<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-16286
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MEDPLUS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 95-4082020
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(State or other jurisdiction of (IRS Employer identification number)
incorporation or organization)
8 S. Nevada Ave., Ste. 500, Colorado Springs, Colorado 80903
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(address of principle executive offices) (Zip Code)
719-575-0044
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(Registrants telephone number, including area code)
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Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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. Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section 13 or 15 (d) of the Securities Exchange
Act of 1934 subsequent to the distribution requirements under a plan confirmed
by a court. Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 19, 1996
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Common Stock, Par-Value 8,878,611
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$.001 per share
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MEDPLUS CORPORATION
REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I PAGE
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NUMBER
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ITEM 1. - FINANCIAL INFORMATION
Balance Sheets at December 31, 1995
and March 31, 1995 3
Statements of Operations for the
Three Months and Nine Months Ended
December 31, 1995 and December 31, 1994 5
Statements of Cash Flows for the
Nine Months Ended December 31, 1995
and December 31, 1994 6
Notes to Financial Statements 7
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10
PART II
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Other Information 12
Exhibit Index. 14
Signature Page 15
2
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PART I
ITEM 1. FINANCIAL INFORMATION
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31, 1995 March 31, 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,153 $ 14,212
Accounts receivable
Prepaid expenses and other
current assets 15 1,238
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Total current assets 2,168 15,450
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PROPERTY:
Office Equipment 16,966 17,428
Furniture and Fixtures 1,982
Leasehold Improvements
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Total 18,948 17,428
Less accumulated depreciation 9,074 7,047
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Net property 9,874 10,381
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OTHER ASSETS:
Customer List (Net of amortization
of $208 at December 31, 1995
and none at March 31, 1995) 4,792
Goodwill (Net of amortization
of $17,256 at December 31, 1995
and $15,906 at March 31, 1995) 25,623 26,973
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Total other assets 30,415 26,973
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TOTAL ASSETS $ 42,457 $ 52,804
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</TABLE>
See accompanying notes to financial statements
3
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MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS CONTINUED
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable and accrued
expenses $ 236,050 $ 196,267
Notes payable (Note 4) 66,526 170,783
Deferred Salaries 171,580 171,580
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Total current liabilities 474,156 538,630
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Long Term Note Payable (Note 4) 117,555 123,555
Total liabilities 591,711 662,185
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SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par value;
authorized 2,000,000 shares;
no shares outstanding
Common stock, $.001 par value;
authorized, 30,000,000 shares;
issued and outstanding, 6,157,874
and 3,943,922 shares at December 31, 1995
and March 31, 1995 respectively 20,508 17,838
Additional paid in capital 6,574,271 6,324,712
Accumulated deficit (7,144,033) (6,951,931)
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Net shareholders' equity (549,254) (609,381)
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TOTAL $ 42,457 $ 52,804
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</TABLE>
See accompanying notes to financial statements
4
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MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ended December 31, Ended December 31,
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES: $ 17,211 $ 17,782 $ 39,162 $ 86,329
EXPENSES:
General and Administrative 26,642 30,243 95,793 216,068
Sales and Marketing 50,606 30,154 135,472 133,962
--------- --------- --------- ---------
Total Expenses 77,248 60,397 231,265 350,030
--------- --------- --------- ---------
Operating Loss (60,037) (42,615) (192,103) ( 263,701)
OTHER INCOME:
Interest Income 4
--------- --------- --------- ---------
Total Other Income 4
Net Loss (60,037) (42,615) ( 192,103) ( 263,697)
Net Loss Per Share of
Common Stock (0.01) (0.01) (0.04) (0.06)
Weighted Average Number of
Common Shares Outstanding 6,157,874 4,210,422 4,795,442 4,093,968
</TABLE>
See accompanying notes to financial statements
5
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MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTH PERIOD ENDED
December 31,
1995 1994
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<S> <C> <C>
CASH FLOWS (USED BY) OPERATING ACTIVITIES:
Net loss ($192,103) ($263,697)
Adjustments to reconcile net income (loss) to net
cash from (used) by operating activities:
Depreciation and amortization 3,585 11,645
(Increase) decrease in assets:
Prepaid expenses and other current
assets 1,223 8,046
Prepaid offering 38,686
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 39,783 121,240
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Total cash provided (used) by operating activities (147,512) (84,080)
CASH FLOWS FROM (USED BY) INVESTING ACTIVITIES:
Retirement and sale of property, plant and equipment 5,000 37,828
