UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to___________
Commission file number 0-5186
OCG TECHNOLOGY, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-2643655
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
450 West 31st Street, New York, New York 10001
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(212) 967- 3079
- -------------------------------------------------------------------------------
(Issuer's telephone number)
- -------------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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. [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Shares Outstanding at November 10, 1995
- -------------------------------------------------------------------------------
Common Stock ($.01 par value) 21,210,759 Shares
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
FINANCIAL INFORMATION PAGE NUMBER
- -------------------------------------------------------------------------------
Consolidated Condensed Balance Sheets
September 30, 1995 and June 30, 1995 1
Consolidated Condensed Statements of Loss
Three Months Ended September 30, 1995 and 1994 2
Consolidated Condensed Statements of
Cash Flow for the Three Months Ended
September 30, 1995 and 1994 3
Notes to Consolidated Condensed
Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 JUNE 30, 1995
------------------ ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash ..................................................... $ 33,104 $ 51,645
Receivables, trade ....................................... 26,781 33,598
Other current assets ..................................... 24,446 21,946
------------------ ---------------
Total current assets .................................. 84,331 107,189
Property and equipment, net of accumulated depreciation of
$199,398 $180,398 ........................................ 234,186 242,732
Proprietary Technology, net of accumulated amortization of
$825,000 $675,000 ........................................ 2,175,000 2,325,000
Covenant not to compete, net of accumulated amortization
of $162,500 $150,000 ..................................... 87,500 100,000
Other assets .............................................. 32,754 33,054
------------------ ---------------
Total assets .......................................... $ 2,613,771 $ 2,807,975
================== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable ............................................ $ 11,344 $ 11,344
Accounts payable and accrued expenses .................... 142,275 163,359
------------------ ---------------
Total current liabilities ............................. 153,619 174,703
------------------ ---------------
Shareholders' equity: (Note 4)
Preferred stock $.10 par value, Series B ................. 10,000 10,000
Preferred stock $.10 par value, Series E ................. 10,000 10,000
Common stock $.01 par value .............................. 209,607 205,107
Additional paid-in capital ............................... 18,507,195 18,421,695
Deficit .................................................. (16,182,273) (15,912,591)
Unearned compensation (Note 3) ........................... (31,877) (38,439)
------------------ ---------------
2,522,652 2,695,772
Less treasury stock, at cost ............................. (62,500) (62,500)
------------------ ---------------
Total shareholders' equity ............................ 2,460,152 2,633,272
------------------ ---------------
Total liabilities and shareholders' equity: ............... $ 2,613,771 $ 2,807,975
================== ===============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1995 1994
------------ ------------
<S> <C> <C>
Revenue:
Sales ................................................... $ 161,326 $ 172,523
------------ ------------
Costs and expenses:
Cost of Sales ........................................... 48,179 58,800
Marketing, general and administrative ................... 382,832 180,183
------------ ------------
Total Expenses ............................................ 431,011 238,983
------------ ------------
Net Income (Loss) ......................................... (269,685) (66,460)
Weighted average number of shares outstanding during
period ................................................... 20,525,759 18,338,390
============ ============
Loss per
Common Share ............................................ $ (0.01) (*)
============ ============
</TABLE>
* Less than ($.01) per share
See accompanying notes to consolidated condensed financial statements
2
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................ $(269,685) $(66,460)
------------ -----------
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization ............................... 181,500 12,966
Changes in assets and liabilities
(Increase) decrease in receivables .......................... 6,817 (2,231)
(Increase) decrease in unearned compensation ................ 6,562 3,437
(Increase) decrease in other current assets ................. (2,500) (1,736)
(Increase) decrease in property and equipment ............... (10,451) (23,815)
(Increase) decrease in other assets ......................... 300 1,136
(Decrease) in accounts payable and accrued expenses ........ (21,084) (13,958)
------------ -----------
Total adjustments .......................................... 161,144 (24,201)
------------ -----------
Net cash used in operating activities ...................... (108,541) (90,661)
------------ -----------
Cash flows from investing activities:
Purchase of fixed assets ..................................... (10,850)
Cash flows from financial activities:
Proceeds from issuance of common stock ....................... 90,000 16,250
------------ -----------
Net cash changes from investing and financing activities .. 90,000 5,400
------------ -----------
Net increase (decrease) in cash ............................... (18,541) (85,261)
Cash, beginning of period ..................................... 51,645 104,867
------------ -----------
Cash, end of period ........................................... $ 33,104 $ 19,606
============ ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1 . In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the financial
position as of September 30, 1995 and the results of operations for the three
months ended September 30, 1995 and 1994 and the statements of cash flows for
the three months ended September 30, 1995 and 1994. The June 30, 1995 balance
sheet has been derived from the Company's audited financial statements.
