<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
MARCH 31, 1995 0-16286
MEDPLUS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 95-4082020
(State of other jurisdiction of identification (IRS Employer number)
incorporation or organization)
8 S. NEVADA AVE., STE. 500
COLORADO SPRINGS, COLORADO 80903
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number,
including area code: (719) 575-0044
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of class)
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
The aggregate market value of voting common stock held by non affiliates of
the registrant was approximately $ 460,000 based on the last reported average
bid and asked price of the common stock on the NASDAQ Bulletin Board
Reporting System on July 12, 1995.
The number of shares outstanding of the issuer's common stock as of July 12,
1995: 3,943,922.
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MEDPLUS CORPORATION
PART I
ITEM 1. BUSINESS
MEDPLUS CORPORATION ("the Company") was incorporated in Delaware in
December, 1986 under the name Vision Technologies International, Inc.,
primarily for the purpose of the design, research, development, manufacture
and sale of intraocular lenses and other ophthalmic devices and products.
Management of the Company, in late 1992, decided to redirect the Company's
activities into the health care financial services industry. As a result, in
November, 1992, the Company acquired a 100% interest in the stock and assets
of Lincoln Professional Services Corporation ("LPS") and Patient Plus, Inc.
("PPI"). Both LPS and PPI are chartered in the State of Texas and have been
in the medical and dental patient financing business since 1988. PPI
originally operated under the name Lincoln Professional Services Corporation
and uses the trade name of PATIENT PLUS - Registered Trademark - for its
product portfolio. PPI solicits, trains, and works as a liaison between
health care professionals and lenders. Both LPS and PPI are wholly owned
subsidiaries of MEDPLUS CORPORATION. The Company intends to utilize the PPI
identity for all of its direct health care provider activities.
In November, 1992, Financial Health Network, Inc., a Colorado
corporation involved in marketing patient financing to health care providers,
merged with the Company's LPS subsidiary. LPS began brokering patient
financing to dentists in early 1988 under the name of PORCELAIN CREDIT. Due
to its acceptance by the dental community, by mid-1989 the program had been
expanded to include audiologists, hospitals, day surgery centers, and medical
doctors under the tradename PATIENT PLUS.
In January, 1993, the Company's Articles of Incorporation were amended
to change the Company's name to MEDPLUS CORPORATION to more adequately
reflect the nature of its current and future operations. The Company
maintains corporate headquarters in Colorado Springs, Colorado.
INDUSTRY BACKGROUND
The health care industry has experienced significant changes over the
past decade in the way health care providers are reimbursed and has put
pressure on health care managers to control and reduce costs while
maintaining the quality of patient care. The new payment methods, including
prospective fixed price payments (DRG's), managed care discounts,
selective-price contracts and capitated payment arrangements now require
providers to have a much better understanding of the actual costs associated
with providing health care products and services.
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Changes in the quantity and the quality of health care reimbursement, as
well as the realization that operational effectiveness and efficiencies could
be gained through the utilization of outside vendors and services has led to
the creation of numerous support and service industries in the health care
environment. For example, the last decade has seen a tremendous increase in
managed care facilities, consolidation of "for profit" hospitals, practice
management consulting firms, centralized billing agencies, temporary staffing
agencies, reimbursement management consulting firms, claims management and
electronic claims processing service bureaus. The Company believes that its
products and services are positioned within this health care market.
The Company's primary objective is to capitalize on current and future
opportunities, in the health care industry, by addressing the problems
brought about by a unique combination of poor consumer economics and a
growing crisis in health care costs. Many households in the United States are
now spending up to 25% of household income for health care products and
services. This self-pay portion of health care expenditures reached
approximately $160 Billion in 1993. Estimates indicate that this component of
the overall health care bill will continue to grow at approximately 15%
annually.
PRODUCTS
The health care industry entails several different components. The
Company's products are positioned in the credit component of the industry.
More specifically, the Company's products are involved in pre-funding the
self-pay portion of patient health care and specialty receivables.
Pre-funding would be described predominantly as cash advance and credit
arrangements with health care and specialty providers.
The Company has developed two products, through its Lincoln Professional
Services Corporation subsidiary, to generate non-recourse, pre-funded or cash
advanced funding for health care and other specialty providers while offering
consumers of health care and other specialty services convenient and
manageable financing programs. These products are:
1. PATIENT PLUS -Registered Trademark-
2. CURRENT CARE -TM-
PATIENT PLUS - The PATIENT PLUS product provides the health care
provider a pre-funded, or cash advance, payment of approximately 95% of the
patient's self-pay accounts receivable balance. The Company's lenders
purchase the self-pay portion of the health care provider's qualified patient
self-pay receivables on a non-recourse basis. The Company's revenues are
derived from a service fee that is deducted from the receivable balance paid
to the health care provider. Annual and network access fees are collected
from participating health care providers and, generally, the product provides
the provider their money within a week to ten days. Once approved by the
lender the health care consumer, or patient, receives a private label PATIENT
PLUS credit card which can
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be used at any health care or specialty establishment participating in the
PATIENT PLUS network program.
CURRENT CARE - CURRENT CARE is a service designed specifically for the
funeral home, or death care, industry and functions in much the same manner
as the Company's PATIENT PLUS product. The Company's lenders purchase the
death care provider's qualified client receivables on a non-recourse basis
and advance the provider approximately 95% of the client's accounts
receivable balance. Once again the Company's revenues are derived from a
service fee that is deducted from the receivable balance paid to the death
care provider. Annual and network access fees are collected from the
participating funeral homes and the funeral home receives its money within a
week to ten days. Once approved by the lender the death care consumer
receives a PATIENT PLUS credit card which also can be used at any health
care, or specialty, establishment participating in the PATIENT PLUS network
program.