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Total cash provided (used) by investing activities 5,000 37,828
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES:
Payment on long term debt (6,000)
Payment of note payable (104,257) (29,000)
Proceeds from issuance of short term debt 39,800
Issuance of common stock 240,710 64,999
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Total cash from (used by) financing activities 130,453 75,799
Increase (decrease) in cash and cash equivalents (12,059) 29,547
Cash and cash equivalents at beginning of period 14,212 2,925
Cash and cash equivalents at end of period 2,153 32,472
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NON CASH FINANCING AND INVESTING ACTIVITIES:
Issuance of common stock in exchange for assets 13,081
</TABLE>
6
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MEDPLUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GOING CONCERN
The accompanying unaudited consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. As reflected in the Company's most recent 10-K for the fiscal
year ended March 31, 1995, the Company has incurred significant losses from
operations during of the years ended March 31, 1995, 1994 and 1993 and at
March 31, 1995 and 1994 have negative working capital and negative
shareholders' equity. Additionally, the Company has been unable to generate
revenues on a sustained basis. These factors may indicate that the Company
will be unable to continue as a going concern for a reasonable period of
time. The consolidated 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 as a going concern. The Company's
continuation as a going concern is dependent upon its ability to generate
sufficient cash to meet its obligations on a timely basis, to obtain
financing as may be required, and ultimately to attain successful
operations. Management is continuing its efforts to obtain additional funds
needed for the successful operation of the Company.(See Part II Other
Information, Item 5)
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of MEDPLUS
CORPORATION contain all adjustments (consisting of only normal recurring
adjustments) which, in the opinion of management are necessary to present
fairly the financial position of the Company as of the periods ended
December 31, 1995 and March 31, 1995, and the results of operations and its
cash flows for the nine and three month periods ended December 31, 1995
and December 31, 1994. Certain information and footnote disclosures
normally included in financial statements have been condensed or omitted
pursuant to rules and regulations of the Securities and Exchange
Commission, although the registrant believes that the disclosures in the
consolidated financial statements are adequate to make the information
presented not misleading.
INCOME TAXES - As of December 31, 1995 the Company has net operating loss
carry forwards of approximately $5,271,000, which can be utilized in future
periods to offset future taxable income. The net operating loss carry
forwards begin expiring in the year 2000. Due to the Company's net
operating loss position and carry forwards the adoption of SFAS 109 has no
material impact.
The unaudited consolidated financial statements included herein should be
read in conjunction with the consolidated financial statements of the
Company for the year ended March 31, 1995, included in the Company's Annual
Report on Form 10-K.
3. COMPUTATION OF NET LOSS PER SHARE
Net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding. Options and warrants are not
included because their effect would be antidilutive.
7
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4. NOTE PAYABLE TO RELATED PARTIES
Notes Payable at December 31 and March 31,1995 consists of the following:
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1995
(Unaudited)
<S> <C> <C>
Unsecured note payable to Company
director bearing interest at 10%
per annum, $10,000 together
with accrued interest, and $15,000
together with accrued interest, is
payable upon the Company obtaining
$100,000 and $500,000 in equity
financing, respectively $25,000 $25,000
Unsecured note payable to the former
President and Director of the
Company bearing interest at 18%
per annum. This note is past due
and under dispute 40,500 40,500
Unsecured note payable to the
President of the Company bearing
interest at 18% per annum. During
August, 1995, the payee elected to
convert the total due, together
with accrued interest, into shares
of the Company's common stock 59,504
Unsecured note payable to partnership
controlled by the President of the
Company bearing interest at 18% per
annum. During August, 1995, the
payee elected to convert the total
due, together with accrued interest,
into shares of the Company's common
stock 44,302
Unsecured note payable to a former
shareholder and officer of the
Company which was in dispute over
amounts owed at March 31, 1994.
The Company accrued $139,000 at
March 31, 1994. The dispute was
settled during the year ended March
31, 1995 through issuance of a
$171,288 note payable. The note is
non-interest bearing, due in equal
monthly installments of $2,000
from May 1995 through April 1997
in addition to a balloon payment of
8
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$123,288 payable May 1997. This
note has been discounted $46,256 to
reflect an effective interest rate
of 18% 119,032 125,032
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Total: 184,532 294,338
Less current portion: (66,977) (170,783)
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Long-term portion: $ 117,555 $ 123,555
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</TABLE>
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had working capital of ($ 471,988) compared to
working capital of ($ 523,180) at March 31, 1995. The increase in working
capital is primarily due to the conversion of debt to the Company's common stock
by a related party (See Note 4 to Financial Statements). The Company's current
liabilities are higher than its assets due primarily to borrowings in the form
of promissory notes, from shareholders of the Company, along with deferred
salaries accrued by officers of the Company.
