U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1998
Commission File No. 0-12968
INMEDICA DEVELOPMENT CORPORATION
Utah 87-0397815
- ------------------------------------ ----------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
825 North 300 West
Salt Lake City, Utah 84103
(801) 521-9300
Securities Registered Pursuant to Section 12(g) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
------------------- ---------------------
Common Stock, $.001 par value None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or Section 15(d) of the Exchange Act during the past 12 months, and (2) has
been subject to such filing requirements for the past 90 days. X yes no
----- -----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation SB contained in this form, and no disclosures will be contained, to
the best of registrant's knowledge, in any definitive proxy or information
statement incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB [X]
Issuer's revenues for its most recent fiscal year: $ 247,400
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of March 16, 1999 was approximately $1,661,359.1 The number of
shares outstanding of the issuer's common stock, $.001 par value, as of March
15, 1999 was 8,660,899.
DOCUMENTS INCORPORATED BY REFERENCE: None
- ---------------------
1 - Based on 4,746,739 non-affiliate shares at $.35 per share, which was
the average of the bid and asked price on that date.
<PAGE>
Item 1. Business General. InMedica Development Corporation ("InMedica") was
incorporated as a Utah corporation on June 16, 1983. During the last three
fiscal years, InMedica's primary business activity has been the operation of the
business of MicroCor, Inc. ("MicroCor"), a wholly owned subsidiary, which was
acquired effective December 31, 1985. MicroCor is presently engaged in research
and development of an experimental device to measure hematocrit non-invasively
(see "Product Development"). MicroCor has historically been engaged in the
development or sale of certain medical technology products. Royalty income
received by MicroCor from the development and sale of certain technology
pursuant to a contract with Johnson & Johnson Medical, Inc. is presently
InMedica's only revenue source (see "Results of Operations"). The Company has
been advised that the royalty is expected to terminate during 1999 as Johnson &
Johnson Medical, Inc. phases out the product line on which the royalty is paid.
See Report of Independent Public Accountants, page F-1.
Preferred Stock. See Note 5 to the Consolidated Financial Statements for
information regarding the preferred stock of the Company. The Company has five
preferred stockholders holding an aggregate of 25,356 shares of the Series A
Preferred Stock, which is 8% cumulative convertable preferred stock. Total
aggregate dividends payable on the preferred stock outstanding is $9,128 per
year.
Principal Products. During the years 1986 and 1987, MicroCor developed,
manufactured and marketed a portable electrocardiograph ("ECG") monitor. About
450 units were manufactured and sold. In July 1989, MicroCor signed a research
and development contract with Critikon (predecessor to Johnson & Johnson
Medical, Inc.) to develop a medical instrument which would incorporate and
enhance the technologies already developed in the MicroCor portable ECG monitor
and combine them with technologies developed by Critikon. The research and
development portion of the contract was completed in July 1990, and resulted in
the design of a new product line. Critikon manufactures and markets the product
line under the name Dinamap Plus(TM). MicroCor is the beneficiary of royalty
income based upon a specified amount per unit sold. The Company's income is
generated exclusively from the agreement with Johnson & Johnson Medical, Inc.
(see "Results of Operations"). MicroCor has been advised that the portable ECG
is now being phased out of the product line of Johnson & Johnson Medical, Inc.
and that the royalty is expected to terminate during 1999.
Product Development. For the past nine years, the Company has conducted
research on a method for measuring hematocrit non- invasively (without drawing
blood) and has applied for patents covering this technology. Hematocrit is the
percentage of blood volume made up by red blood cells and is a common laboratory
test currently performed invasively by drawing a blood sample from the patient.
For several years, the Company conducted research and development in-house,
under the direction of Dr. Allan Kaminsky, former president of the Company.
2
<PAGE>
Subsequently, the Company engaged outside consultants to work on the project
including Paul W. Ruben and the Northern Ireland Bio-Engineering Centre.
During May 1997, the Company employed Dr. Gail Billings, a bio-medical
researcher and, effective August 29, 1997, the Company engaged Medical Physics,
Inc., a biomedical research company located in Salt Lake City, Utah to conduct
further research and development on the project. The Company agreed to pay
Medical Physics $11,111 per month for nine months and granted options to Medical
Physics to purchase 54,000 shares of the common stock of the Company with an
exercise price of $.73 per share, exercisable for three years. The Company also
granted Medical Physics options to purchase an additional 54,000 shares with an
exercise price of $.73 per share for a period of three years from the date, not
later than May 30, 1998, on which Medical Physics demonstrates a hematocrit
measuring device to InMedica which measures human hematocrit with an accuracy of
plus or minus 3.5 hematocrit points through all ranges from 20 to 60.
Beginning December 1997, the Company began paying Medical Physics
approximately $15,000 per month for research services. Effective March 1, 1998,
the Company and Medical Physics modified their agreement to provide that Medical
Physics do the following: (1) accept a total of 25,000 restricted shares of
common stock and $10,000 per month as compensation during the period March,
April and May 1998, and (2) conduct such demonstrations of the hematocrit device
during April and May 1998 as InMedica may direct. Effective March 1, 1998, the
Company issued 20,000 shares of its restricted common stock to Dr. Billings in
satisfaction of one half of Dr. Billings' salary during the months of March,
April and May, 1998. Dr. Billings and Medical Physics continue work on the
research and development of the project however there is no assurance that a
commercially viable hematocrit measuring device can be developed.
The Company agreed effective October 29, 1998 to issue an aggregate of
65,000 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.
Government Regulation. Medical products may be subject to regulation by the
Food and Drug Administration (the "FDA") pursuant to the Federal Food, Drug and
Cosmetic Act and other federal and state laws regarding the regulation,
manufacture and marketing of products in which InMedica may be involved. The
laws of foreign nations may also apply to any international marketing of such
products. To the extent InMedica has acquired or developed an interest in
medical products or the companies manufacturing such products, InMedica's
business may be indirectly affected by such regulation. As the manufacturer of
the Dinamap Plus(TM) (see "Principal Products") Johnson & Johnson's predecessor,
Critikon, was responsible for obtaining FDA 510(K) approval on that product
line. Testing of the Company's non-invasive hematocrit technology is subject to
prior approval and supervision of an Internal Review Board of a medical facility
overseeing the testing.