The results of operations for the three months ended September 30, 1995 are not
necessarily indicative of the results to be expected for the full year.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form 10-KSB.
The accompanying consolidated financial statements have been prepared on a going
concern basis which contemplates continuity of operations and realization of
assets and liquidation of liabilities in the ordinary course of business.
Because of significant operating losses, the Company's ability to continue as a
going concern is dependent upon its ability to obtain sufficient additional
financing and, ultimately, upon future profitable operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue in
existence.
2. Earnings per share data is computed using the weighted average number of
shares outstanding during the periods. The effect of warrants outstanding and
convertible debt, during the period it was outstanding, would be antidilutive.
3. Unearned compensation decreased as a result of amortizing the cost arising
from the issuance of shares of the Company's common stock, par value $.01 per
share, for services.
4. Capital Changes:
During the three months September 30, 1995, warrants were issued to purchase
150,000 shares of the Company's Common Stock, par value $.01 per share. Exercise
of these warrants by the holder thereof is subject to the occurrence of an
increase in the number of the Corporation's authorized shares of Common Stock,
par value $.01 per share, from twenty-five million to fifty million.
During the three months ended September 30, 1995, 450,000 shares of the
Company's Common Stock, par value $.01 per share, were sold for $0.20 per share,
the gross proceeds of which were $90,000.
4
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A SUMMARY OF INCREASES (DECREASES) IN THE ITEMS INCLUDED IN
THE CONSOLIDATED STATEMENTS OF LOSS IS SHOWN BELOW:
Results of Operations
Total revenues decreased $11,197 for the three months ended September 30, 1995
as compared to 1994 primarily as a result of an decrease in revenues of Mooney-
Edwards Enterprises, Inc. ("MIS"), a subsidiary of the Company. Cost of sales
decreased $10,621 for the three months ended September 30, 1995, as compared
to 1994. The sales of OCG, PSI and MIS respectively were $275, $2,267 and
$158,284 for the three months ended September 30, 1995.
Marketing, general and administrative expenses increased $202,649 for the three
months ended September 30, 1995 as compared to 1994. The increase is primarily
due to the amortization of software costs and the loss from operations of PSI
resulting from the acquisition of PSI by the Company.
Liquidity and Capital Resources
At September 30, 1995 the Company had a current ratio of .55 to 1 compared to
.77 to 1 as of September 30, 1994. The decrease primarily resulted from the
operating losses. Although the net loss from operations for the three months
ended September 30, 1995 was $269,685 most of the loss resulted from non-cash
charges of $188,062, which accounted for 70% of the total loss from operations.
The Company has experienced recurring losses from operations and has been
unable to provide sufficient working capital from operations and has relied
significantly on the sale of equity interests in the Company and loans from
officers and shareholders to fund its operations. The Company's auditors have
included an explanatory paragraph regarding the ability of the Company to
continue as a "going concern".
Cash on hand and accounts receivable were $59,885 at June 30, 1995. In addition
the Company has on hand equipment which will be available to lease on a fee for
service basis. The lead time involved in obtaining delivery of certain
components necessary to complete the manufacture of the units to be leased has
delayed the leasing of the equipment. In the past, the Company's principal
means of overcoming its cash shortfalls from operations was from the sale of
the Company's common stock. During the three months ended September 30, 1995,
the Company raised $90,000 through the sale of equity interests and an
additional $55,000 through the sale of equity interests and the exercise of
warrants since September 1995 to date. The Company intends to provide
additional working capital through the sale of equity interests in the Company.
Although, in the past, the Company has been able to provide working capital
through the sale of equity interests in the Company, there can be no assurances
that the Company will succeed in its efforts.
As of May 16, 1994, PrimeCare Systems, Inc. ("PSI") was acquired by the
Company. At that time, PSI owned a sole and exclusive worldwide license to use,
market, sell, manufacture and otherwise commercialize on the PrimeCare(TM)
Patient Management System. PSI also received an assignment of the
PrimeCare(TM) Patient Management System which was to become effective in June
1996. On September 21, 1995, the assignment to PSI was accelerated and became
effective as of that date.