MARKETING
The primary market for the Company's products is a broad base of health
care and specialty providers. The Company markets its private label credit
card by entering into licensing and support agreements with industry leaders
in each of several specialty areas of the health care and death care
industries. The Company manages and services these agreements with a largely
identical underlying portfolio of products. However, marketing
differentiation is accomplished through a series of sales strategies in
combination with the Company's private label finance package designed to
address the specific needs of each individual specialty.
The Company primarily markets its products and services through an
independent sales representative organization comprised of 248 sales
representatives throughout the United States and has contracted with an
alliance partner currently marketing the Company's product to the death care
industry. In both cases, these partners have an established, ongoing
relationship with the provider and have existing members and/or sales
organizations nationwide. The Company continues to identify and market to
prospective alliance companies. The Company's marketing arrangements provide
national coverage while reducing the costs associated with an in-house sales
organization.
In addition to the marketing arrangements mentioned above, the Company
will continue direct marketing to specific target markets. The Company's
direct marketing efforts will continue to focus on select provider accounts,
such as hospital and clinic systems, as well as consumer groups.
COMPETITION
The self-pay patient financing industry is fragmented and consists of
many small firms similar to the Company. There are firms with greater
resources and larger client bases than the Company's, however, there are no
clear market leaders in this segment.
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The Company currently anticipates that there are between 40 and 50 firms
which it could identify as competitors throughout the United States. The
number of firms competing within the industry remains relatively small
without any significant large company participants. However, the nature of
the health care crisis today and the increasing awareness among consumers and
providers of health care has created a particularly keen awareness of this
emerging market. As a result, the Company has seen an increasing number of
start-ups and expects to see new entrants to the market over time.
Although there are a few competitor organizations that have been
providing products and services for some number of years the industry remains
relatively immature. There are currently no centralized associations,
national organizations, or organized industry groups. This is largely the
result of the regional and fragmented nature of the industry. The Company
anticipates that as the industry grows and matures, and as more health care
providers become aware of the services that the industry has to offer,
opportunities for growth through acquisition may occur.
PRODUCT LIABILITY INSURANCE
Due to the nature of the Company's current and future activities, the
Company does not currently carry Product Liability Insurance nor does the
Company foresee a need for such coverage in the future.
TRADEMARKS
The Company currently has one registered trademark, "PATIENT PLUS
- -Registered Trademark- " along with its respective design. The Company and
its subsidiaries utilize this mark in connection with the marketing and
identification of certain of its products and services. The Company believes
this mark is valuable and material to it and its subsidiaries' marketing
efforts.
EMPLOYEES
At March 31, 1995, the Company had 6 employees. None of the Company's
employees are represented by a labor organization. The Company considers its
relations with its employees to be satisfactory.
ITEM 2. PROPERTY
The Company's facilities are comprised of a 3,800 square foot
administrative office and a 2000 square foot storage storage unit/warehouse
in Colorado Springs, Colorado. The office space is owned by a Real Estate
Limited Partnership of which an officer and director of the Company is the
Managing General Partner who has not charged the Company rent for use of the
space. The office space is suitable, adequate and fully utilized.
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The Company's storage unit/warehouse in Colorado Springs is used for storage
of Company records and files and is leased on a month to month basis.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved in lawsuits incidental to its
business. Management does not believe that any of the lawsuits will have a
material adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
ended March 31, 1995 to a vote of security holders through the solicitation
of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On September 17, 1987, the Company made an initial public offering of
5,185,000 shares of common stock at a price of $1.00 per share* as Vision
Technologies International, Inc.. The Stock is traded on the NASDAQ Bulletin
Board under the symbol MPPI. The high and low bid prices are set forth
through March 31, 1995 by fiscal quarter on the following table:
<TABLE>
<CAPTION>
BID HIGH BID LOW BID
- --- -------- -------
<S> <C> <C>
1st quarter ended June 30, 1987 N/A N/A
2nd quarter ended September 30, 1987** 2 1/2 1
3rd quarter ended December 31, 1987 2 3/4 3/8
4th quarter ended March 31, 1988 1 3/8 3/4
1st quarter ended June 30, 1988 1 1/2 15/16
2nd quarter ended September 30, 1988 2 1/16 7/8
3rd quarter ended December 31, 1988 2 7/16 1 3/4
4th quarter ended March 31, 1989 1 3/4 7/8
1st quarter ended June 30, 1989 31/32 3/4
2nd quarter ended September 30, 1989 27/32 3/8
3rd quarter ended December 31, 1989 5/8 1/4
4th quarter ended March 31, 1990 9/32 1/16
1st quarter ended June 30, 1990 5/8 1/8
2nd quarter ended September 30, 1990 5/8 1/8
3rd quarter ended December 31, 1990 3/8 1/16
4th quarter ended March 31, 1991 3/8 1/8
1st quarter ended June 30, 1991 3/8 1/32
2nd quarter ended September 30, 1991 5/8 1/32
3rd quarter ended December 31, 1991 1/16 1/32
4th quarter ended March 31, 1992* 11/16 1/32
1st quarter ended June 30, 1992 1/4 1/16
2nd quarter ended September 30, 1992 1/4 1/16
3rd quarter ended December 31, 1992 1/2 1/8
4th quarter ended March 31, 1993 1/2 1/8
</TABLE>
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<TABLE>
<S> <C> <C>
1st quarter ended June 30, 1993 9/16 1/16
2nd quarter ended September 30, 1993 7/8 3/8
3rd quarter ended December 31, 1993 15/16 7/16
4th quarter ended March 31, 1994 11/16 1/4
1st quarter ended June 30, 1994 11/16 1/4
2nd quarter ended September 30, 1994 5/16 1/32
3rd quarter ended December 31, 1994 1/4 1/20
4th quarter ended March 31, 1995 1/4 1/14
</TABLE>
* In February 1992 the Company effected a 1 for 10 reverse stock split. One
new share was exchanged for each pre-existing 10 common shares. The tables
above do not reflect an adjustment of stock prices but rather are actual
historic prices based on the number of shares issued and outstanding at each
period. The March 31, 1992 prices incorporate the reverse stock split and
shares outstanding upon completion of the reverse stock split.