3
<PAGE>
Marketing of any new product line which might be developed based on the
Company's non-invasive hematocrit device would be subject to prior approval by
the FDA.
Patents. As of December 12, 1995, the Company's application for a patent
entitled "Method and Apparatus for Non-Invasively Determining Hematocrit," was
allowed by the U.S. Patent Office and the Patent issued on June 18, 1996 with a
term of 17 years. The Company has filed an application for an additional patent
which claims priority from October 4, 1990, the date of filing of the Company's
"Method and Apparatus for Non-Invasively Determining Hematocrit". The second
patent has been allowed and is expected to issue in due course. The patent term
is expected to run from October 4, 1990 for a period of 17 years.
Raw Materials. Materials and electronic components used in the production
and development of ECG monitors and like products are components readily
available through various suppliers.
Competition. InMedica is not presently a significant factor in the medical
products industry and does not presently compete directly in the medical
products field. The medical products industry is dominated by large and well
established corporations with vastly greater financial and personnel resources
than those of InMedica. There can be no assurance that the companies and
products in which InMedica has an interest will be able to compete profitably in
the marketplace. Further, there is no assurance that the Company will be able to
complete research, development and marketing of its hematocrit technology in
advance of any competitors who may be developing competing technologies.
Research and Development Costs. Research and development costs for the two
years ended December 31, 1998 and 1997, were $224,618 and $165,803,
respectively. None of the expenses were incurred on customer-sponsored research
activities relating to the development of new products.
Employees. InMedica and MicroCor had two part time employees as of
December 31, 1998.
Item 2. Properties
----------
Office. The Company presently uses facilities provided by Medical Physics,
Inc., at no cost, for its offices.
Item 3. Legal Proceedings.
------------------
During the third quarter of 1996, a former officer of the Company, Allan L.
Kaminsky, threatened to bring legal proceedings affecting the Company or a proxy
contest to obtain control of the Company. Among other things, Dr. Kaminsky
4
<PAGE>
objected to the number of options issued to officers, directors, employees and
consultants of the Company. At a board meeting held July 31, 1996, the Company
voluntarily reduced the number of options by 25% effective August 1, 1996,
reducing the total options granted from 1,100,000 to 825,000. Dr. Kaminsky
thereafter offered to continue to be associated with the Company on terms which
were subsequently rejected by the Board of Directors after due consideration. On
September 17, 1996, Dr. Kaminsky advised the Company that his offer to negotiate
had expired, that he had no further association (employment, consulting or
advisory) with InMedica/MicroCor, other than being a passive shareholder and
that his action was permanent and irreversible.
At the Company's annual shareholder meeting held August 29, 1997, Company
personnel advised the shareholders that they believed notice of meeting had been
inadequate due to inadvertent failure to mail notice to beneficial owners of
stock held in street name, although there appeared to be sufficient shares
present to constitute a quorum and ballots were accepted at the meeting. The
following week the Company mailed a letter to shareholders advising them that
the meeting would be rescheduled.
Following the mailing, Dr. Kaminsky demanded through his attorney that the
Company disclose the results of the tallies of the August 29, 1997 ballots and
proxies under threat of litigation. He also claimed the meeting was valid and
that proper notice had been given. After reviewing the matter, the Company
disclosed the results of the meeting and concluded that the incumbent Board of
Directors had been re-elected at the meeting by a plurality of the shares
present and voting at the meeting. Dr. Kaminsky continues to be a principal
shareholder of the Company (see "Security Ownership of Certain Beneficial Owners
and Management").
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
There were no matters submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders.
5
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
-----------------------------------------------------------------------
Matters.
- --------
(a) Price Range of Common Stock.
---------------------------
The Common Stock of InMedica is traded in the over-the-counter market
and is quoted on the "NASD OTC Bulletin Board". The following table sets forth,
for the calendar quarters indicated, the high and low closing bid prices for the
InMedica Common Stock as reported by the NASD OTC Bulletin Board. These
quotations represent prices between dealers without adjustment for retail
markups, markdowns or commissions and may not represent actual transactions.
Bid Price
Quarter Ended High Low
------------- ---- ---
March 31, 1997 $ .75 $ .34
June 30, 1997 .44 .34
September 30, 1997 .47 .25
December 31, 1997 .38 .25
March 31, 1998 $ .72 $ .25
June 30, 1998 1.00 .56
September 30, 1998 .75 .31
December 31, 1998 .44 .22
As of March 15, 1999, there were approximately 512 record holders of
InMedica Common Stock. Such record holders do not include individual
participants in securities position listings. The Company also has five holders
of its Series A Preferred Stock. There is no public market for the Series A
Preferred Stock (see "Preferred Stock").
InMedica has not paid any cash dividends on its Common Stock since
organization. For the foreseeable future, InMedica expects that earnings, if
any, will be retained for use in the business or be used to retire obligations
of the Company. For information as to the Company's obligation to pay dividends
on Preferred Stock, see "Preferred Stock."
Item 6. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
- --------------
6
<PAGE>
Liquidity and Capital Resources
For the years ended December 31, 1998 and 1997, liquidity was generated
from royalty income received from Johnson & Johnson Medical, Inc. ("JJMI"). This
income source is not expected to be sufficient to provide liquidity needs over
time and is not expected to be adequate to retire debt when it comes due and
fund continued research and development. The Company's line of credit agreement
with its Chief Executive Officer expires on June 22, 1999. InMedica continues to
look for other funding sources, however to date it has no commitments.
The Company's royalty agreement with JJMI has been pledged to secure
repayment of the $145,000 debt owed to the Company's Chief Executive Officer.
Funds invested to develop the hematocrit device have been expensed as research
and development. 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
InMedica achieved profitable operations during 1996, but the Company has
incurred net losses in 1997 and 1998. The Company has an accumulated deficit of
$7,080,726 as of December 31, 1998. Included in the net loss for the year ended
December 31, 1998 was non-cash expense of $48,281 related to stock options
issued to consultants.
