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, 1996
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to___________
Commission file number 0-5186
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OCG TECHNOLOGY, INC.
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(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
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(Address of principal executive offices)
(212) 967-3079
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(Issuer's telephone number)
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(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 12, 1996
- ----------------------------- ----------------------------------------
Common Stock ($.01 par value) 23,151,559 Shares
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------------- -----------
Consolidated Condensed Balance Sheets
September 30, 1996 and June 30, 1996 1
Consolidated Condensed Statements of Loss for
the Three Months ended September 30, 1996 and 1995 2
Consolidated Condensed Statements of Cash Flow for
the Three Months Ended September 30, 1996 and 1995 3
Notes to Consolidated Condensed Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION
- -----------------------------
Item 6. Exhibits and Reports on Form 8-K 7
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
SEPTEMBER 30, 1996 JUNE 30, 1996
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 170,621 $ 318,088
Receivables, trade 38,810 45,441
Other current assets 33,556 35,606
---------- ---------
Total current assets 242,987 399,135
Property and equipment, net of
accumulated depreciation of
$282,722 $261,178 202,086 199,603
Proprietary Technology, net of
accumulated amortization of
$1,425,000 $1,275,000 1,575,000 1,725,000
Covenant not to compete, net of
accumulated amortization of
$212,500 $200,000 37,500 50,000
Other assets 30,360 29,233
---------- ----------
Total assets $2,087,933 $2,402,971
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to shareholders $ 11,344 $ 11,344
Accounts payable and accrued expenses 176,410 223,420
---------- ----------
Total current liabilities 187,754 234,764
---------- ----------
Shareholders' equity: (Note 4)
Preferred stock $.10 par value, Series E 10,000 10,000
Common stock $.01 par value 232,324 231,515
Additional paid-in capital 20,453,478 20,384,287
Deficit (18,722,810) (18,381,343)
Unearned compensation (Note 3) (10,313) (13,752)
------------ ------------
1,962,679 2,230,707
Less treasury stock, at cost (62,500) (62,500)
----------- -----------
Total shareholders' equity 1,900,179 2,168,207
----------- -----------
Total liabilities and
shareholders' equity: $2,087,933 $2,402,971
========== ==========
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
1
<PAGE>
<TABLE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER 30,
1996 1995
<S> <C> <C>
Revenue:
Sales $ 166,528 $ 161,326
---------- ----------
Costs and expenses:
Cost of sales 66,930 48,179
Marketing, general and
administrative 441,065 382,832
--------- ---------
Total Expenses 507,995 431,011
Net Income (Loss) $ (341,467) $ (269,685)
========= =========
Weighted average number
of shares outstanding
during period 23,151,559 20,525,759
========== ===========
Loss per
Common Share ($0.01) ($0.03)
========== ===========
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
2
<PAGE>
<TABLE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(341,467) $(269,685)
---------- ----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 184,397 181,500
Issuance of stock and warrants for services 0 0
Amortization of unearned compensation 3,439 6,562
Changes in assets and liabilities:
(Increase) decrease in receivables 6,631 6,817
(Increase) decrease in other current assets 2,050 (2,500)
(Increase) decrease in property and equipment (24,027) (10,451)
(Increase) decrease in other assets (1,480) 300
(Decrease) in accounts payable
and accrued expenses (47,010) (21,084)
---------- ---------
Total adjustments 124,000 161,144
---------- ---------
Net cash used in operating activities (217,467) (108,541)
---------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 70,000 90,000
---------- ---------
Net cash changes from investing
and financing activities 70,000 90,000
---------- ---------
Net increase (decrease) in cash (147,467) (18,541)
Cash, beginning of period 318,088 51,645
---------- ---------
Cash, end of period $ 170,621 $ 33,104
========== =========
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
3
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1 . In the opinion of the Company, the accompanying unaudited con-
solidated condensed financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the financial position as of September 30, 1996 and the
results of operations for the three months ended September 30, 1996
and 1995 and the statements of cash flows for the three months ended
September 30, 1996 and 1995. The June 30, 1996 balance sheet has been
derived from the Company's audited financial statements.
The results of operations for the three months ended September 30,
1996 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 classifica-
tion 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 anti-dilutive.
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 ended September 30, 1996, 68,400 shares of the
Company's Common Stock, par value $.01 per share, were sold for $0.95
per share, the gross proceeds of which were $65,000.