The Company has not declared any cash dividends on its common equity in
the past two years and has no present intention to pay cash dividends in the
foreseeable future.
** Period from September 18, 1987 to September 30, 1987.
The foregoing prices represent high and low closing bid prices, which
reflect quotations between dealers without adjustments for markups, markdowns
or commissions and may not represent actual transactions. On July 12, 1995,
the closing price of the Company's common stock on the NASDAQ Bulletin Board
was $.17 bid and $.21 asked. As of July 12, 1995 and to the best of the
Company's knowledge, there were approximately 700 holders of its common
stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, for the periods and at the dates
indicated, selected consolidated financial data for the Company. The data
includes results of operations of acquired companies subsequent to the
effective date of each acquisition. The selected consolidated financial
data for the five fiscal years ended March 31, 1995 have been derived from
the audited consolidated financial statements of the Company. This
information should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Revenues $ 103,523 $ 52,468 $ 17,654 $ 0 $ 583,286
Income/(Loss)
From Operations (480,924) (588,611) (478,156) (280,017) (1,381,590)
Income/(Loss)
From Operations
Per Share (0.12) (0.14) (0.13) (0.18) (1.05)
YEAR ENDED MARCH 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $ 52,804 $ 218,960 $ 398,021 $ 542,178 $1,382,813
Total Liabilities 662,184 550,966 378,667 147,058 678,526
Working Capital* (523,180) (498,300) (154,910) 207,096 22,955
Long Term Debt
and Capitalized
Leases 123,555 0 4,587 0 0
Stockholders' Equity (609,381) (332,006) 19,354 395,120 704,287
</TABLE>
NOTE
* In computing the Company's working capital for fiscal year 1991,
management considered it appropriate to exclude deferred revenue related to
product sales to Staar Surgical due to ongoing litigation with Staar
Surgical. If such deferred revenue was included in the determination of
working capital at March 31, 1991 the Company's working capital would have
been negative ($182,863) and the Company's current liabilities would have
been higher than its current assets by approximately $182,863.
Prior to 1993, the Company was in the business of the design, research,
development, manufacture and sale of intraocular lenses and other ophthalmic
products. Management of the Company, in late 1992, decided to redirect the
Company's activities into the health care financial services industry.
Therefore, the revenues for the year ended March 31, 1991 are associated with
the liquidation of certain assets pertaining to the Company's prior
activities. The Company had no operations during the year ended March 31,
1992 as it was in the process of redirecting the Company's activities into
other viable industries and was inactive save for administrative expenses. As
stated above, the Company, in late 1992, decided to redirect the Company's
activities into the health care financial services industry through the
acquisition of Lincoln Professional Services and Financial Health
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Network. All the revenues and start-up costs associated with the Company's
operations relating to its health care financial services products are
reflected in the Selected Financial Data for the years ended March 31, 1993,
1994 and 1995.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated the funds necessary to meet its
working capital needs through internally generated funds, the private sale of
common stock in August 1987 and prior years, and the sale of common stock in
its initial public offering in September 1987.
At March 31, 1995, the Company had working capital of ($523,180) compared
to working capital of ($498,300) at March 31, 1994. The decline in working
capital is primarily due to the Company's net loss for the twelve months
ended March 31, 1994. The Company's current liabilities are higher than its
assets due primarily to borrowings, in the form of one year promissory notes,
from shareholders of the Company along with deferred salaries accrued by
officers of the Company which are to be paid out of future financings.
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 the Company's 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 twelve months following
the year ended March 31, 1995. However, as of March 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 March 31, 1995 there were no known demands,
commitments and uncertainties affecting cash flows other than normal accounts
payable demands.
RESULTS OF OPERATIONS
REVENUE
Revenue derived from the sale of the Company's products was $103,523 for
the fiscal year ended March 31, 1995 as compared to $52,468 operating revenue
for the fiscal year 1994 and $17,654 operating revenue for fiscal year 1993.
The Company's revenue increase over fiscal year 1994 is primarily
attributable to the introduction and marketing launch of a new product which
resulted in obtaining new customer accounts. The Company spent most of fiscal
year 1993 developing its new private label health care credit
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card during which time the Company did not generate any revenues. The Company
introduced its new health care credit card in late December 1993 in twenty
eight states. The Company is currently marketing its credit card in forty one
states through its Strategic Alliance Marketing Program. The Company's
revenue increase in fiscal year 1994 over fiscal year 1993 is primarily
attributable to the Company's have a full 12 months of revenues in fiscal
Year 1994 as opposed to four months of revenues in fiscal Year 1993 due to
product development activities. All of the Company's revenues for the three
years ended March 31, 1994 were derived in the domestic market.