Operating revenues have been derived only from royalties during the
two-year period ended December 31, 1998. During the years ended December 31,
1998 and 1997 royalty revenue totaled $247,400 and $420,960, respectively.
InMedica has been advised that the royalty stream is expected to terminate
during 1999. See Report of Independent Public Accountants, page F-1.
The net loss of $241,188 for the year ended December 31, 1998 compared to
the net loss of $153,609 for 1997, resulted primarily from a $173,560 decrease
in royalty revenues and from recording $103,863 of expense related to stock and
stock options issued as compensation for services rendered. The Company met all
its debt service, research and development and administrative expenditure
requirements from existing cash, royalty receipts and the issuance of stock and
stock options. General and administrative expense decreased as the Company
restricted expenditures in this area to allow for an increase in research and
development efforts from 1997 to 1998.
7
<PAGE>
Item 7. Financial Statements Beginning at Page
-------------------- -----------------
Report of Independent Public Accountants F-1
Consolidated Balance Sheet as of December 31, 1998 F-2
Consolidated Statements of Operations for the
years ended December 31, 1998 and 1997 F-3
Consolidated Statements of Stockholders' Deficit
for the years ended December 31, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the
years ended December 31, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-7
8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To InMedica Development Corporation:
We have audited the accompanying consolidated balance sheet of InMedica
Development Corporation (a Utah corporation) and subsidiary as of December 31,
1998, and the related consolidated statements of operations, stockholders'
deficit and cash flows for the years ended December 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of InMedica Development
Corporation and subsidiary as of December 31, 1998, and the results of their
operations and their cash flows for the years ended December 31, 1998 and 1997
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company generated net losses of $241,188
and $153,609 during 1998 and 1997, respectively, and there can be no assurance
of profitability in the future. The Company's sole source of revenue is a
royalty arrangement and the Company has been notified that the royalties are
expected to terminate in 1999. As of December 31, 1998, the Company had an
accumulated deficit of $7,080,726, a total stockholders' deficit of $122,123 and
negative working capital of $125,890. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters also are discussed in Note 1. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
March 25, 1999
F-1
<PAGE>
<TABLE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash $ 38,565
Royalties receivable 45,920
Prepaid expenses and other 16,787
-----------
Total current assets 101,272
EQUIPMENT AND FURNITURE, at cost, less accumulated
depreciation of $251,418 1,571
OTHER ASSETS 2,196
-----------
Total assets $ 105,039
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Note payable to related party $ 145,000
Consulting fees payable to related party 51,996
Accrued payroll 1,068
Accounts payable 29,098
-----------
Total current liabilities 227,162
-----------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 6)
STOCKHOLDERS' DEFICIT:
Preferred stock, 10,000,000 shares authorized; Series A preferred stock, 8%
cumulative and convertible, $4.50 par value, 1,000,000 shares designated,
25,356 shares outstanding
(aggregate liquidation preference of $114,102) 114,102
Common stock, $.001 par value; 20,000,000 shares authorized,
8,660,899 shares outstanding 8,661
Additional paid-in capital 6,835,840
Accumulated deficit (7,080,726)
-----------
Total stockholders' deficit (122,123)
-----------
Total liabilities and stockholders' deficit $ 105,039
===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-2
<PAGE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
----------- ------------
ROYALTY REVENUES $ 247,400 $ 420,960
----------- -----------
OPERATING EXPENSES:
General and administrative 251,737 381,183
Research and development 224,618 165,803
----------- -----------
Total operating expenses 476,355 546,986
----------- -----------
LOSS FROM OPERATIONS (228,955) (126,026)
----------- -----------
OTHER INCOME (EXPENSE):
Interest, net (11,594) (28,768)
Other (639) 1,185
----------- -----------
Total other expense, net (12,233) (27,583)
----------- -----------
NET LOSS (241,188) (153,609)
PREFERRED STOCK DIVIDENDS (9,128) (9,128)
----------- -----------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $ (250,316) $ (162,737)
=========== ===========
NET LOSS PER COMMON SHARE $ (.03) $ (.02)
(BASIC AND DILUTED) =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (BASIC AND DILUTED) 8,599,350 8,164,527
=========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-3
<PAGE>
<TABLE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<CAPTION>
Series A
Preferred Stock Common Stock Additional Total
--------------------------- ------------------------ Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Deficit
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 25,356 $ 114,102 7,999,232 $ 7,999 $ 6,482,369 $(6,667,673) $ (63,203)
Common stock options exercised -- -- 551,667 552 146,318 -- 146,870
Common stock options granted for
services rendered -- -- -- -- 103,400 -- 103,400
Preferred stock dividends -- -- -- -- -- (9,128) (9,128)
Net loss -- -- -- -- -- (153,609) (153,609)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1997 25,356 114,102 8,550,899 8,551 6,732,087 (6,830,410) 24,330
Common stock issued for
services rendered -- -- 110,000 110 48,171 -- 48,281
Common stock options granted for
services rendered -- -- -- -- 55,582 -- 55,582
Preferred stock dividends -- -- -- -- -- (9,128) (9,128)
Net loss -- -- -- -- -- (241,188) (241,188)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1998 25,356 $ 114,102 8,660,899 $ 8,661 $ 6,835,840 $(7,080,726) $ (122,123)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-4
<PAGE>
<TABLE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Increase (Decrease) in Cash
<CAPTION>
1998 1997
-----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(241,188) $(153,609)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities-
Depreciation and amortization 864 1,494
Expense related to stock options issued as compensation for services
rendered 55,582 --
Expense related to common stock issued as compensation for services
rendered 48,281 103,400
Gain on sale of equipment and furniture -- (700)
Change in assets and liabilities-
Decrease in royalties receivable 21,280 142,080
Decrease in prepaid expenses and other 1,676 3,877
Increase in accounts payable 28,067 1,031
Decrease in accrued payroll (5,876) (2,294)
Decrease in accrued interest (4,752) (3,843)
Increase (decrease) in consulting fees payable
to related party 30,330 (17,335)
-----------------------
Net cash (used in) provided by operating activities (65,736) 74,101
-----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment and furniture -- 1,500
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- 146,870
Principal payments on note payable to related party (25,000) (185,000)
Principal payments on notes payable -- (67,500)
Preferred stock dividends (9,128) (9,128)
-----------------------
Net cash used in financing activities (34,128) (114,758)
-----------------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-5
<PAGE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Increase (Decrease) in Cash
1998 1997
-----------------------
NET DECREASE IN CASH $ (99,864) $ (39,157)
CASH AT BEGINNING OF THE YEAR 138,429 177,586
-----------------------
CASH AT END OF THE YEAR $ 38,565 $ 138,429
=======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 17,657 $ 32,611
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
During 1997, the Company's president paid a $355,000 note payable owed by the
Company to a bank in exchange for the Company entering into a note
agreement for the same amount with the president.