The Company's liquidity position is severely strained. Liquidity needs are
currently being met from the proceeds of a private placement sold pursuant to
Regulation D under the Securities Act of 1933. Because the Company has not
achieved positive cash flow from its operating activities, the Company's ability
to continue operations is dependent upon its ability to raise additional equity
and/or debt financing. This and other factors raise substantial doubt as to the
Company's ability to continue as a going concern. Management believes the
Company needs approximately $500,000 in equity or debt financing in order to
sustain operations for the next twelve months following the period ended
December 31, 1995. However, as of December 31, 1995 there were no serious
discussions, and therefore, no viable offers of equity or debt financing for the
Company to consider. Management is continuing its efforts to raise equity
financing in order to meet its long-term and short-term liquidity needs.
Although the Company is actively engaged in activities with intent to raise
equity financing, in order to meet its long-term liquidity needs, there can be
no assurance that the Company will be able to consummate the transaction and/or
raise the additional financing necessary for continuing operations. As of
December 31, 1995 there were no known demands, commitments and uncertainties
affecting cash flows other than normal accounts payable demands.(See Part II
Other information, Item 5)
RESULTS OF OPERATIONS
Revenue derived from the sale of the Company's services decreased 3% from $
17,782 during the three month period ended December 31, 1994 to $ 17,211 during
the three month period ended December 31, 1995 and decreased 55 % from $ 86,329
during the nine month period ended December 31, 1994 to $ 39,162 during the nine
month period ended December 31, 1995. The Company's decrease in revenues for the
nine months ended December 31, 1995 is primarily attributable to a decline in
approval rates by the Company's former lender. In November, 1995 the Company
signed an agreement with Care Card Northwest ("Care Card") to provide Care
Card's two health care credit cards , Care Card Northwest and Care Line
Northwest-TM-, to health care, death care and veterinary care providers across
the nation. The Care Card programs are financed under an agreement between Care
Card and United States Bank of Oregon, a U.S. Bancorp Company, Member FDIC. It
is expected that this relationship with Care Card will significantly improve
MEDPLUS' approval rates to its health care providers across the nation.
Also in November, 1995, the Company acquired Surgical Funding Group, ("SFG"), a
provider of health care financing to plastic surgeons nationwide located in
Irvine, California. Revenues generated by the acquisition of SFG for the three
month period ended December 31, 1995 were $15,059. Without the acquisition of
SFG, revenues for the three month period ended December 31, 1995 would have
totaled $2,152 and for the nine months ended December 31, 1995 would have
totaled $24,103. The decrease in revenues for the three and nine month period
ended December 31, 1995 is due to a decrease in lending operations as the
Company transitioned its provider base over to the Care Card Northwest product
lines. (See PART II, ITEM 5. OTHER INFORMATION).
10
<PAGE>
Revenues pertaining to annual and network access fees for the three month period
ended December 31, 1995 decreased 75% to $585 from $2,302 during the three month
period December 31, 1995 and decreased 86% to $3,860 from $27,614 for the nine
month period ended December 31, 1995. The decrease in annual and network access
fees are due primarily to the lack of operating capital to support the Company's
marketing plan.
General and administrative expenses decreased 12% to $ 26,642 during the three
month period ended December 31, 1995 as compared to $ 30,243 during the three
month period ended December 31, 1994 and decreased 56% to $ 95,793 during the
nine month period ended December 31, 1995 as compared to $ 216,068 during the
nine month period ended December 31, 1994. The decrease of 12% and 56%
respectively, is due primarily to a decrease in support personnel, and related
expenses, in an effort to reduce overhead expense.
Sales and marketing expenses increased 68% to $ 50,606 during the three month
period ended December 31, 1995 as compared to $ 30,154 during the three month
period ended December 31, 1994 and increased 1% to $ 135,472 during the nine
month period ended December 31, 1995 as compared to $ 133,962 during the nine
month period ended December 31, 1994. The increases are due primarily to the
acquisition of Surgical Funding Group and their related Sales and Marketing
expenses. Without the acquisition of Surgical Funding Group, Sales and Marketing
expense would have increased 18% to $35,542 during the three month period ended
December 31, 1995 as compared to $30,154 during the three month period ended
December 31, 1994 and decreased 10% to $120,407 during the nine month period
ended December 31, 1995 as compared to $133,962 during the nine month period
ended December 31, 1994. The increase of 18% during the three month period ended
December 31, 1995 is due primarily to increased travel expense related to the
Surgical Funding Group acquisition and the Care Card Northwest Agreement. The
decrease of 10% is due primarily to a reduction in operating personnel, and
related expenses, due to the Company's severely limited operating capital.