Revenues pertaining to annual and network access fees for the years ended
March 31, 1995, 1994 and 1993 were $27,614, $11,512 and less than $1,000
respectively.
OTHER OPERATING EXPENSES
Sales and Marketing expenses decreased by 25% to $189,385 for the fiscal
year ended March 31, 1995 as compared to $253,530 expense for fiscal year
1994 and zero expense for fiscal year 1993. The 25% decrease in sales and
marketing expenses during fiscal year 1995 are attributable to cost reduction
measures due to the Company's strained financial position. The increase in
sales and marketing expenses during fiscal year 1994 is primarily
attributable to the Company's transition towards actively marketing and
promoting its services under LPS, the development and marketing of its new
private label health care credit card and Strategic Alliance Marketing
Program. The Company incurred zero sales and marketing expense in fiscal year
1993 attributable to the Company's product development phase.
General and Administrative expenses increased by 5% to $387,452 during the
fiscal year ended March 31, 1995 as compared to $368,557 during fiscal year
1994 and $540,849 during fiscal year 1993. During fiscal year 1995 the
Company took charges to General and Administrative expense for prepaid
offering costs associated with prior equity offerings totaling $38,686,
legal expense associated with the settlement of the Company's facility lease
with a previous landlord in California totaling $45,560, a loss on
liquidation of assets associated with the Company's move to new
administrative offices in December 1994 totaling $19,330 and a writedown of
goodwill associated with the acquisition of LPS of $79,346. If not for the
charges mentioned above General and Administrative expense for fiscal year
1995 would have decreased 45% to $204,530. The 45% decrease in General and
Administrative expense in fiscal year 1995 are attributable again to cost
reduction measures due to the Company's strained financial condition.
Included in the $387,452 of General & Administrative expense for fiscal year
1995 are approximately $55,000 in accruals for deferred salaries for two
officers of the Company who elected to defer part of their annual salary to
improve cash flow.
General and Administrative expenses decreased 32% to $368,557 during
fiscal year 1994 as compared to $ 540,849 during fiscal year 1993. The 32%
decrease during fiscal year 1994 is primarily attributable to the transition
from activities and expense related to the Company's acquisition of LPS
towards actively marketing and promoting its
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services under LPS. Included in the $368,557 of General and Administrative
expense for fiscal year 1994 are approximately $82,000 in accruals for
deferred salaries for two officers of the Company who elected to defer either
all or part of their annual salary to improve cash flow.
NET LOSS
The Company had a net loss of $480,924 for the fiscal year ended March 31,
1995 as compared to a net loss of $588,611 for fiscal year 1994 and a net
loss of $478,156 for fiscal year 1993. The reduction in the Company's net
loss for fiscal year 1995 was due to increased revenues combined with cost
reduction measures due to the Company's strained financial condition. The
increase in the Company's net loss for fiscal year 1994 was primarily a
result of reduced operations as the Company developed its new private label
credit card and Strategic Alliance Program.
Interest income for the fiscal year ended March 31, 1995 decreased by 100%
to zero as compared to $634 during fiscal year 1994 and $18,084 during fiscal
year 1993. The decrease in interest income for fiscal year 1995 is due
primarily to the net loss and resultant decrease in cash balances the Company
has incurred during the three year period ended March 31, 1995.
The Company has not been required to pay income taxes for the past three
fiscal years due to its net loss position in each of the respective fiscal
years.
Management believes that inflation has not had a significant impact on the
prices of the Company's products, the cost of its materials or its operating
results.
SUBSEQUENT EVENTS
On April 18, 1995 the Company entered into an agreement with Interchange,
Inc. ("Interchange") located in Myrtle Beach, South Carolina. Under the terms
of the agreement the Interchange sales force of 248 representatives will
offer the Patient Plus credit card to health care providers and their
patients as part of their existing finance products portfolio. Interchange
representatives are independent contractors who have established a presence
in the health care community by marketing proprietary cash management
programs to health care providers nationwide.
On June 5, 1995 the Company signed a letter of intent to form a joint
venture with Senior Care Action Network ("SCAN") located in Scottsdale,
Arizona. SCAN is the owner of a Proffered Provider Organization ("PPO") of
nursing homes, home health care and other services dedicated to the health
care needs of senior citizens. SCAN is also affiliated with National Health
& Safety Corporation ("NHS") which is the authorized representative for its
Power Consumer Wholesale Buying Service which offers discounts for a
comprehensive line of health care products and services, including the SCAN
PPO network. The objective of the joint venture will be to enhance the demand
for the
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Company's products by adding certain other related health care products and
services made available to the Company by SCAN. SCAN will be able to expand
the market for its products and services by offering them to the Company's
present and future client base through the Company's marketing
arrangement with Interchange.
On April 21, 1995 a $10,000,000 line of credit was made available to the
Company by Refractive Capital Partners, LLC ("RCP"), located in Oceanside,
California, for the financing of refractive surgery lasers manufactured by
Summit Technology and other manufacturers. Such credit will be marketed by
the Company, along with its Patient Plus credit card, to Ophthalmic Surgeons
wishing to lease/purchase a refractive surgery laser subject to credit review
and approval of the lessees of each transaction.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent accountants and financial statements appear on
page F1 of this report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See note below.