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-6
<PAGE>
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
InMedica Development Corporation ("InMedica") and its wholly owned subsidiary,
MicroCor, Inc. ("MicroCor") (collectively, the "Company") historically have
engaged in the research, development and sale of medical technology and fund
raising to support such activity. During the years 1986 and 1987, MicroCor
developed and marketed a portable electrocardiograph ("ECG") monitor and
manufactured and sold about 450 units. In July 1989, MicroCor signed a research
and development contract with a predecessor of Johnson and Johnson Medical, Inc.
("Johnson and Johnson"), for further development of the ECG technology. As a
result of the agreement, Johnson and Johnson now manufactures and markets a
product line under the name of Dinamap Plus(TM) which incorporates the Company's
ECG technology. Royalties received from Johnson and Johnson are presently the
Company's sole source of revenue.
Since 1989, the Company has engaged in research and development of a device to
measure hematocrit non-invasively (the "Non-Invasive Hematocrit Technology").
During 1996, the Company was issued patent No. 5526808 related to certain
aspects of its Non-Invasive Hematocrit Technology. Additionally, a patent
application was allowed in November 1996 related to this technology. Hematocrit
is the percentage of red blood cells in a given volume of blood. At the present
time, the test for hematocrit is performed invasively by drawing blood from the
patient and testing the blood sample in the laboratory. Commercialization of the
Non-Invasive Hematocrit Technology is dependent upon favorable testing, Food and
Drug Administration approval, financing of further research and development and,
if warranted, financing of manufacturing and marketing activities. The Company
has been advised that the royalties from Johnson and Johnson are expected to
terminate in 1999. The Company generated net losses of $241,188 and $153,609
during 1998 and 1997, respectively, and there can be no assurance of
profitability in the future. As of December 31, 1998, the Company had an
accumulated deficit of $7,080,726, a total stockholders' deficit of $122,123 and
negative working capital of $125,890. 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 and to obtain additional debt or equity financing.
Management's operating plan includes continuing to search for financing
alternatives, including the formation of strategic alliances or partnerships to
continue research and, if warranted, the manufacture and sale of products
developed from the Non-Invasive Hematocrit Technology. However, at present, the
Company has no commitments related to these matters.
F-7
<PAGE>
Principles of Consolidation
The consolidated financial statements include the accounts of InMedica and
MicroCor. All material intercompany accounts and transactions have been
eliminated.
Revenue Recognition
Royalty revenues are recognized as sales information is received from Johnson
and Johnson and cash receipts are assured.
Equipment and Furniture
Equipment and furniture are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. The asset
cost and accumulated depreciation for property retirements and disposals are
eliminated from the respective accounts, and any gain or loss is included in the
determination of net loss. The costs of major additions and improvements are
capitalized while the cost of maintenance and repairs are charged to expense as
incurred.
Equipment and furniture consisted of the following at December 31, 1998.
Equipment $ 242,260
Furniture 10,729
---------------------
252,989
Less accumulated depreciation (251,418)
=====================
$ 1,571
=====================
Depreciation has been computed using the straight-line method over the three to
five year useful lives of the related assets.
Included in equipment and furniture is approximately $248,700 of fully
depreciated equipment and furniture.
Net Loss Per Common Share
The net loss per common share computation is based on the weighted average
number of shares of common stock outstanding during each year. Preferred stock
dividends are deducted from net loss in calculating net loss per common share.
Basic net loss per common share ("Basic EPS") excludes dilution and is computed
by dividing net loss by the weighted average number of common shares outstanding
during the year. Diluted net loss per common share ("Diluted EPS") reflects the
potential dilution that could occur if stock options or other common stock
equivalents were exercised or converted into common stock. The computation of
Diluted EPS does not assume exercise or conversion of securities that would have
an antidilutive effect on net loss per common share.
F-8
<PAGE>
At December 31, 1998 and 1997, there were outstanding options to purchase
849,000 and 862,500 shares of common stock, respectively, which were not
included in the computation of Diluted EPS because they would be anti dilutive.
Income Taxes
The Company accounts for income taxes using the liability method. Deferred taxes
are determined based on the estimated future tax effects of differences between
the financial reporting and tax reporting bases of assets and liabilities given
the provisions of currently enacted tax laws.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The book value of the Company's financial instruments approximates fair value.
The estimated fair values have been determined using appropriate market
information and valuation methodologies.
2. INCOME TAXES
As of December 31, 1998, deferred income tax assets consisted of the following:
Net operating loss carryforwards $ 1,014,236
Future deductible temporary differences
related to compensation, reserves and
accruals 186,830
Less: valuation allowance (1,201,866)
---------------------
Net deferred income tax asset $ -
=====================
At December 31, 1998, the Company has consolidated net operating loss
carryforwards ("NOLs") for federal income tax purposes of approximately
$2,574,700. These NOLs expire at various dates through December 31, 2013. An NOL
generated in a particular year will expire for federal tax purposes if not
utilized within 15 years. Additionally, the Internal Revenue Code contains other
provisions which could reduce or limit the availability and utilization of NOLs.
For example, limitations are imposed on the utilization of NOLs if certain
ownership changes have taken place or will take place. A valuation allowance is
provided when it is more likely than not that all or some portion of the
deferred income tax asset will not be realized. Due to the uncertainty with
respect to ultimate realization, the Company established a valuation allowance
for the entire deferred income tax asset.
