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 December 31, 1995
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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.
-------------------------------------------------------------------
(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)
- ---------------------------------------------------------------------------
(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
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------------- -----------
Consolidated Condensed Balance Sheets
December 31, 1995 and June 30, 1995 1
Consolidated Condensed Statements of Loss for
the Three Months Ended December 31, 1995 and 1994 2
Consolidated Condensed Statements of Cash Flow for the
Three Months Ended December 31, 1995 and 1994 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>
DECEMBER 31, 1995 JUNE 30, 1995
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 73,505 $ 51,645
Receivables, trade 42,243 33,598
Other current assets 24,446 21,946
---------- ---------
Total current assets 140,194 107,189
Property and equipment, net of
accumulated depreciation of
$219,737 $180,398 230,153 242,732
Proprietary Technology, net of
accumulated amortization of
$975,000 $675,000 2,025,000 2,325,000
Covenant not to compete, net of
accumulated amortization of
$175,000 $150,000 75,000 100,000
Other assets 32,754 33,054
---------- ----------
Total assets $2,503,101 $2,807,975
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to shareholders $101,344 $11,344
Accounts payable and
accrued expenses 153,034 163,359
---------- ----------
Total current liabilities 254,378 174,703
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 212,107 205,107
Additional paid-in capital 18,559,695 18,421,695
Deficit (16,455,264) (15,912,591)
Unearned compensation (Note 3) (25,315) (38,439)
------------ ------------
2,311,223 2,695,772
Less treasury stock, at cost (62,500) (62,500)
----------- -----------
Total shareholders' equity 2,248,723 2,633,272
Total liabilities and
shareholders' equity: $2,503,101 $2,807,975
========== ==========
<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 SIX MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue:
Sales $ 197,814 $ 109,363 $ 359,140 $ 281,886
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 75,456 34,036 123,635 92,836
Marketing, general and
administrative 395,349 188,565 778,055 368,748
--------- --------- --------- ---------
Total Expenses 470,805 222,601 901,816 461,584
Net Income (Loss) (272,991) (113,238) (542,676) (179,698)
========== ========= ========= =========
Weighted average number
of shares outstanding
during period 21,177,063 18,716,370 20,848,802 18,716,370
========== ========== ========== ===========
Loss per
Common Share ($0.01) (*) ($0.03) ($0.01)
=========== ========== =========== ===========
* Less than ($.01) per share
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
2
<PAGE>
<TABLE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(542,676) $(179,698)
---------- ----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 364,339 25,466
Issuance of stock for services 781
Amortization of unearned compensation 13,124 13,124
Changes in assets and liabilities
(Increase) decrease in receivables (8,645) 3,231
(Increase) decrease in other current assets (2,500) (1,736)
(Increase) decrease in property and equipment (26,757) (30,665)
(Increase) decrease in other assets 300 1,136
(Decrease) in accounts payable
and accrued expenses (10,325) (11,343)
---------- ---------
Total adjustments 329,536 (6)
---------- ---------
Net cash used in operating activities (213,140) (179,704)
---------- ---------
Cash flows from investing activities:
Purchase of fixed assets (16,282)
Cash flows from financing activities:
Due to Shareholders 90,000
Proceeds from issuance of common stock 145,000 215,000
---------- ---------
Net cash changes from investing
and financing activities 235,000 198,718
---------- ---------
Net increase (decrease) in cash 21,860 19,014
Cash, beginning of period 51,645 104,867
---------- ---------
Cash, end of period $73,505 $123,881
========== =========
<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 consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the
financial position as of December 31, 1995 and the results of operations
for the three and six months ended December 31, 1995 and 1994 and the
statements of cash flows for the six months ended December 31, 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 six months ended December 31, 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 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 each of the three month periods, ended September 30, 1995 and ended
December 31, 1995, warrants were issued to purchase 150,000 shares of the
Company's Common Stock, par value $.01 per share (in total warrants to
purchase 300,000 shares). Exercise of these warrants by the holders 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, and the three months ended
December 31, 1995, 450,000 shares and 150,000 shares (for a total of 600,000
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 $120,000.
During the three months ended December 31, 1995, warrants were exercised to
purchase 100,000 shares of the Company's Common Stock, par value $.01 per
share for the sum of $25,000 and the shares of stock were issued.
4
<PAGE>
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 increased $88,451 and $77,254 for the three months and six
months ended December 31, 1995 as compared to the same periods for 1994
primarily as a result of an increase in revenues of Mooney-Edwards Enterprises,
Inc. ("MIS"), a subsidiary of the Company. Cost of sales increased $41,420
and $30,799 for the three and six months ended December 31, 1995, as compared
to the same periods for 1994. The sales of OCG Technology, Inc. ("OCGT"),
PrimeCare Systems, Inc. ("PSI") and MIS were $5,556, $10,681 and $342,752
respectively for the six months ended December 31, 1995.
Marketing, general and administrative expenses increased $206,784 and $409,433
for the three and six months ended December 31, 1995 as compared to the same
periods for 1994. The increases are primarily due to the charge of $150,000
per quarter for the amortization of Proprietary Technology resulting from
the acquisition of PSI by the Company in May of the 1994 fiscal year, which
charges were not recorded in the corresponding quarters of the three and six
months ended December 31, 1994.
Liquidity and Capital Resources
At December 31, 1995 the Company had a current ratio of .55 to 1 compared
to 1.83 to 1 as of December 31, 1994. The decrease primarily resulted
from the operating losses. Although the net loss from operations for the
six months ended December 31, 1995 was $542,676 most of the loss
resulted from non-cash charges of $364,339, which accounted for 67%
of the total loss from operations. The Company has experienced recurring
losses fom 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 $115,748 at December 31, 1995. In
addition, the Company has 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 overcoming its cash shortfalls from
operations was from the sale of the Company's common stock.
During the six months ended December 31, 1995, the Company raised
$145,000 through the sale of equity interests and the exercise of warrants.
The Company raised an additional $90,000 through borrowings from Shareholders.
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
<PAGE>
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.
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
could 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 ("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 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, 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. There can be no assurance that the
service can be marketed successfully.
6
<PAGE>
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 will not commence
until the manufacture of the units to be leased has been completed.
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.
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.
7
<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: February 13, 1996
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 73,505
<SECURITIES> 0
<RECEIVABLES> 42243
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 140,194
<PP&E> 230,153
<DEPRECIATION> 219,737
<TOTAL-ASSETS> 2,503,101
<CURRENT-LIABILITIES> 254,378
<BONDS> 0
0
20,000
<COMMON> 212,107
<OTHER-SE> 2,016,616
<TOTAL-LIABILITY-AND-EQUITY> 2,503,101
<SALES> 359,140
<TOTAL-REVENUES> 359,140
<CGS> 123,635
<TOTAL-COSTS> 901,816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (542,676)
<INCOME-TAX> 0
<INCOME-CONTINUING> (542,676)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (542,676)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