ITEM 11. EXECUTIVE COMPENSATION
See note below.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
See note below.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See note below.
NOTE: The Company intends to file with the Commission within 120 days
after March 31, 1995, the close of its fiscal year, the
information required by this Part III by amendment or definitive
copies of its Proxy Statement for its 1995 Annual Meeting of
Stockholders, and pursuant to General Instruction G, the contents
of such Proxy Statement are incorporated herein by reference in
response to Items 10, 11, 12 and 13 above.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of MEDPLUS
CORPORATION are included in part II, Item 8.
Consolidated financial statements for the fiscal years ended
March 31, 1995, March 31, 1994 and March 31, 1993.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of independent accountants.......................... F-1
Balance Sheets at March 31, 1995 and
March 31, 1994......................................... F-2
Statements of operations for the years
ended March 31, 1995, March 31, 1994
and March 31, 1993..................................... F-3
Statements of stockholders' equity for
the years ended March 31, 1995,
March 31, 1994 and March 31, 1993...................... F-4
Statement of cash flows for the years
ended March 31, 1995, March 31, 1994
and March 31, 1993..................................... F-5
Notes to financial statements............................... F-6
</TABLE>
(a) 2. Financial Statement Schedules
No financial schedules are included herein because they
are inapplicable. Schedules not listed are omitted because
they are not required under the instructions or because the
required information is given in the financial statements or
notes thereto.
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(a) 3. Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation
of Vision Technologies International, Inc.*
3.2 Certificate of Merger of Varitek Research Inc.
and Vision Technologies International, Inc.*
3.3 By-Laws of the Registrant*
4.1 Stock Option Plan of the Registrant**
4.2 Form of Incentive Stock Option Agreement**
4.3 Form of Non-statutory Stock Option **
11.1 Acquisition and Investment in Newly Formed
Corporation, Newlensco, Inc. ("Newlensco")***
15.1 Stock Purchase Agreement For Lincoln
Professional Services Corporation and Patient
Plus, Inc.*****
15.2 Certificate of Merger with Lincoln Professional
Services Corporation and Financial Health
Network, Inc.*****
15.3 Amended and Restated Certificate of Incorporation
of Vision Technologies International, Inc. to
Change the Name of the Company to MEDPLUS
CORPORATION******
16.1 Stock Option Plan of the Registrant*******
16.2 Business Consulting and Options Agreement with
Mr. John Banas********
</TABLE>
* Filed with Registration Statement (Registration Statement No.
33-13006-LA) on Form S-18 on or about April 3, 1987, and incorporated herein
by reference.
** Filed with Registration Statement (Registration Statement No.
33-21313-LA) on Form S-8 on or about April 20, 1988, and incorporated herein
by reference.
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*** Filed on Form 8-K on or about August 30, 1988 (Commission File
Number 0-16286) and incorporated herein by reference.
***** Filed on Form 8-K on or about November 22, 1992 (Commission
File Number 0-16286) and incorporated herein by reference.
****** Filed on Form 10-K on or about July 1, 1993 (Commission File
Number 0-16286) and incorporated herein by reference.
******* Filed with Registration Statement (Registration Statement No.
33-77700) on Form S-8 on or about April 13, 1994, and incorporated herein by
reference.
******** Filed on Form 8-K on or about May 13, 1994, (Commission File
Number 0-16286) and incorporated herein by reference.
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the fiscal quarter
ended March 31, 1992 and is incorporated herein by reference.
- Form 8-K filed February 1, 1992 reporting on the Company's reverse
stock split.
No reports on Form 8-K were filed during the quarter ended March 31
1993.
The following report on Form 8-K was filed during the fiscal quarter
ended March 31, 1994 and is incorporated herein by reference.
- Form 8-K filed on or about March 25, 1994 reporting on changes in
Registrant's Certifying Accountants.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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
Date: February 22, 1996 By /s/ JAMES W. SNYDER
-------------------------------
James W. Snyder
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES W. SNYDER Chairman; February 22, 1996
- ----------------------------- Chief Executive Officer;
James W. Snyder Director
/s/ Tim C. DeHerrera President; February 22, 1996
- -----------------------------
/s/ Robert T. Ryman V.P. of Finance; February 22, 1996
- ----------------------------- Chief Financial Officer
Robert T. Ryman Chief Accounting Officer
</TABLE>
19
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
MEDPLUS CORPORATION
Colorado Springs, CO
We have audited the accompanying consolidated balance sheets of Medplus
Corporation and its subsidiaries (Medplus) as of March 31, 1995 and 1994 and
the related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for the three years in the period ended March 31,
1995. These consolidated financial statements are the responsibility of
Medplus' management. Our responsibility is to express an opinion on the
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Medplus as of March
31, 1995 and 1994 and the results of their operations and their cash flows
for each of the three years ended March 31, 1995 in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Medplus will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, Medplus' significant operating
losses raise substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ STOCKMAN KAST RYAN & SCRUGGS P.C.