F-9
<PAGE>
3. COMMON STOCK TRANSACTIONS
During 1998, the Company authorized the issuance of 110,000 shares of restricted
common stock to consultants and to one employee for research and development
services. As of December 31, 1998, 45,000 of these shares were issued and the
Company is obligated to issue the remaining 65,000 shares. As a result, the
65,000 shares have been reflected as outstanding in the 1998 financial
statements even though they will not be physically issued until 1999. During
1998, the Company recognized $48,281 in expense, which represented the market
price of the stock at the dates of approval.
4. STOCK OPTIONS
With respect to employees and directors, the Company accounts for its stock
incentive plan, formula stock option plan and certain options granted outside
the plans under APB Opinion No. 25. Had compensation cost for these plans been
determined consistent with Statement of Financial Accounting Standards ("SFAS")
No. 123, the Company's pro forma net loss and Basic and Diluted EPS would have
been as follows:
1998 1997
----------------- -----------------
Net loss applicable to common
stock:
As reported $ (250,316) $ (162,737)
Pro forma (250,316) (183,362)
Basic and Diluted EPS:
As reported $ (.03) $ (.02)
Pro forma (.03) (.02)
The Company did not grant options to employees during 1998. However, for the
options granted in 1997, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in 1997: risk-free interest rate of
6.04 percent; no expected dividend yield; expected life of 3 years; expected
volatility of 111 percent.
Stock Incentive Plan
The Company has in place an incentive stock option plan (the "Stock Incentive
Plan") for eligible directors and key employees of the Company, covering
1,350,000 shares of the Company's common stock. Under the terms of the Stock
Incentive Plan, the options granted may be either incentive stock options as
defined in the Internal Revenue Code or nonqualified stock options. A committee
composed of disinterested members of the Board of Directors has authority to
determine, among other matters, which eligible key employees and directors are
to receive options, the price at which the nonqualified options will be granted,
the period in which the options are exercisable and the type of options to be
granted. The exercise price for the incentive stock options may not be less than
100 percent of the fair market value of the common stock on the date of the
grant. The Stock Incentive Plan contains antidilution provisions which provide
for adjustments to option prices or quantities in the event of certain changes
in the number of outstanding shares of common stock or the capitalization of the
Company.
F-10
<PAGE>
The following table presents the aggregate options granted and exercised under
the Stock Incentive Plan during the years ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
-------------------------------- -------------------------------
Wtd. Avg. Wtd. Avg.
Exercise Exercise
Shares Prices Shares Prices
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares under option, beginning of year, at prices
ranging from $.08 to $1.00 per share 31,500 $.60 152,445 $ .26
Options granted at a price of $.60 per share -- 31,500 .60
Options exercised at prices ranging from $.08 to $.15
per share -- (101,667) .12
Options forfeited at prices ranging from $.15 to $.60
per share -- (50,778) .55
---------------- ---------------
Shares under option, end of year at
$.60 per share 31,500 $.60 31,500 $ .60
================ ===============
</TABLE>
All of the 31,500 options outstanding and exercisable at December 31, 1998 have
exercise prices at $.60 and a remaining contractual life of 3.5 years.
At December 31, 1998, options for the purchase of 980,769 shares were available
for granting under the Stock Incentive Plan.
Formula Stock Option Plan
The Company has in place a formula stock option plan (the "Formula Plan") for
eligible directors of the Company, covering 100,000 shares of common stock. A
committee of the Board of Directors has the authority to determine, among other
matters, the term of the options and the period during which the options are
exercisable. Under the terms of the Formula Plan, each member of the committee
which administers the Stock Incentive Plan is eligible to receive nonqualified
stock options pursuant to a formula set forth in the Formula Plan. The exercise
price for options granted shall be 30 percent of the fair market value of the
common stock on the date of the grant. The Formula Plan contains antidilution
provisions which provide for adjustments to option prices or quantities in the
event of certain changes in the number of outstanding shares of common stock or
the capitalization of the Company.
There were no options granted or exercised under the Formula Plan during the
years ended December 31, 1998 and 1997. At December 31, 1998, there were no
shares under option under the Formula Plan and options for the purchase of
95,500 shares were available for granting.
F-11
<PAGE>
Other Stock Options
During 1995, the Company granted nonqualified options for the purchase of
1,050,000 shares of common stock at prices ranging from $.30 to $.39 with a
weighted average exercise price of $.32. The options were granted to officers,
directors, employees and consultants to the Company. A total of 500,000 of these
nonqualified options were issued to the Company's president and chief executive
officer in consideration of collateral provided by him with respect to a Company
bank loan described in Note 6. All options granted during 1995 vested
immediately upon granting and are exercisable through 2005. During 1996, these
option grants were reduced to 788,500 by resolution of the board of directors of
the Company. During 1997, 450,000 options were exercised at $.30 per share and
the Company received $135,000. As of December 31, 1998, 338,500 options were
outstanding and exercisable with exercise prices ranging from $.30 to $.39, with
a weighted average exercise price of $.33 and a weighted average remaining
contractual life of 7.8 years.
During 1996, the Company granted nonqualified options for the purchase of
338,500 shares of common stock at prices ranging from $1.16 to $1.22 per share
with a weighted average exercise price of $1.17. The options were granted to
consultants to the Company. A total of 38,500 of these nonqualified options
vested immediately upon granting and are exercisable through 2006. A total of
300,000 of these nonqualified options were issued in consideration for
engineering work related to the Company's Non-Invasive Hematocrit Technology. A
total of 175,000 of the 300,000 options are vested as of December 31, 1998.
Effective June 2, 1998, the agreement with the consultant was terminated and all
remaining unvested options were cancelled. Total compensation expense recorded
over the vesting period of two years was $222,275. The weighted average
remaining contractual life of these options is 4.2 years.
During 1997, the Company granted nonqualified options to consultants and one
employee for the purchase of a total of 154,000 shares of common stock with an
exercise price of $.73. A total of 100,000 of the 154,000 options vested
immediately upon granting. The remaining 54,000 options become exercisable for a
period of three years from the completion date (not later than December 31,
1998) of satisfactory clinical trials related to the Company's Non-Invasive
Hematocrit Technology. As of December 31, 1998, successful clinical trials were
not completed, therefore these options did not vest. During 1997, the Company
recorded $14,400 in expense related to the options issued to consultants. The
options expire in August 2000.
