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, 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 February 11, 1997
- ----------------------------- ----------------------------------------
Common Stock ($.01 par value) 24,251,259 Shares
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------------- -----------
Consolidated Condensed Balance Sheets
December 31, 1996 and June 30, 1996 1
Consolidated Condensed Statements of Loss for the
Three and Six Months ended December 31, 1996 and 1995 2
Consolidated Condensed Statements of Cash Flow for
the Six Months Ended December 31, 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
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Item 6. Exhibits and Reports on Form 8-K 7
<PAGE>
<TABLE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION
DECEMBER 31,1996 JUNE 30, 1996
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 416,422 $ 318,088
Receivables, trade 71,253 45,441
Other current assets 33,556 35,606
---------- ----------
Total current assets 521,231 399,135
Property and equipment, net of accumulated depreciation of
$305,638 $261,178 235,257 199,603
Proprietary technology, net of accumulated amortization of
$1,575,000 $1,275,000 1,533,702 1,725,000
Covenant not to compete, net of accumulated amortization
$225,000 $200,000 25,000 50,000
Other assets 30,007 29,233
---------- ----------
Total assets $2,345,197 $2,402,971
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to shareholders $33,344 $11,344
Accounts payable and accrued expenses 217,923 223,420
---------- ----------
Total current liabilities 251,267 234,764
---------- ----------
Shareholders' equity: (Note 4)
Preferred stock $.10 par value, Series E 10,000 10,000
Common stock $.01 par value 238,612 231,515
Additional paid-in capital 20,887,645 20,384,287
Deficit (18,972,951) (18,381,343)
Unearned compensation (Note 3) (6,876) (13,752)
---------- ----------
2,156,430 2,230,707
Less treasury stock, at cost (62,500) (62,500)
---------- ----------
Total shareholders' equity 2,093,930 2,168,207
---------- ----------
Total liabilities and
shareholders' equity: $2,345,197 $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 DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Sales $ 226,915 $ 197,814 $ 393,443 $ 359,140
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 94,560 75,456 161,490 123,635
Marketing, general and
administrative 382,496 395,349 823,561 778,181
---------- ---------- ---------- ----------
Total Expenses 477,056 470,805 985,051 901,816
---------- ---------- ---------- ----------
Net Income (Loss) ($250,141) ($272,991) ($591,608) ($542,676)
========== ========== ========== ==========
Weighted average number of
shares outstanding
during period 21,694,476 21,177,063 21,694,476 20,848,802
========== ========== ========== ==========
Loss per
Common Share ($0.01) ($0.01) ($0.03) ($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>
SIX MONTHS ENDED DECEMBER 31,
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($591,608) ($542,676)
---------- ----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 370,167 364,339
Issuance of stock and warrants for services 16,000 0
Amortization of unearned compensation 6,876 13,124
Changes in assets and liabilities
(Increase) decrease in receivables (25,812) (8,645)
(Increase) decrease in other current assets 2,050 (2,500)
(Increase) decrease in property and equipment (80,114) (26,757)
(Increase) decrease in Proprietary Technology (108,702)
(Increase) decrease in other assets (1,481) 300
(Decrease) in accounts payable
and accrued expenses (5,497) (10,325)
---------- ----------
Total adjustments 173,487 329,536
---------- ----------
Net cash used in operating activities (418,121) (213,140)
---------- ----------
Cash flows from financing activities:
Increase (decrease) in due to shareholders 22,000 90,000
Proceeds from issuance of common stock 494,455 145,000
---------- ----------
Net cash changes from investing and financing activities 516,455 235,000
---------- ----------
Net increase (decrease) in cash
98,334 21,860
Cash, beginning of period 318,088 51,645
---------- ----------
Cash, end of period $416,422 $73,505
========== ==========
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
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<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 posi-
tion as of December 31, 1996 and the results of operations for the three and
six months ended December 31, 1996 and 1995 and the statements of cash flows
for the six months ended December 31, 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 six months ended December 31, 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 realiza-
tion of assets and liquidation of liabilities in the ordinary course of busi-
ness. 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 is computed using the weighted average number of shares
outstanding during the periods. The effect of warrants 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 for services.
4. Capital Changes:
During the three months ended September 30,1996, 68,400 shares of the
Company's common stock were sold for $0.95 per share, the gross proceeds of
which were $65,000.
On December 22, 1996, the Company sold 352,300 shares of common stock
for $299,455 ($0.85 per share) in a private placement, which was exempt from
registration under Section 4(6) of the Securities Act of 1933, to individuals,
all of whom were "accredited investors."
During the three months ended September 30, 1996, warrants were exercised
to purchase 12,500 shares of the Company's common stock for the sum of $5,000
and the shares of stock were issued.
During the three months ended December 31, 1996 warrants were exercised
to purchase 240,000 shares of the Company's common stock for the sum of $111,000
and the shares of stock were issued.
During the three months ended September 30, 1996 the Company's Board of
Directors approved the issuance of warrants to purchase 1,220,000 shares of
the Company's common stock exercisable on or before July 25, 1999, at an exer-
cise price of $1.09 per share. 560,000 of these warrants were issued to Offi-
cers and Directors of the Company. On the date of issue the quoted market price
per share of the Company's common stock was less than the per share exercise
price of the warrants.