- ---------------------------------------
Colorado Springs, Colorado
July 7, 1995
F-1
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND 1994
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . $ 14,212 $ 2,925
Prepaid expenses and other current assets. . . . . . . . . . . . . . 1,238 49,741
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,450 52,666
---------- ----------
PROPERTY (Note 1)
Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 17,428 15,000
Furniture, fixtures and leasehold improvements . . . . . . . . . . . 51,284
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,428 66,284
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . 7,047 12,379
---------- ----------
Net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,381 53,905
---------- ----------
GOODWILL - (Net of accumulated amortization of $15,906 and
$9,162 in 1995 and 1994, respectively - Note 1). . . . . . . . . . 26,973 112,389
---------- ----------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,804 $ 218,960
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 162,220 $ 79,523
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 34,047 148,393
Deferred salaries. . . . . . . . . . . . . . . . . . . . . . . . . . 171,580 93,050
Current portion of notes payable to related parties (Note 3) . . . . 170,783 230,000
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538,630 550,966
LONG-TERM PORTION OF NOTE PAYABLE (Notes 3 and 7). . . . . . . . . . 123,555
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662,185 550,966
---------- ----------
SHAREHOLDERS' DEFICIT
Preferred stock,$.001 par value; authorized 2,000,000
shares; no shares issued or outstanding
Common stock; $.001 par value; authorized, 30,000,000
shares; issued and outstanding, 3,943,922 and 4,210,422
in 1995 and 1994, respectively (Notes 5 and 6) . . . . . . . . . . 17,838 18,105
Common stock subscribed, $.001 par value; 881,000 shares . . . . . . 881
Additional paid-in capital (Notes 5 and 6) . . . . . . . . . . . . . 6,323,831 6,120,896
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . (6,951,931) (6,471,007)
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (609,381) (332,006)
---------- ----------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,804 $ 218,960
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
- ------------------------------------------------------------------------------
F-2
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1995, 1994 AND 1993
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
REVENUE.................................... $ 103,523 $ 52,468 $ 17,654
--------- --------- ---------
OPERATING EXPENSES
General and administrative................. 387,452 368,557 540,849
Sales and marketing........................ 189,385 253,530
--------- --------- ---------
Total...................................... 576,837 622,087 540,849
--------- --------- ---------
Loss from operations....................... (473,314) (569,619) (523,195)
--------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense........................... (7,610) (19,626) (1,653)
Interest income............................ 634 18,094
Other income (Note 8)...................... 28,598
--------- --------- ---------
Total...................................... (7,610) (18,992) 45,039
--------- --------- ---------
NET LOSS................................... $(480,924) $(588,611) $(478,156)
--------- --------- ---------
--------- --------- ---------
NET LOSS PER SHARE......................... $ (0.12) $ (0.14) $ (0.13)
--------- --------- ---------
--------- --------- ---------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING................ 4,032,460 4,169,396 3,677,089
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
- -----------------------------------------------------------------------------
F-3
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 1995, 1994 AND 1993
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL COMMON NET
------------------- PAID-IN STOCK ACCUMULATED NOTES SHAREHOLDERS'
SHARES AMOUNT CAPITAL SUBSCRIBED DEFICIT RECEIVABLE EQUITY (DEFICIT)
--------- ------- ---------- ---------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, March 31, 1992.............. 1,543,756 $15,438 $5,903,072 $(5,404,240) $(119,150) $ 395,120
Issuance of common stock (Note 8).... 2,400,000 2,400 349,990 352,390
Note received from shareholder/
officer with stock issuance........ (250,000) (250,000)
Forgiveness of notes receivable...... (369,150) 369,150
Net loss............................. (478,156) (478,156)
--------- ------- ---------- ----------- --------- ---------
BALANCE, March 31, 1993.............. 3,943,756 17,838 5,883,912 (5,882,396) 19,354
Issuance of common stock............. 266,666 267 199,733 200,000
Contribution of capital.............. 37,251 37,251
Net loss............................. (588,611) (588,611)
--------- ------- ---------- ----------- --------- ---------
BALANCE, March 31, 1994.............. 4,210,422 18,105 6,120,896 (6,471,007) (332,006)
Issuance of common stock............. 230,000 230 64,770 65,000
Issuance of common stock to satisfy
accounts payables.................. 25,000 25 6,225 6,250
Common stock returned at no cost..... (671,500) (672) 672
Issuance of common stock at no cost.. 150,000 150 (150)
Common stock subscribed.............. 131,418 $881 132,299
Net Loss............................. (480,924) (480,924)
--------- ------- ---------- ---- ----------- --------- ---------
BALANCE, March 31, 1995.............. 3,943,922 $17,838 $6,323,831 $881 $(6,951,931) $ $(609,381)
--------- ------- ---------- ---- ----------- --------- ---------
--------- ------- ---------- ---- ----------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
- -----------------------------------------------------------------------------
F-4
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1995, 1994 AND 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS USED BY OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . . . $(480,924) $(588,611) $(478,156)
Adjustments to reconcile net loss to net cash
and cash equivalents used by operating activities:
Depreciation and amortization . . . . . . . . . . . 14,021 16,946 4,495
Loss on sale of note receivable . . . . . . . . . . 8,775
Loss on write down of goodwill. . . . . . . . . . . 79,346
Write-off of deferred offering costs . . . . . . . 38,686
Loss on sale of furniture and fixtures. . . . . . . 19,330
Gain on land sales. . . . . . . . . . . . . . . . . (28,268)
Decrease (increase) in prepaid and other assets . . 9,817 (41,157) (1,365)
Increase in accounts payable and accrued
liabilities. . . . . . . . . . . . . . . . . . . . 46,881 152,382 21,526
---------- ---------- ----------
Cash and cash equivalents used in operating
activities. . . . . . . . . . . . . . . . . . . . . . (272,843) (451,665) (481,768)
---------- ---------- ----------
INVESTING ACTIVITIES
Proceeds from sale of note receivable. . . . . . . . . 25,173