During 1998, the Company issued nonqualified options to a consultant for the
purchase of a total of 12,500 shares of common stock with an exercise price of
$.73 per share. These options vested in April 1998 and are exercisable through
2000. The Company recorded $5,375 in expense related to these options.
During 1998, the Company entered into an agreement whereby an existing option
holder agreed to transfer 37,500 options to another consultant. The options are
exercisable through 2000 with an exercise price of $1.22 per share. The Company
recorded $13,125 in expense related to these options.
5. Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock. The
Company's board of directors designated 1,000,000 shares of this preferred stock
F-12
<PAGE>
as Series A Cumulative Convertible Preferred Stock ("Series A Preferred") with a
par value of $4.50 per share. Holders of the Series A Preferred receive annual
cumulative dividends of eight percent, payable quarterly, which dividends are
required to be fully paid or set aside before any other dividend on any class or
series of stock of the Company is paid. Holders of the Series A Preferred
receive no voting rights but do receive a liquidation preference of $4.50 per
share, plus accrued and unpaid dividends. Series A Preferred stockholders have
the right to convert each share of Series A Preferred to the Company's common
stock at $3.00 per common share.
6. NOTE PAYABLE TO RELATED PARTY
During 1997, the Company's president paid a $355,000 note payable owed by the
Company to a bank (on which the president was the co-obligor) and the Company
entered into a line of credit loan agreement (the "Agreement") with the
president, and borrowed an initial amount thereunder of $355,000. The Agreement
provides for the Company to borrow up to a maximum amount of $450,000.
Borrowings under the Agreement carry terms that are not less favorable than the
terms of a loan that the president has with a bank which loan was used by the
president to fund the advance under the Agreement to the Company. As of December
31, 1998, outstanding principal under the Agreement was $145,000. All
outstanding borrowings accrue interest at a bank's prime rate (7.75 percent at
December 31, 1998) plus .25 percent. The Company is required to make minimum
principal payments of $12,500. The Agreement is secured by the Company's royalty
stream from the Johnson and Johnson agreement (see Note 1).
7. RELATED-PARTY TRANSACTIONS
During 1998 and 1997, the Company incurred interest expense of $12,905 and
$11,011, respectively, on the related-party note payable described in Note 6.
The Company has a consulting arrangement with an entity owned by the Company's
president whereby the Company was to pay $4,333 per month during 1998. The
arrangement can be terminated by either party at any time. As of December 31,
1998, $51,996 was owed under the arrangement.
F-13
<PAGE>
Item 8. Disagreements With Accountants on Accounting and Financial Disclosures.
-----------------------------------------------------------------------
There have been no changes in or disagreements with accountants on accounting
and financial disclosures, as provided in Regulation S-B, Item 304.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
-----------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act.
- --------------------------------------------------
Directors and Executive Officers of InMedica. The following table furnishes
information concerning the executive officers and directors of InMedica and
their business backgrounds for at least the last five years.
Name Age Director Since
---- --- --------------
Larry E. Clark 77 1995
John R. Merendino 60 1995
David L. Dingman 62 1995
Richard Bruggeman 43 1995
LARRY E. CLARK - Chairman, Principal Executive Officer and Director of
InMedica. Mr. Clark was president of Clark-Knoll & Associates, Inc., a Denver,
Colorado management consulting firm specializing in mergers and acquisitions
from 1963 to 1969. He served as president of Petro-Silver, Inc., a small public
company based in Salt Lake City, Utah, which engaged in the oil and gas business
from 1970 to 1975. From 1975 to 1981 Mr. Clark was president of Larry Clark &
Associates, a private company which engaged in a corporate mergers and
acquisitions business. In 1981, Mr. Clark formed Hingeline-Overthrust Oil & Gas,
Inc., a Utah public company, which merged with Whiting Petroleum Corporation of
Denver, Colorado in December 1983. Mr. Clark served as a director of Whiting
Petroleum from 1983 until 1992 when Whiting Petroleum merged with IES Industries
and Mr. Clark returned to full time employment as president of Larry Clark &
Associates. Mr. Clark graduated from the U.S. Merchant Marine Academy with a BS
degree in Naval Science in 1943 and received a degree in Business Administration
from the University of Wyoming in 1948.
JOHN R. MERENDINO, M.D. - Director. Dr. Merendino obtained a D.A. in
chemistry from Lafayette College, Pennsylvania in 1960 and an M.D. degree from
9
<PAGE>
New Jersey College of Medicine and Dentistry in 1964. He completed his
internship and residency at Monmouth Medical Center in New Jersey. From 1976 to
1984 he was an Associate Clinical Professor at the University of Utah School of
Medicine. He also served as a member of the residency committee of the
University of Utah School of Medicine from 1978 to 1984. He was Chairman of the
Division of Orthopedics at Holy Cross Hospital, Salt Lake City, Utah from 1977
to 1984 and Chairman (or Chairman elect) of the Department of Surgery, Holy
Cross Hospital. Since 1984, he has been engaged in private practice in
Orthopedics and Sports Medicine. He also acts as an independent consultant to
the Honolulu Athletic Club, Alta View Sports Medicine Clinic and Diversified
Tech Inc. He is a Director of the Snowbird Clinic, physician to the U.S. Ski
Team and a member of the Board of Advisors to Nautilus Physical Fitness Centers.
He previously served as the Team Physician to the Salt Lake Golden Eagles and
the Salt Lake Gulls, professional sports teams.
DAVID L. DINGMAN, M.D. - Director of the Company. Dr. Dingman is a
Professor of Surgery, Emeritus, at the University of Utah Medical Center. He was
Associate Professor and Professor of Surgery from 1989-1993. He was an Attending
Staff Surgeon at the Veterans Administration Medical Center, Salt Lake City,
Utah from 1984-1989. He also served as Chairman of the Department of Surgery at
Holy Cross Hospital in Salt Lake City, Utah from 1986-1989 and as Chairman of
the Department of Plastic Surgery at Holy Cross Hospital from 1982-1985. From
1972-1989 he was a Clinical Associate Professor of Surgery at the University of
Utah Medical Center. He graduated in pre-med from Dartmouth College in 1957 and
received his M.D. degree from the University of Michigan in 1961.
