT END OF THE PERIOD $ 82,607 $ 157,778
=========== ==========
See notes to condensed consolidated financial statements.
6
<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 only of normal
recurring adjustments) considered necessary for fair presentation have been
included. Operating results for the three and nine-month periods ended September
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 J & J Medical, Inc. agreement are the Company's sole
source of revenue and the Company has been advised that the royalty is expected
to terminate within the next year. The Company generated a net loss of $232,244
during the nine-month period ended September 30, 1998 and as of September 30,
1998, the Company had an accumulated deficit of $7,069,500. 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.
NOTE B - OUTSTANDING OPTIONS
At September 30, 1998 there were outstanding options to purchase 682,500 shares
of common stock which were not included in the computation of diluted net loss
per common share because they would be antidilutive.
NOTE C- AGREEMENT TO ISSUE STOCK FOR SERVICES
The Company has agreed effective October 29, 1998 to issue an aggregate of
70,000 shares of restricted common stock valued at $.60 per share as partial
compensation for services rendered during the months of June through September,
1998 by researchers working on the hematocrit project.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
Total revenues for the nine months ended September 30, 1998 were $167,040
or $72,480 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"). JJMI
recently advised the Company informally that royalty revenues are expected to
continue for less than one year because the product line incorporating
InMedica's technology is being phased out by JJMI. At present, royalties are
paid to the Company on a quarterly basis. Royalty revenues being received by the
Company are 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 paying quarterly interest payments on
the note. InMedica continues to look for funding sources to retire the note but
has no commitments. Research and development expenditures on the proposed
hematocrit device have been expensed as incurred. The ability of the Company to
use the proposed 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
- ---------------------
The net loss of $232,244 for the nine-months ended September 30, 1998
increased by $136,736 compared to the same period of the prior year as royalty
revenues declined by $72,480 and research and development expenses increased by
$121,884 compared to the prior year. The increase in research and development
expenses was due to payments made under a 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 September 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. General and administrative
expenses decreased due to reduction in office overhead and payments to service
providers.
The Company does not expect that its operations will be directly affected
by the Year 2000 issue ("Y2K"). The Company is unable to forecast any indirect
effect of computer or other device malfunction related to Y2K on the Company's
results of operations.
8
<PAGE>
The Company contacted JJMI and was assured by JJMI that it is aware of the Y2K
issue and is acting responsibly to avoid any adverse impact on JJMI's ability to
conduct its operations which presently generate royalty revenue for the Company.
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:
None
Item 6. Exhibits and reports on Form 8-K:
Exhibits:
(1) Financial Data Schedule
Form 8-K: None
9
<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, Chief Executive
Officer
/s/ Richard Bruggeman
----------------------------------
Date: October 28, 1998 By Richard Bruggeman, Chief
Financial Officer
10
<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 (27) Financial Data Schedule
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 82607 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 86071 0
<PP&E> 252989 0
<DEPRECIATION> 251203 0
<TOTAL-ASSETS> 90053 0
<CURRENT-LIABILITIES> 226,978 0
<BONDS> 0 0
0 0
114102 0
<COMMON> 8551 0
<OTHER-SE> (259,578)<F1> 0
<TOTAL-LIABILITY-AND-EQUITY> 90053 0
<SALES> 0 0
<TOTAL-REVENUES> 167040 239520
<CGS> 0 0
<TOTAL-COSTS> 389621 310062
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9663 24966
<INCOME-PRETAX> (232244) (95508)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (232244) (95508)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (232244) (95508)
<EPS-PRIMARY> (.03) .01
<EPS-DILUTED> (.03) .01
<FN>
<F1>
Additional paid in capital and retained earnings
</FN>
</TABLE>
