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, 1997
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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)
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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 10, 1997
- ---------------------------- ---------------------------------------
Common Stock ($.01 par value) 24,516,759 Shares
<PAGE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I. - FINANCIAL INFORMATION PAGE NUMBER
- -------------------------------- -----------
Consolidated Condensed Balance Sheets
September 30, 1997 and June 30, 1997 1
Consolidated Condensed Statements of Loss for the
Three Months Ended September 30, 1997 and 1996 2
Consolidated Condensed Statements of Cash Flow for
the Three Months Ended September 30, 1997 and 1996 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>
<TABLE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
SEPTEMBER 30,1997 JUNE 30, 1997
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 88,279 $ 167,996
Receivables, trade 78,262 87,963
Demand notes due from officers/directors/affiliates 15,000 123,500
Other current assets 12,320 8,825
----------- -----------
Total current assets 193,861 388,284
----------- -----------
Property and equipment, net of accumulated depreciation
of $379,472 $353,122 171,524 194,835
Proprietary technology, net of accumulated amortization
of $2,039,588 $1,879,863 1,154,922 1,314,647
Other assets 116,786 117,139
----------- -----------
Total assets $ 1,637,093 $ 2,014,905
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 108,621 $ 166,944
Note Payable - related party 11,344 11,344
Due to Officer (non-interest bearing) 15,121 15,121
----------- ------------
Total current liabilities 135,086 193,409
----------- ------------
Shareholders' equity: (Note 4)
Preferred stock $.10 par value, Series E 10,000 10,000
Common stock $.01 par value 245,167 245,152
Additional paid-in capital 21,528,635 21,521,150
Deficit (20,190,295) (19,863,306)
Subscription receivable (29,000) (29,000)
----------- -----------
1,564,507 1,883,996
Less treasury stock, at cost (62,500) (62,500)
----------- -----------
Total shareholders' equity 1,502,007 1,821,496
----------- -----------
Total liabilities and shareholders' equity: $ 1,637,093 $ 2,014,905
=========== ===========
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
Page 1
<PAGE>
<TABLE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1997 1996
-------- --------
<S> <C> <C>
Revenue:
Sales $ 208,599 $ 166,528
---------- ----------
Costs and expenses:
Cost of sales 64,495 66,930
Marketing, general and
administrative 471,350 441,065
Interest - net (257) -
---------- ----------
Total Expenses 535,588 507,995
---------- ----------
Net Income (Loss) $ (326,989) $ (341,467)
========== ==========
Weighted average number of
shares outstanding
during period 24,516,759 23,151,559
========== ==========
Loss per Common Share $ (0.01) $ (0.01)
========== ==========
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
Page 2
<PAGE>
<TABLE>
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(326,989) $(341,467)
Adjustments to reconcile net income (loss) ---------- ----------
to net cash used in operating activities:
Depreciation and amortization 186,428 184,397
Issuance of stock and warrants for services 7,500 0
Amortization of unearned compensation 0 3,439
Changes in assets and liabilities
(Increase) decrease in receivables 9,701 6,631
(Increase) decrease in demand notes 108,500 0
(Increase) decrease in other current assets (3,495) 2,050
(Increase) decrease in property and equipment (3,039) (24,027)
(Increase) decrease in Proprietary Technology 0 0
(Increase) decrease in other assets 0 (1,480)
(Decrease) in accounts payable
and accrued expenses (58,323) (47,010)
---------- ----------
Total adjustments 247,272 124,000
---------- ----------
Net cash used in operating activities (79,717) (217,467)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 0 70,000
---------- ----------
Net cash changes from financing activities 0 70,000
---------- ----------
Net increase (decrease) in cash (79,717) (147,467)
Cash, beginning of period 167,996 318,088
---------- ----------
Cash, end of period $ 88,279 $ 170,621
========== ==========
<FN>
See accompanying notes to consolidated condensed financial statements
</TABLE>
Page 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 September 30, 1997 and the results of operations for the three
months ended September 30, 1997 and 1996 and the statements of cash flows for
the three months ended September 30, 1997 and 1996. The June 30, 1997 balance
sheet has been derived from the Company's audited financial statements.
The results of operations for the three months ended September 30, 1997
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 recover-
ability 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, 1997, for services rendered
in accord with the terms of a consulting agreement, warrants were issued to
purchase a total of 30,000 shares of the Company's common stock at exercise
prices ranging between $0.59 to $0.77 per share with exercise dates of said
warrants expiring between July 1 to September 1, 2000. The Company reflected a
total expense of $6,000 for the three month period ending September 30, 1997.