Proceeds from investment land sales. . . . . . . . . . 177,892
Proceeds from sale of furniture and fixtures . . . . . 18,500
Purchased goodwill related to subsidiaries . . . . . . 29,343
Purchases of property and equipment. . . . . . . . . . (2,257) (43,097) (20,187)
Payments received on notes receivable. . . . . . . . . 76,552
---------- ---------- ----------
Cash and cash equivalents provided by
(used in) investing activities. . . . . . . . . . . . 16,243 (17,924) 204,914
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of notes payable. . . . . . . . 127,632 230,000 211,000
Contribution of capital. . . . . . . . . . . . . . . . 37,251
Proceeds from common stock subscribed. . . . . . . . . 132,299
Proceeds from issuance of common stock . . . . . . . . 71,250 2,390
Payments on notes payable. . . . . . . . . . . . . . . (63,294) (2,291) (917)
---------- ---------- ----------
Cash and cash equivalents provided by financing
activities. . . . . . . . . . . . . . . . . . . . . . 267,887 264,960 212,473
---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . 11,287 (204,629) (64,381)
CASH AND CASH EQUIVALENTS, Beginning of year . . . . . 2,925 207,554 271,935
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, End of year . . . . . . . . $ 14,212 $ 2,925 $ 207,554
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------
F-5
<PAGE>
MEDPLUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL -- MEDPLUS CORPORATION (the "Company") was incorporated in
Delaware in December 1986. The Company and its subsidiaries operate in
the health care financing industry. It has developed and introduced its
private label health care credit card, among other products, for health
care patients use in funding the self-pay portion of their health care
expenditures. The Company utilizes a consortium of outside lenders to
provide the financing for its various products.
In November 1992, the Company acquired, for $26,500 cash, an $11,000 note
and 10,000 shares of common stock of the Company, the business and 100%
of the assets and liabilities of Lincoln Professional Services
Corporation ("LPS") and PATIENT PLUS, Inc. ("PPI"). Both LPS and PPI are
chartered in the State of Texas and have been in the medical and dental
patient financing business since 1988. In connection with the acquisition
of LPS and PPI, the Company also acquired all of the stock of Financial
Health Network, Inc. (FHN) in exchange for 390,000 shares of common stock
of the Company and warrants to purchase up to an additional 250,000
shares of its stock at $.50 per share through November 25, 1995. Shares
of stock issued in connection with the acquisitions were valued at $0.25
per share, the fair market price at the date of acquisition. The excess
of the purchase price over the fair market value of identifiable net
assets acquired is recorded as goodwill. LPS and PPI are both
wholly-owned subsidiaries of the Company, and their operating results are
included in the Company's consolidated results of operations from the
date of acquisition. FHN was merged into LPS.
GOING CONCERN -- The accompanying 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 shown in the accompanying consolidated financial
statements, the Company incurred significant losses from operations
during 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 revenue 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.
F-6
<PAGE>
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries.
All intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION -- Revenue is recognized when the patient signs a
financing agreement with the financial institution and patient vouchers
are received from the health care providers.
PROPERTY -- Property is recorded at cost. Depreciation is computed on the
straight-line method over the estimated useful life of the respective
assets (generally five to seven years).
GOODWILL -- Goodwill represents costs in excess of net assets acquired in
the acquisition of LPS, PPI and FHN. Amortization is computed on a
straight-line basis over the estimated useful life of five years.
Annually management evaluates the expected benefits associated with the
remaining recorded goodwill in order to determine an appropriate
valuation. At March 31, 1995 management determined that the value of the
recorded goodwill had declined in 1995 by approximately $79,000.
Accordingly this amount has been charged to expense in the 1995 financial
statements with a corresponding reduction of goodwill.
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.
Stock options and warrants are not included in the calculation of net
loss per share because their effect would be antidilutive.
DEFERRED OFFERING COSTS -- Deferred offering costs of $38,686 were
included in prepaid expenses at March 31, 1994 and represented amounts
incurred in connection with a proposed offering of the Company's common
stock. Since the offering was not successful, the costs were charged to
operations during the year ended March 31, 1995.
2. NOTE RECEIVABLE
A note receivable consisting of a 9% promissory note due in monthly
installments of $520, including interest, and collateralized by real
estate was sold during the year ended March 31, 1994 with the Company
incurring an immaterial loss on the sale.
F-7
<PAGE>
3. NOTE PAYABLE TO RELATED PARTIES
Notes payable to related parties consist of the following at March 31:
<TABLE>
<CAPTION>
1995 1994
------- --------
<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. The note is past due................................... 40,500 45,000
Unsecured note payable to the President of the Company
bearing interest at 18% per annum. Principal and interest
payments of $49,108 were past due at March 31, 1994. The
balance of the note was due in April 1994..................... 59,504 75,000
Unsecured note payable to partnership controlled by the
President of the Company bearing interest at 18% per
annum. Principal and accrued interest was due
December 15, 1994............................................. 44,302 85,000
Unsecured note payable to a shareholder and former officer
of the Company which was in dispute over amounts owed at
March 31, 1994. The Company had accrued $139,000 at March
31, 1994. The dispute was settled during the year ended
March 31, 1995 through the 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 $123,288 payable
in May 1997. This note has been discounted $46,256 to
reflect an effective interest rate of 18%..................... 125,032
-------- --------
Total........................................................... 294,338 230,000
Less current portion............................................ 170,783 230,000
-------- --------
Long-term portion............................................... $123,555 $ -
-------- --------
-------- --------
</TABLE>
Future payments on the above notes for the years ended March 31,
1996, 1997 and 1998 are $191,306 (including $20,523 of discount),
$24,000 (including $22,087 of discount) and $123,288 (including $1,646
of discount), respectively.