During the six months ended December 31, 1996, for services rendered in
accord with the terms of a consulting agreement, warrants were issued to pur-
chase a total of 60,000 shares of the Company's common stock at exercise prices
ranging between $0.98 to $1.62 per share with exercise dates of said warrants
expiring between July 1 to December 1, 1999. The Company reflected a total
expense of $12,000 for the six month period ending December 31, 1996.
During the three months ended December 31, 1996, pursuant to the terms of
an agreement for public relations services to be rendered to the Company, the
Company issued 4,000 shares of its common stock for services rendered to date.
The Company reflected an expense of $4,000 in its Statement of Operations for
the three months ended December 31, 1996.
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<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 $29,101 and $34,303 for the three and six months ended
December 31, 1996 as compared to the same periods for 1995 primarily as a result
of an increase in revenues of PrimeCare Systems, Inc. ("PSI") and Mooney-Edwards
Enterprises, Inc. ("MIS"), subsidiaries of the Company. Cost of sales increased
$19,104 and $37,855 for the three and six months ended December 31, 1996, as
compared to the same period for 1995. The sales of OCG Technology, Inc.
("OCGT"), PSI and MIS were $340, $32,794 and $360,309 respectively, for the six
months ended December 31, 1996.
Marketing, general and administrative expenses decreased $12,853 and increased
$45,380 for the three and six months ended December 31, 1996, respectively, as
compared to the same periods for 1995. PSI's expense decreased in the three
months ended December 31, 1996 primarily due to the $108,702 capitalization of
six months of salaries and related costs incurred in the development of the
Windows version of the PrimeCare(TM) Patient Management System. MIS's expenses
increased due to the increased sales activity in the three months and six months
ended December 31, 1996 as compared to the same periods in 1995.
Liquidity and Capital Resources
_______________________________
At December 31, 1996 the Company had a current ratio of 2.07 to 1 compared to
.55 to 1 as of December 31, 1995. The increase primarily resulted from the sale
of equity interests and the exercise of warrants. Although the net loss from
operations for the six months ended December 31, 1996 was $591,608 most of the
loss resulted from non-cash charges of $393,013, which accounted for 66% 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 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 $487,675 at December 31, 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 overcoming its cash shortfalls from
operations was from the sale of the Company's common stock. During the six
months ended December 31, 1996, the Company raised $494,455 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"), which is protected by copyrights. This
DOS based System includes a patient-centered integrated medical interview,
encounter documentation, physician and patient education data, and chart crea-
tion 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 assur-
ance audits. The medical content of the System is updated from time to time to
ensure that it reasonably reflects currently accepted medical knowledge. To ac-
complish this the Company, on September 15, 1995, entered into an agreement with
the Mount Sinai School of Medicine ("MSSM") which provides for the MSSM to as-
sume the task of updating and enhancing the medical content of the System.
Having concluded the agreement with MSSM, the Company, in early 1996, commenced
the development of a network of dealers to market the System. The Company cur-
rently has arrangements with a number of dealers to sell the PrimeCare(TM)
System and intends to continue to enlarge this network of independent dealers.
The Company markets 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 signifi-
cant 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 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 physicians could use the System routinely. It is estimated
that the average number of patient visits per month for a primary care physi-
cian 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.
However, no assurances can be given that a significant number of physicians will
contract for and use the System.
The Company has completed a Windows 95 and a Windows NT (collectively, the
"Windows") version of the System which it intends to release on or before the
end of February 1997. A number of additional features have been incorporated in
the Windows version of the System. The Company has established its own Internet
site and is in the process of completing the technology to enable physicians and
their patients to access the System over the Internet and, thereby, generate
patient histories to aid the physician in the diagnosis and treatment of an ill-
ness without an office visit.
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 consecu-
tive fiscal years and the end user purchasers (i.e., physicians and corporate
and governmental medical departments) appear to find the unit useful, the CIG
business segment has been unable to generate sufficient revenues to fund its
operations or to operate at a profit. The Company believes that lack of uni-
versal 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 free the physician
from the general reluctance of physicians to purchase medical diagnostic equip-
ment not reimbursed by Medicare. The Company has Cardiointegraph equipment in
the final stages of manufacture, which, when completed, will be available to
lease on a fee for service basis.
The Company licensed its CIG technology to Compumed, Inc. ("CMPD") to enable
CMPD to offer the CIG as a service to subscribers 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. Based on the experience to date,
the Company does not believe that the service will be marketed 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.
-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 11, 1997
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 416,422
<SECURITIES> 0
<RECEIVABLES> 71,253
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 521,231
<PP&E> 235,257
<DEPRECIATION> 305,638
<TOTAL-ASSETS> 2,345,197
<CURRENT-LIABILITIES> 251,267
<BONDS> 0
0
10,000
<COMMON> 238,612
<OTHER-SE> 1,845,318
<TOTAL-LIABILITY-AND-EQUITY> 2,345,197
<SALES> 393,443
<TOTAL-REVENUES> 393,443
<CGS> 161,490
<TOTAL-COSTS> 985,051
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (591,608)
<INCOME-TAX> 0
<INCOME-CONTINUING> (591,608)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (591,608)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
