<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September
30, 1997.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period from to .
Commission file number 0-16286
MEDPLUS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4082020
-------- ----------
(State or other jurisdiction of (IRS Employer dentification number)
incorporation or organization)
8 S. Nevada Ave., Ste. 204, Colorado Springs, Colorado 80903
(address of principle executive offices) (Zip Code)
719-575-0044
(Registrant's telephone number, including area code)
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
--- ---
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 November 21, 1997
----- --------------------------------
Common Stock, Par-Value 7,661,254
$.001 per share
<PAGE>
MEDPLUS CORPORATION
REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE NUMBER
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PART I
ITEM 1. - FINANCIAL INFORMATION
Balance Sheets at September 30, 1997.....................3
Statements of Operations for the
Three Months Ended September 30, 1997
and September 30, 1996...................................5
Statements of Cash Flows for the
Three Months Ended September 30, 1997
and September 30, 1996...................................6
Notes to Financial Statements............................7
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........10
PART II
Other Information........................................11
Signature Page...........................................12
<PAGE>
PART I
ITEM 1. FINANCIAL INFORMATION
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, 1997
(Unaudited)
------------------
CURRENT ASSETS:
Cash and cash equivalents $ (14,278)
Accounts receivable 43,551
Prepaid expenses and other
current assets 5,845
Inventory 3,172
--------
Note receivable from Shareholder 20,000
Total current assets 58,290
--------
PROPERTY:
Office Equipment 41,729
Furniture and Fixtures 26,365
Leasehold Improvements 87,785
--------
Total 155,879
Less accumulated depreciation 43,903
--------
Net property 111,976
--------
TOTAL ASSETS $ 170,266
=========
See accompanying notes to financial statements
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
September 30, 1997
------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 1,022,405
Notes payable to related parties (Note 4) 366,043
Deferred Salaries 73,575
Convertible note payable - net of
discount (Note 4) 37,500
Notes payable 278,475
Line of credit 5,064
-----------
Total liabilities 1,783,062
-----------
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, 3,690,907
and 6,771,266 shares at March 31, 1997
and September 30, 1997 respectively 8,322
Additional paid in capital 7,523,809
Accumulated deficit (9,144,927)
------------
Net shareholders' equity (1,612,796)
------------
TOTAL $ 170,266
============
See accompanying notes to financial statements
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Month Period Six Month Period
Ended September 30, Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
PATIENT FINANCE REVENUES: $1,422 $ 9,078 $7,062 $ 55,521
EXPENSES:
General and Administrative 112,399 63,649 214,816 114,459
Sales and Marketing 109,708 82,583 185,983 188,362
Total expenses 222,107 146,232 400,799 302,821
-------- -------- -------- --------
Loss from Operations (220,685) (137,154) (393,737) (247,300)
Loss from Continuing
Operations (220,685) (137,154) (393,737) (247,300)
Loss from Discontinued Operations
of Occupational Health Clinic(24,484) (103,109) (54,012) (189,552)
Operating Loss (245,169) (240,263) (447,749) (436,852)
-------- -------- -------- --------
Total Other Income 0 90,007 0 90,034
Net loss (245,169) (150,256) (447,749) (346,818)
Loss Per Share From
Continuing Operations (0.03) (0.01) (0.07) (0.03)
From Discontinued Operations 0 (0.01) (0.01) (0.02)
Total (0.03) (0.02) (0.08) (0.04)
========= ======== ========= =========
Weighted average number of
common shares outstanding 6,363,700 9,456,407 4,999,695 8,014,829
See accompanying financial statements
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTH PERIOD ENDED
September 30,
1997 1996
------ ------
CASH FLOWS (USED BY) OPERATING ACTIVITIES:
Net loss ($ 447,749) ($ 346,818)
Adjustments to reconcile net income (loss) to net
cash from (used) by operating activities:
Depreciation and amortization 9,858 9,796
(Increase) decrease in assets:
Accounts receivable ( 18,681) 6,164
Inventory (3,172) (5,891)
Prepaid expenses and other current
assets 4,006 (5,058)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 161,173 221,591
-------- --------
Total cash provided (used) by operating activities (294,565) (120,213)
CASH FLOWS FROM (USED BY) INVESTING ACTIVITIES:
Investment in property, plant and equipment (102) 0
Proceeds from sale of equipment 0 0
Additions to property, plant and equipment 0 (139,172)
-------- --------
Total cash provided (used) by investing activities (102) (139,172)
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES:
Purchase of short term debt 214,221 117,901
Purchase of long term debt 0 0
Payment on short term debt 0 0
Payment of note payable 0 0
Issuance of common stock 64,248 136,328
--------- --------
Total cash from (used by) financing activities 278,469 254,229
Increase (decrease) in cash and cash equivalents (16,198) (5,156)
Cash and cash equivalents at beginning of period 1,920 7,778
--------- --------
Cash and cash equivalents at end of period $ (14,278) $ 2,622
=========== ==========
<PAGE>
MEDPLUS CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. 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
September 30, 1997 and March 31, 1997, and the results of operations and its
cash flows for the six month periods ended September 30, 1997 and September 30,
1996. 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 March 31, 1997 the Company has net operating
loss carryforwards of approximately $2,362,000, which can be utilized
in future periods to offset future taxable income. The net operating
loss carryforwards begin expiring in the year 2000. Due to the Company's
net operating loss position and carryforwards the adoption of SFAS 109
has no material impact.