F-8
<PAGE>
4. OPERATING LEASE
The Company is a party to a noncancelable lease for office space
which was to expire July 31, 1997. Under the terms of the lease, the
Company prepayed its first eighteen months of rent during the year ended
March 31, 1994. The Company vacated this space in December 1994 in an
effort to terminate the lease. The office space was leased to another
party in 1995. The Company has accrued lease costs through March 31,
1995 of $28,707 and does not expect to incur any additional costs under
this lease.
5. SHAREHOLDERS' EQUITY
The following table summarizes stock option activity for fiscal years
ending March 31, 1995, and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Options outstanding at beginning of year........... 40,000
Options issued..................................... 2,000,000
Options exercised.................................. (200,000)
Options canceled................................... (1,800,000) (40,000)
---------- --------
Options outstanding at end of year................. - -
---------- --------
---------- --------
</TABLE>
In April 1989, in connection with a proposed financing, which was
not consummated, the Company granted warrants to purchase 100,000 shares
of its common stock at $10 per share to unrelated parties. These
warrants were fully exercisable at the date of grant and expired in
March 1994.
In April 1994, the Company approved a Stock Option Plan and granted
a consultant to the Company the option to purchase 2,000,000 shares of
the Company's common stock at an exercise price of $0.25 per share.
The consultant exercised options to purchase 200,000 shares of common
stock and the remaining 1,800,000 options expired.
In April 1992, the Board of Directors of the Company approved a private
transaction whereby it sold 2,000,000 shares of its restricted common
stock and a common stock purchase warrant to JADREW Corporation (a
company controlled by the former President of the Company) for $2,000
cash and a $250,000 promissory note with interest at 8% per annum due in
installment payments through January 1996. The common stock purchase
warrant entitles JADREW Corporation the right to exercise the warrant
between April 1993 and June 1995 and purchase 1,000,000 shares of
restricted common stock at $0.50 per share. The $250,000 note was
subsequently forgiven.
In November 1992, in connection with the purchase of LPS, PPI and FHN,
the Company issued 400,000 shares of common stock to the shareholders of
LPS, PPI and FHN (see Note 1). The Company also granted warrants to
purchase 250,000 shares of the Company's common stock at $0.50 per share
through November 25, 1995.
F-9
<PAGE>
In March 1995 the Company received $132,299 for stock subscriptions. The
stock has not been issued as of July 7, 1995.
At March 31, 1995 and 1994, the Company had outstanding warrants to
purchase 2,000,000 and 1,250,000 shares, respectively, of the Company's
common stock at $0.20 to $0.75 per share. In June 1995, 1,000,000
warrants expired without being exercised. The remaining warrants expire
at various dates through February 1997.
6. INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of deferred taxes at March 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards . . . . . . . . . $ 1,726,000 $1,624,000
Write down of goodwill not deductible. . . . . . . 27,000
Deferred salaries not deductible . . . . . . . . . 34,000 32,000
----------- ----------
1,787,000 1,656,000
Less valuation allowance . . . . . . . . . . . . . (1,787,000) (1,656,000)
----------- ----------
Net deferred taxes . . . . . . . . . . . . . . . . $ - -
----------- ----------
----------- ----------
</TABLE>
As of March 31, 1995, the Company's net operating loss carryforward of
approximately $5,077,000 which expires beginning in the year 2000. The
valuation allowance increased by $131,000 during the year ended March 31,
1995. As of March 31, 1995 and March 31, 1994, the Company has recorded
valuation allowances to reduce existing deferred tax assets since the
assets are not likely to be realized.
7. RELATED PARTY TRANSACTIONS
The Company and one of its shareholders have a dispute over amounts owed
under an office space lease arrangement. The Company had accrued
$139,000 at March 31, 1994. The dispute was settled during the year
ended March 31, 1995 through the issuance of a note payable (see Note 3).
In December 1994, the Company moved its offices to a location owned in
part by an officer/director of the Company who has not charged the
Company rent for use of the space. This informal lease arrangement may
terminate at any time. The Company considers the fair value of the rent
provided by the officer/director to be insignificant.
8. OTHER INCOME
During the year ended March 31, 1993, other income consisted primarily
of profit made from the sale of the Company's land investments.
F-10
<PAGE>
9. STATEMENT OF CASH FLOWS
The Company considers cash on deposit with banks and in money market
accounts at brokerage houses to be cash and cash equivalents.
During the year ended March 31, 1994, a note payable for $200,000 was
converted to 266,000 shares of Company common stock.
During the year ended March 31, 1994, the Company became aware of
certain misrepresentations made during the LPS and PPI acquisitions and
determined that it would make no further payments on a note payable for
$7,792 which was issued in connection with the acquisition of LPS and PPI.
Accordingly, the note payable was reduced to zero with a corresponding
reduction to goodwill acquired in the LPS and PPI acquisition.
No income taxes were paid by the Company during the years ended March 31,
1995, and 1994 and 1993.
Interest paid during the years ended March 31, 1995, 1994 and 1993 was
$18,720, $10,056 and $1,653, respectively.
F-11