RICHARD BRUGGEMAN - Director and Secretary/Treasurer and Chief Financial
Officer of the Company. Since 1993, he has been employed as Controller of
Kitchen Specialties, Inc., a Salt Lake City firm distributing kitchen appliances
in the United States and Canada. From 1986 until 1993 he was employed by the
Company's subsidiary, MicroCor, Inc. as financial manager. During the period
1983-1985, he was a sole practitioner in accounting and from 1981-1983 he was
employed by the Salt Lake City public accounting firm of Robison Hill & Co. He
graduated from the University of Utah in 1981 with a B.S. degree in accounting.
ROBERT GAIL BILLINGS - Dr. Billings, age 63, has been employed by or
consulted with the Company since May 1997, in research and development on its
hematocrit project. From 1992 until 1997, Dr. Billings was employed as Vice
President for Research and Development of Utah Medical Products, Inc., a Salt
Lake City based publicly held company specializing in medical technology. Prior
to that time, he was employed as an engineer for Utah Medical in research and
development. From 1976 until 1990, he was Vice President of Research and
10
<PAGE>
Development for Tenet Information Services of Salt Lake City, which was engaged
in the development of computer systems and software for pulmonary function test
analysis. During the period 1971-1976, he conducted medical research for Primary
Children's Medical Center, Salt Lake City, Utah as a graduate student and later
as a post-doctoral fellow. Prior to that time he was employed for 15 years in
the aerospace industry. He holds a BS in Electrical Engineering from the
University of Utah (1956), an MS in Electrical Engineering from Utah State
University (1965) and a PhD in Biophysics from the University of Utah (1975).
Each director serves until the next annual meeting of shareholders or until
a successor is elected and qualified. Officers serve at the pleasure of the
board of directors.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of equity securities of the Company. Officers, directors and greater
than ten percent shareholders are required to furnish the Company with copies of
all Section 16(a) forms they file. To the Company's knowledge, based solely on
review of the copies of any such reports furnished to the Company, during the
fiscal year ended December 31, 1998 all Section 16(a) filing requirements
applicable to officers, directors and greater than ten percent shareholders were
complied with.
Item 10. Executive Compensation.
----------------------
Executive Compensation. No executive officer of the Company has received
compensation during the three fiscal years ended December 31, 1998, except as
disclosed in the table below:
<TABLE>
<CAPTION>
Annual Compensation
Long Term
Compensation Awards
Name Year Salary Bonus Common Stock underlying Options Other
---- -------- ----- ------------------------------- -----
<S> <C> <C> <C> <C> <C>
Larry E. Clark (CEO) 1998 $ - - - $51,996*
Larry E. Clark (CEO) 1997 $ - - - $51,996**
Larry E. Clark (CEO) 1996 $39,000 - - -
</TABLE>
* - consulting fees accrued for payment to a corporation owned by Larry E.
Clark.
** - includes consulting fees paid ($30,331) and consulting fees accrued
($21,665) for payment to a corporation owned by Larry E. Clark.
Director Compensation. Directors may be compensated at the rate of $100 for
attendance at each board meeting, but did not receive compensation for meetings
in 1998 and 1997.
Compensation Committee Interlocks and Insider Participation. Compensation
of officers and employees is determined by the Board of Directors. Mr. Larry E.
Clark, chief executive officer, is chairman of the Board of Directors.
11
<PAGE>
Other Compensation Plans. On December 6, 1991, the Company adopted a stock
incentive plan (the "Stock Incentive Plan") and a formula stock option plan (the
"Formula Plan"). On May 30, 1992, at the annual shareholder meeting, the
shareholders approved the Stock Incentive Plan and the Formula Plan.
The Stock Incentive Plan covers 1,350,000 shares of the Company's common
stock. Under the terms of the plan, the options granted to eligible key
employees and directors, shall be either incentive stock options as defined in
Section 422 of the Internal Revenue Code of 1986, as amended, or non-qualified
stock options. A committee composed of disinterested members of the Board of
Directors has authority to determine, among other matters, which eligible key
employees and directors are to receive options, the price at which the
non-qualified options will be granted, the period in which the options are
exercisable and the type of options granted. The exercise price for the
incentive stock options shall not be less than 100 percent of the fair market
value of the common stock on the date of the grant.
The Formula Plan covers 100,000 shares of common stock. Under the terms of
the plan each member of the committee which administers the Stock Incentive Plan
is eligible to receive non-qualified stock options pursuant to a formula set
forth in the plan. The exercise price for options granted shall be 30 percent of
the fair market value of the common stock on the date of the grant. A committee
of the Board of Directors has the authority to determine, among other matters,
the term of options and the period during which the options are exercisable.
The following tables show certain information regarding stock options
granted to and exercised by officers named in the executive compensation table:
OPTIONS GRANTED IN THE LAST FISCAL YEAR
% of Total
Options
Granted to Exercise
Options Employees in Price Expiration
Name Granted FY 1997 ($/Share) Date
---- ------- ------------ --------- -----------
None
AGGREGATED OPTIONS EXERCISED IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised
Number of In-The-Money
Unexercised Options Options at Fiscal
Shares at Fiscal Year End Year End
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ ------------- -------------
None
12
<PAGE>
The Company presently has no plan for the payment of any annuity or pension
retirement benefits to any of its officers or directors, and no other
remuneration payments, contingent or otherwise, are proposed to be paid in the
future to any officer or director, directly or indirectly.