Operating results for the six months ended September 30, 1997 are
not necessarily indicative of the results for the year ending March 31, 1998.
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, 1997, included in the Company's Annual Report on
Form 10-K.
2. 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.
3. 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, 1997, the Company
has incurred significant losses from operations during the years
ended March 31, 1997 and 1996 and at March 31, 1997 and 1996 have
negative working capital and negative shareholders' equity. 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 Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations to review management's attempt to solve the cash flow
needs of the Company.
4. NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties all of which are considered to be
current liabilities by their term or due to default consists of
the following at September 30, 1997 and March 31, 1997:
September 30, 1997 March 31, 1997
Unaudited
------------------ --------------
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. 25,000 25,000
Unsecured note payable to a former officer and
director of the Company bearing interest
at 18% per annum. The note is past due
and is currently under dispute. 40,500 40,500
Unsecured note payable to a shareholder and
former officer of the Company, non-interest
bearing, due in equal monthly
installments of $2,000 from May 1996
through April 1997 with a final installment
of $123,288 payable in May 1997. This note
is recorded net of unamortized discount of
$5,074 at March 31, 1997 to reflect an
effective interest rate of 18%. Payments
on this note are in default. 157,763 157,763
Unsecured note payable to shareholders of the
Company bearing interest at 10% per
annum. The note is payable on demand. 105,280 103,962
Unsecured note payable to shareholder of the
Company bearing interest at 11% per
annum. The note is payable on demand. -0- 12,500
Unsecured note payable to shareholder of the
Company bearing interest at a range
between 10% and 17%, depending on
shareholder's credit card rate. The note
is payable on demand. 37,500 19,000
Total $ 366,043 $ 358,725
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<PAGE>
CONVERTIBLE NOTES PAYABLE
- -------------------------
During 1997, the Company issued $100,000 of convertible notes due
October 1, 2006 bearing interest at 8% per annum. Upon closing of
an anticipated public offering of common stock, the noteholders
have thirty days to convert the notes into shares of common stock
of the Company in face value amount equal to 200% of the dollar
amount of the notes based on the per share price of the common
stock as set forth in the anticipated public offering. In the
event the planned public offering has not become effective by
October 1, 1997, the noteholders may, at their sole option, elect
to convert the notes and all accrued interest into share of common
stock of the Company based on the closing price per share at the
close of business on the last business day of the month in which
the notice is received by the transfer agent. Payments of accrued
interest are payable on April 1 and October 1. The Company is in
default on the interest payments as of November 13, 1997.
In order to recognize the beneficial conversion feature to the
noteholders of these convertible notes, the Company has recorded
the $100,000 excess value of the common stock to be issued upon
the anticipated conversion of the notes over the face value as a
note discount and additional paid-in capital. The discount is
being amortized to interest expense from the issuance date through
October 1, 1997.
During the year ended March 31, 1997, $50,000 of the convertible
notes were converted into 256,410 shares of common stock. At the
date of conversion, $50,000 of unamortized discount was charged to
interest expense with a corresponding increase to common stock and
additional paid-in capital.