5
The System comprises a patient-centered integrated medical interview, encounter
documentation, patient and physician education, and chart creation system
which, in turn, provides an uncomplicated, standardized mechanism for
collecting and documenting all relevant clinical encounter data at minimal cost
and time. The System also provides a data base and means for clinical and
outcomes research as well as a means for utilization review and quality
assurance audits. The Company has decided to market the System as a service, on
a pay for use basis, with a charge of $1.50 per patient visit. This marketing
method eliminates a significant financial commitment to purchase the software,
plus monthly maintenance charges for updates, and ties the cost directly to
use. The financial benefits derived by the physician from use of the
PrimeCare(TM) System exceed $1.50 cost per patient visit. The Company intends
to interface MIS's proprietary medical billing software with the PrimeCare(TM)
System, which will enable the automatic generation of patient billing. The
Company intends to charge an additional fee of $.50 per bill. According to the
American Medical Association, there are over 650,000 physicians in the U.S.,
creating a very large potential market for the System. The Company estimates
that as many as 250,000 of these physicians could use the system routinely. It
is estimated that the average number of patient visits per month for a primary
care physician is between 500 and 600. Assuming 500 patients per month at $1.50
per patient, use by 100 physicians would generate revenues of $75,000 per
month.
The medical content of the System is continually updated. During 1994, the
System had ten updates. On September 15, 1995, the Company entered into an
agreement with the Mount Sinai School of Medicine ("MSSM") which provides for
the MSSM to assume the task of updating and enhancing the medical content of
the PrimeCare(TM) System. Having concluded this agreement, the Company
commenced marketing the PrimeCare(TM) System. The Company currently has
arrangements with several dealers to sell the PrimeCare(TM) System and is in
the process of establishing a network of independent dealers. However, no
assurances can be given that the physician population will contract for and use
the PrimeCare(TM) System nor does the Company know the interest of dealers in
selling the PrimeCare(TM) System.
In the past, the Company sold its Cardiointegraph, a proprietary heart
diagnostic instrument for the early detection of coronary heart disease,
through medical distributors, a sales and marketing method employed by other
medical equipment manufacturers. Although Cardiointegraphs were sold for ten
consecutive fiscal years and the end user purchasers, (i.e., physicians and
corporate and governmental medical departments), appear to find the unit
useful, the Company has been unable to generate sufficient revenues to fund its
operations or to operate at a profit. The Company believes that lack of
universal reimbursement for the CIG has hindered its attempt to sell the CIG.
The Company believes that marketing the CIG technology as a service, with a
minimal fee charged to the physician per CIG generated, may overcome the
reluctance of physicians to purchase medical diagnostic equipment not
reimbursed by Medicare. During the 1993 fiscal year, the Company commenced its
plan to market the Cardiointegraph as a service. The program is being focused
in the following directions.
The Company licensed its CIG technology to Compumed, Inc. ("CMPD") to enable
CMPD to offer the CIG as a service to CMPD's customers who subscribe to CMPD's
service which interprets electrocardiographic (EKG) signals transmitted
telephonically to CMPD's central computer. During March 1994, CMPD commenced
offering the CIG service to CMPD's customers. To date, several large companies
have contracted for the service. However, the Company is totally dependant upon
CMPD for the marketing effort to CMPD's customers. There can be no assurance
that the service can be marketed successfully.
6
The Company, together with its wholly owned subsidiary, MIS, has taken steps to
develop a dealer network to market the CIG as a service. Although there is
interest in the service, the marketing effort has been delayed as a result of
the lead time involved in obtaining delivery of certain components necessary to
complete the manufacture of the units to be leased. Therefore, at this time,
there can be no assurance that a dealer network can be established or that if
it is established, the network will successfully place the CIG service in
physicians offices.
The Company believes that it could provide sufficient working capital from
operations through marketing the PrimeCare(TM) System, the MIS billing system
after interfacing it with the PrimeCare(TM) System, and marketing the CIG as a
service and expanding the operations of MIS.
Currently, the Company has no lines of credit and has no material commitments
for capital expenditures outstanding.
7
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
OCG TECHNOLOGY, INC.
BY /s/ Edward C. Levine
---------------------------
EDWARD C. LEVINE, PRESIDENT
BY /s/ Erich W. Augustin
---------------------------
ERICH W. AUGUSTIN, TREASURER
(PRINCIPAL FINANCIAL OFFICER)
DATED: November 10, 1995
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 33,104
<SECURITIES> 0
<RECEIVABLES> 26,781
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 84,331
<PP&E> 234,186
<DEPRECIATION> 199,398
<TOTAL-ASSETS> 2,613,771
<CURRENT-LIABILITIES> 153,619
<BONDS> 0
<COMMON> 209,607
0
20,000
<OTHER-SE> 2,230,545
<TOTAL-LIABILITY-AND-EQUITY> 2,632,771
<SALES> 161,326
<TOTAL-REVENUES> 161,326
<CGS> 48,179
<TOTAL-COSTS> 431,011
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (269,685)
<INCOME-TAX> 0
<INCOME-CONTINUING> (269,685)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (269,685)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