13
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management. The
-----------------------------------------------------------------
following table furnishes information concerning the common stock ownership of
directors, officers, and principal shareholders as of March 15, 1999:
Nature of Number of
Name and Position Ownership Shares Owned Percent
----------------- --------- ------------ -------
Larry E. Clark Direct 1,553,000 17.9%
Allan L. Kaminsky Direct 798,875 9.2%
4602 S. Fortuna Way
S.L.C., Utah 84124
Principal Shareholder
Paul J. Diehl Direct 719,230 2 8.3%
2963 E. Fallentine Rd. and Indirect
Sandy, Utah 84092
Principal Shareholder
J. Lynn Smith Direct 452,048 3 5.2%
5770 S. 250 East #115 and Indirect
Murray, Utah 84107-8100
Principal Shareholder
John R. Merendino Options 75,000 0.9%
Director
David L. Dingman Options 75,000 0.9%
Director
Richard Bruggeman Direct 174,387 4 2.0%
Director, Chief and Indirect
Financial Officer Options 106,500 1.2%
-------
Total 280,887 3.2%
=======
All Executive Officers Direct 1,727,387 19.9%
and Directors as a and Indirect
group (4 persons) Options 256,500 2.9%
---------
Total 1,992,887 22.5%
=========
- ----------------
2 - Includes 639,599 shares held by the Paul J. Diehl, M.D. P.C. profit
sharing plan, one share held by Paul J. Diehl, P.C. and 79,630 shares held by
Dr. Diehl as custodian for his wife's daughter, Shanon.
3 - Includes 186,048 shares held directly by Dr. Smith and 266,000 shares
held by the J. Lynn Smith Family Limited Partnership.
4 - Includes 400 shares held in individual retirement accounts and 4,620
shares held in a family trust of which Mr. Bruggeman is Trustee.
14
<PAGE>
Shares shown in the forgoing table as directly owned are owned beneficially and
of record, and such record shareholder has sole voting, investment, and
dispositive power. Calculations of the percentage of ownership of shares
outstanding in the foregoing table assumes the exercise of options, to which the
percentage relates. Percentages calculated for totals assume the exercise of
options comprising such totals.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
The Company owes $145,000 to its Chief Executive Officer, Larry E. Clark
,for loans made by Mr. Clark in prior years. The Company pays interest at the
prime rate plus .25%. During 1998, interest payments to Mr. Clark totalled
$12,905. Repayment of the loan is secured by an assignment of the royalty
contract with Johnson & Johnson Medical, Inc.
Item 13. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
--------
Exhibit No. S-K No. Description
- ----------- ------- -----------
(3) Articles of Incorporation and Bylaws incorporated by
reference to the exhibits to Form 10-K for the year ended
December 31, 1983
(3) Articles of Amendment to the Articles of Incorporation of
the Company changing the Company's name to "InMedica
Development Corporation" incorporated by reference to
Exhibit 1 to Form 10-K for the year ended December 31,
1984
(4) Articles of Amendment, dated June 16, 1995 to the
Articles of Incorporation of the Company adopting a class
of Preferred Stock, incorporated by reference to Exhibit
1 to Form 10-QSB for the period ended September 30, 1995
(4) Articles of Amendment, dated September 25, 1995 to the
Articles of Incorporation of the Company adopting a
Series A Preferred Stock, incorporated by reference to
Exhibit 2 to Form 10-QSB for the period ended September
30, 1995
(10) Agreement between MicroCor, Inc. and Johnson & Johnson
Medical, Inc. dated June 15, 1995, incorporated by
reference to Form 8-K dated June 30, 1995
15
<PAGE>
(10) Agreement dated September 3, 1996 between InMedica
Development Corporation and Paul Ruben dba Ruben
Engineering and Calvin Ruben, incorporated by reference
to the Exhibits to Form 8-K dated September 20, 1996.
(10) Loan Agreement between Larry E. Clark and the InMedica
Development Corporation dated June 23, 1997, incorporated
by reference to Exhibits of Form 10QSB for the Quarter
ended June 30, 1997.
(10) Hematocrit Development and Option Agreement between
InMedica Development Corporation and Medical Physics,
dated August 29, 1997 incorporated by reference to
Exhibits of Form 10QSB for the Quarter ended September
30, 1997.
(10) First Amendment to the Hematocrit Development and Option
Agreement between InMedica Development Corporation and
Medical Physics, dated March 1, 1998.
(10) Agreement among InMedica Development Corporation, David
Wheeler, Nevada Cancer Center and Chris Bringhurst dated
April 16, 1998, incorporated by reference to Exhibits of
Form 10QSB for the Quarter ended March 31, 1998.
(11) Statement regarding Computation of Per Share Loss (see
Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996
(21) Subsidiaries of the Company (MicroCor, Inc., a Utah
corporation)
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1998.
16
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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 /s/ Larry E. Clark
-------------------------
LARRY E. CLARK, President
/s/ Larry E. Clark
-----------------------
Date: March 26,1999 RICHARD BRUGGEMAN,
------------- Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
/s/ Larry E. Clark
-----------------------
March 26 , 1999 LARRY E. CLARK
- ---------- Director
President and Principal
Executive Officer
/s/ John R. Merendino
-----------------------
March 24 , 1999 JOHN R. MERENDINO
- ---------- Director
/s/ Richard Bruggeman
-----------------------
March 26 , 1999 RICHARD BRUGGEMAN
- ---------- Director and Principal
Financial Officer
/s/ David L. Dingman
-----------------------
March 26 , 1999 DAVID L. DINGMAN
- ---------- Director
<PAGE>
EXHIBITS
Exhibits filed with the Form 10-KSB of InMedica Development Corporation, SEC
File No. 0-12968, for the year ended 12/31/98:
Exhibit No. SB Item No. Description
- --------------------------------------------------------------------------------
1 (27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 38565
<SECURITIES> 0
<RECEIVABLES> 45920
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 101272
<PP&E> 252989
<DEPRECIATION> (251418)
<TOTAL-ASSETS> 105039
<CURRENT-LIABILITIES> 227162
<BONDS> 0
0
114102
<COMMON> 8661
<OTHER-SE> (244886) <F1>
<TOTAL-LIABILITY-AND-EQUITY> 105039
<SALES> 0
<TOTAL-REVENUES> 247400
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11594
<INCOME-PRETAX> (241188)
<INCOME-TAX> 0
<INCOME-CONTINUING> (241188)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (241188)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
<FN>
Additional paid in capital and accumulated deficit
</FN>
</TABLE>