During the three months ended September 30, 1996, warrants were
exercised to purchase 12,500 shares of the Company's Common Stock, par
value $.01 per share for the sum of $5,000 and the shares of stock
were issued.
4
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S 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 increased $5,202 for the three months ended September 30,
1996 as compared to the same period for 1995 primarily as a result of an
increase in revenues of Mooney-Edwards Enterprises, Inc. ("MIS"), a sub-
sidiary of the Company. Cost of sales increased $18,751 for the three
months ended September 30, 1996, as compared to the same period for
1995. The sales of OCG Technology, Inc. ("OCGT"), PrimeCare Systems,
Inc. ("PSI") and MIS were $340, $4,705 and $161,439 respectively, for
the three months ended September 30, 1996.
Marketing, general and administrative expenses increased $58,233 for the
three months ended September 30, 1996 as compared to the same period for
1995. MIS's expenses decreased by $19,412 thereby more than offsetting
its increase in Cost of Sales. PSI's expense increase of $76,421 is due
primarily to marketing and customizing the PrimeCare(TM) Patient
Management System to meet customer needs.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1996 the Company had a current ratio of 1.3 to 1
compared to .55 to 1 as of September 30, 1995. The increase primarily
resulted from the sale of equity interests and the exercise of warrants.
Although the net loss from operations for the three months ended
September 30, 1996 was $341,467 most of the loss resulted from non-cash
charges of $187,836, which accounted for 55% of the total loss from
operations. The Company has experienced recurring losses from operations
and has been unable to provide sufficient working capital from opera-
tions and has relied significantly on the sale of equity interests in
the Company and loans from officers and shareholders to fund its opera-
tions. 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 $170,621 at September 30,
1996. In addition, the Company has Cardiointegraph equipment, in the
final stages of manufacture, which will be available to lease on a fee
for service basis. In the past, the Company's principal means of over-
coming its cash shortfalls from operations was from the sale of the
Company's common stock. During the three months ended September 30,
1996, the Company raised $70,000 through the sale of equity interests
and the exercise of warrants. 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. PSI owns the sole and exclusive right, title and interest in
the PrimeCare(TM) Patient Management System. 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 com-
mitment to purchase the software, plus monthly maintenance charges for
updates, and ties the cost directly to use. The financial benefits de-
rived by the physician from use of the PrimeCare(TM) System exceed $1.50
cost per patient visit. The Company has enhanced its software to enable
the System to interface with any compatible medical billing software.
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 physi-
cians 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 patient visits per month at $1.50 per
visit, use by 100 physicians could generate revenues of $75,000 per
month.
The Company is in the process of creating its own site to enable physi-
cians and their patients to access the PrimeCare(TM) System over the
Internet and, thereby, generate patient histories to aid the physician
in the diagnosis and treatment of an illness in the absence of an office
visit.
The medical content of the System is continually updated. 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 in early 1996. The Company currently has arrange-
ments with a number of dealers to sell the PrimeCare(TM) System and con-
tinues to enlarge its network of independent dealers. However, no as-
surances can be given that a significant number of physicians will
contract for and use the PrimeCare(TM) System.
In the past, the Company sold its Cardiointegraph ("CIG"), 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 Cardiointe-
graphs 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 re-
imbursement 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 free
the physician from the general reluctance of physicians to purchase
medical diagnostic equipment not reimbursed by Medicare.
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, the Company has not received significant revenues
from CMPD for the service. The Company is totally dependant upon CMPD
for the marketing effort to CMPD's customers. The Company does not
believe that the service will be market successfully by CMPD.
The Company believes that it could provide sufficient working capital
from operations through marketing the PrimeCare(TM) System and marketing
the CIG as a service.
Currently, the Company has no lines of credit and has no material
commitments for capital expenditures outstanding.
6
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. - Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter for
which this report is filed.
<PAGE>
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,
EXECUTIVE VICE PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
DATED: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 170,621
<SECURITIES> 0
<RECEIVABLES> 38,810
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 242,987
<PP&E> 202,086
<DEPRECIATION> 282,722
<TOTAL-ASSETS> 2,087,933
<CURRENT-LIABILITIES> 187,754
<BONDS> 0
0
10,000
<COMMON> 232,324
<OTHER-SE> 1,657,855
<TOTAL-LIABILITY-AND-EQUITY> 2,087,933
<SALES> 166,528
<TOTAL-REVENUES> 166,528
<CGS> 66,930
<TOTAL-COSTS> 507,995
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (341,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> (341,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (341,467)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