11
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently involved in a lawsuit incidental to its
business. Management does not believe that the lawsuit will have a material
adverse effect on the Company's financial position.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
ITEM 5. OTHER INFORMATION
On July 13, 1995 the Company signed a letter of intent to acquire Surgical
Funding Group, Inc., located in Irvine, California for stock. In November, 1995
the Company completed the acquisition. Surgical Funding Group, Inc. provides
patient financing to a significant provider base of plastic surgeons nationwide
and has a strong presence in California. Under the terms of the agreement
Surgical Funding will retain its present marketing facilities in California.
Also P. James Voloshin, MD, Surgical Funding's President and founder, has
accepted a nomination and been elected to serve on the Board of Directors of
MEDPLUS.
In November, 1995 the Company reached an agreement with Care Card Northwest
("Care Card") to provide Care Card's two health care credit cards, Care Card
Northwest-TM- and Care Line Northwest-TM-, to health care, death care and
veterinary care providers across the nation. The Care Card Northwest and Care
Line Northwest programs are financed under an agreement between Care Card
Northwest and United States Bank of Oregon, a U.S. Bancorp Company, Member
FDIC. Both MEDPLUS and Care Card are in the health care financial services
industry providing patient financing to health care providers. Under the terms
of the agreement MEDPLUS and Care Card Northwest will mutually develop and
expand Care Card's health care credit card and loan programs. MEDPLUS will
market the Care Card products in all states other than Washington and Oregon
through its nationwide marketing affiliates. MEDPLUS will also transfer its
provider/merchant account base to the Care Card Northwest program. It is
expected that this relationship with Care Card Northwest will significantly
improve MEDPLUS' approval rates to its health care providers across the nation.
On November 22, 1995 the Company offered a letter of intent to acquire Yes
Charge, located in Ventura, California for stock. Yes Charge markets a non-
recourse credit card to Dental Care providers throughout the State of
California. On February 26, 1995 Yes Charge accepted the letter of intent and
negotiations are continuing.
On November 4, 1995 the Company moved its corporate headquarters to 8 S.
Nevada Ave., Ste. 500, Colorado Springs, Colorado, 80903. The Company is
subleasing approximately 1700 square feet of office space.
12
<PAGE>
On February 28, 1996, the Company executed a non-binding Letter of Intent
with Starboard Holding Co. (Starboard), located in the Cayman Islands, to
complete a private placement purchase of the Company's common stock. Under the
terms of the letter of intent Starboard will purchase 28,125,000 shares of the
Company's common stock at a purchase price of $0.3556 per share resulting in
net proceeds to the Company of approximately $8,500,000. In addition, Starboard
will be granted warrants to purchase up to an additional 9,375,000 shares of the
Company's common stock, over a period of 48 months, at purchase prices ranging
from $0.25 to $1.00 per share. In addition to the sale of common stock to
Starboard, the Company will agree to increase the size of its Board of Directors
to a total of seven (7) members four (4) of whom will be representatives of
Starboard. The funds will be used by the Company to implement its marketing
plan, to fund future acquisitions and for operating capital. The sale of the
Company's common stock is subject to the approval by the Company's shareholders
to an increase in its authorized shares of common stock from 30,000,000 to
100,000,000 shares and to entering into a mutually satisfactory formal stock
purchase agreement no later than April 1, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
(a) The following exhibit is attached hereto:
Exhibit
No. Title of Document
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27 Financial Data Schedule
13
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EXHIBIT INDEX
Exhibit
No. Title of Document
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27 Financial Data Schedule
14
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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 thereunto duly authorized.
MEDPLUS CORPORATION
March 19, 1996 James W. Snyder
-----------------------------
James W. Snyder, Chairman and
Chief Executive Officer
March 19, 1996 Tim C. Deherrera
-----------------------------
Tim C. DeHerrera, President
March 19, 1996 Robert T. Ryman
-----------------------------
Robert T. Ryman, Vice President
of Finance, Chief Financial
Officer and Chief Accounting
Officer.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,153
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,168
<PP&E> 18,948
<DEPRECIATION> 9,074
<TOTAL-ASSETS> 42,457
<CURRENT-LIABILITIES> 474,156
<BONDS> 0
20,508
0
<COMMON> 0
<OTHER-SE> (569,762)
<TOTAL-LIABILITY-AND-EQUITY> 42,457
<SALES> 17,211
<TOTAL-REVENUES> 17,211
<CGS> 0
<TOTAL-COSTS> 77,248
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (60,037)
<INCOME-TAX> 0
<INCOME-CONTINUING> (60,037)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (60,037)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