During the three months ended September 30, 1997, pursuant to the terms
of an agreement for public relations services to be rendered to the Company,
the Company issued 1,500 shares of its common stock for services rendered to
date. The Company reflected an expense of $1,500 in its Statement of
Operations for the three months ended September 30, 1997.
Page 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 $42,071 for the three months ended September 30, 1997
as compared to the same periods for 1996 primarily as a result of an increase
in revenues of Mooney-Edwards Enterprises, Inc. ("MIS"), a subsidiary of the
Company. Cost of sales decreased by $2,435 for the three months ended
September 30, 1997 as compared to the same period for 1996. The sales of OCG
Technology, Inc. ("OCGT"), Prime Care Systems, Inc. ("PSI") and MIS were $0,
$1,884 and $206,715 respectively, for the three months ended September 30,
1997.
Marketing, general and administrative expenses increased $30,285 for the three
months ended September 30, 1997 as compared to the same period for 1996. OCGT's
expense increased in the three months ended September 30, 1997, due to
increased NASDAQ fees and the cost of warrants issued for services. MIS's
expenses increased due to the increased sales activity in the three months
ended September 30, 1997 as compared to the same period in 1996.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1997 the Company had a current ratio of 1.43 to 1 compared to
1.29 to 1 as of September 30, 1996. Although the net loss from operations for
the three months ended September 30, 1997 was $326,989 most of the loss
resulted from non-cash charges of $193,928, which accounted for 59% 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 the exercise of warrants 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 $186,541 at September 30, 1997. The
Company also has $44,000 of demand notes due from officers and directors
related to their exercise of warrants. 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 three months ended September
30, 1997, the Company has not raised any money through the sale of equity
interests and the exercise of warrants. However, the Company believes it will
provide additional working capital through the sale of equity interests in the
Company and through the exercise of warrants. Although, in the past, the
Company has been able to provide working capital through the sale of equity
interests in the Company and through the exercise of warrants, 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 all right, title and interest in the PrimeCare(TM) Patient
Management System (the "PrimeCare(TM) System"), which is protected by
copyrights. The PrimeCare(TM) System comprises a patient-centered integrated
medical interview, encounter documentation, patient education and physician
reference materials, 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 PrimeCare(TM)
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 completed development of the Windows 95/NT version the
PrimeCare(TM) System and has also completed an interface which enables the
PrimeCare(TM) System to communicate with other systems used in medical
facilities. This provides a method for these systems to transfer information
to the System, such as patient demographics and appointment scheduling. The
Company intends to continue to expand the interface capabilities to enable the
PrimeCare(TM) System to transfer information (such as billing information
including E&M codes, ICD-9 codes and CPT codes) to these other systems. The
Company has ceased supporting its DOS version of the PrimeCare(TM) System. The
medical content of the System is also 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 System.
The Company markets the PrimeCare(TM) 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 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 physician is between 500 and 600.
Assuming 500 patient visits per month at $1.50 per visit, each 100 physicians
using the System could generate revenues of $75,000 per month for the Company.
However, no assurances can be given that a significant number of physicians
will contract for and use the PrimeCare(TM) System.
The Company has commenced marketing the Windows 95/NT version of the
PrimeCare(TM) System. The Company currently has arrangements with a number of
dealers to sell the PrimeCare(TM) System and continues to enlarge this network
of independent dealers. A program has been commenced to recruit distributors
who currently sell, install, and service medical office and billing systems to
medical facilities, to market the PrimeCare(TM) System. MIS is the first of
such dealers to be recruited and has licensed and installed the Windows 95/NT
version of the PrimeCare(TM) System in medical facilities on a pay per use
basis. However, no assurances can be given that the company will be able to
recruit a significant number of distributors who currently sell, install, and
service medical office and billing systems to medical facilities.
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 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 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 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 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 Window 95/NT version of the PrimeCare(TM)
System and expanding the operations of MIS.
Currently, the Company has no lines of credit and has no material commitments
for capital expenditures outstanding.
<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 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: November 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 88,279
<SECURITIES> 0
<RECEIVABLES> 78,262
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 193,861
<PP&E> 171,524
<DEPRECIATION> 379,472
<TOTAL-ASSETS> 1,637,093
<CURRENT-LIABILITIES> 135,086
<BONDS> 0
0
10,000
<COMMON> 245,167
<OTHER-SE> 1,246,840
<TOTAL-LIABILITY-AND-EQUITY> 1,637,093
<SALES> 208,599
<TOTAL-REVENUES> 208,599
<CGS> 64,495
<TOTAL-COSTS> 535,588
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (257)
<INCOME-PRETAX> (326,989)
<INCOME-TAX> 0
<INCOME-CONTINUING> (326,989)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (326,989)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