NOTES PAYABLE
- -------------
Notes payable, all of which are current liabilities by their
terms, consist of the following:
September 30, 1997 March 31, 1997
Unaudited
------------------ --------------
Unsecured note payable to an individual
bearing interest at 12%, interest
payable monthly and due August 1997. 49,072 49,072
Note secured by officers' personal stock
payable to individuals bearing interest
at 18% interest and principle due
August 1998. 196,108 0
Unsecured note payable to an individual
bearing interest at 12%, interest
payable monthly and due August 1997. 25,000 0
Note payable to bank bearing interest at
9.875%, collateralized by certain assets
of a shareholder and due June 1997. 28,231 35,000
Unsecured $5,000 line of credit bearing interest
at 15%. 5,064 4,327
Total $ 278,475 $ 88,399
------------ -----------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At September 30, 1997 the Company had working capital of ($1,724,772)
compared to working capital of ($1,351,027) at March 31, 1997. The
decline in working capital is primarily due to the Company's net loss
for the six months ended September 30, 1997. 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 and
related parties along with accrued payables and expenses.
Liquidity needs are currently being met from revenues and short-term
borrowing in the form of promissory notes, without that the Company's
liquidity position is severely strained. 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 $
2,000,000 in equity or debt financing in order to sustain operations for
the next twelve months following the period ended September 30, 1997.
On or about April 8, 1997, the Company entered into a financing
agreement with Sands Brothers & Co., Inc., to provide debt/equity
financing which would be more than sufficient to operate the Company and
fulfill its business plans. The proceeds of this offering will be
utilized to expand the Company's marketing activities, for future
acquisitions and to reduce the Company's debt. The Company has been
advised efforts are close to coming to completion. Although the Company
is actively engaged in activities with intent to raise equity and/or
debt 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 September 30, 1997 there were no known
demands, commitment or uncertainties affecting cash flows other than
normal accounts payable demands, debt, and past due interest payments.
RESULTS OF OPERATIONS
---------------------
Revenue derived from the sale of products from the Company's continuing
operations was $7,062 for the six month period ended September 30, 1997
as compared to $55,521 in operating revenue for the six month period
ended September 30, 1996. The Company's revenue decrease over the six
month period ended September 30, 1996 is primarily attributable to
nonpayment of the Company's revenue from United States Bank of Oregon
and commencing a new relationship with Pullman Bank of Chicago, which
has limited financial potential. The Company's loan volumes generated
to United States Bank of Oregon had increased. However, the Company has
failed to receive any of its revenue from the United States Bank of
Oregon. Revenue derived from discontinued operations was $146,153 for
the six month period ended September 30, 1997, as compared to $19,112
for the six month period ended September 30,1996.
General and administrative expenses from continued operations increased
88% from $114,459 during the six month period ended September 30, 1996
to $214,816 during the six month period ended September 30, 1997. The
increase of 88% during the six month period ended September 30, 1997 is
due primarily to increase in personnel to support to Company's new
product.
Sales and marketing expenses for continued operations decreased 1% from
$188,362 during the six month period ended September 30, 1996 to
$185,983 during the six month period ended September 30, 1997. The
decrease of 1% during the six month period ended September 30, 1997 is
primarily due to sales and marketing personnel and related expense for
the Company's health care credit card services field offices in
California in support of the Company's new product remaining relatively
consistent.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Form 10-KSB regarding litigation no changes for period ending
September 30, 1997
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 May 9, 1997, the Company effectuated a one for three reverse
stock split, whereby shareholders received one share of common stock
for every three shares of common stock held of record. Fractional
shares were rounded upward to the next full share.
On July 11 and August 5,1997, Phillip R. Beautel and James W.
Snyder, respectively, tendered their resignation from the Board of
Directors due to personal commitments that would reduce their
effective time as a Director of the Company. The Company
subsequently accepted these resignations from its Board.
On July 28, 1997, the Company announced its decision to divest
itself of the occupation medicine clinic to focus on its core
business. While there currently is not a suitable buyer, the
Company intends to sell the clinic by March 31, 1998, and should
not incur a loss.
During the three month peroid ending September 30, 1997, the
company raised $240,500 through four accredited investors through the
purchase of debt. As a part of this agreement the company issued
warrants to purchase shares of common stock in the amounts of 20,000
shares, 17,850 shares, 67,500 shares, 21,425 shares and 25,000
shares.
The warrants issued are exersisable at $.15, $.35, $.50, $.65 and
$1.00 respectively and are two year terms. The capital raised was
used for general working capital purposes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Reports on Form 8-k
None
<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 thereunto duly authorized.
MEDPLUS CORPORATION
Date: November 21, 1997 \By\Tim C. DeHerrera
-----------------------
Tim C. DeHerrera
Chief Executive Officer
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<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JUL-01-1997
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<PERIOD-TYPE> 6-MOS
<CASH> (14,278)
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<PP&E> 155,879
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2,000,000
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