<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
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
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
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(Exact name of registrant as specified in its charter)
Delaware 95-4082020
- -------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer identification number)
incorporation or organization)
8 S. NEVADA AVE., STE. 500, COLORADO SPRINGS, COLORADO 80903
- -------------------------------------------------------- ----------
(address of principle executive offices) (Zip Code)
719-575-0044
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(Registrants telephone number, including area code)
- ------------------------------------------------------------------------------
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
--- ---
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
--- ---
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 APRIL 30, 1997
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Common Stock, Par-Value 11,151,726
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$.001 per share
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<PAGE>
MEDPLUS CORPORATION
REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I PAGE NUMBER
-----------
ITEM 1. - FINANCIAL INFORMATION
Balance Sheets at December 31, 1996
and March 31, 1996. . . . . . . . . . . . . . . . 3
Statements of Operations for the
Nine Months Ended December 31, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . 5
Statements of Cash Flows for the
Nine Months Ended December 31, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . 7
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS. . . . . . . . . . . . . . . . . . . . . 11
PART II
Other Information. . . . . . . . . . . . . . . . . . . . 13
Signature Page . . . . . . . . . . . . . . . . . . . . . 15
2
<PAGE>
PART I
ITEM 1. FINANCIAL INFORMATION
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, 1996 March 31, 1996
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 7,676 $ 7,778
Accounts receivable 25,744 23,639
Inventory (Note 5) 3,804
Prepaid expenses and other
current assets 5,573 515
-------------- ------------
Total current assets 42,797 31,932
-------------- ------------
PROPERTY:
Office Equipment 45,660 16,966
Furniture and Fixtures 25,726 3,033
Leasehold Improvements 87,785
-------------- ------------
Total 159,171 19,999
Less accumulated depreciation 26,418 10,072
-------------- ------------
Net property 132,753 9,927
-------------- ------------
OTHER 3,541 4,375
-------------- ------------
TOTAL ASSETS $ 179,091 $ 46,234
-------------- ------------
-------------- ------------
See accompanying notes to financial statements
3
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MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS CONTINUED
December 31, 1996 March 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 587,237 $ 313,620
Notes payable (Note 4) 363,310 205,470
Deferred Salaries 40,685 8,073
------------ ------------
Total current liabilities 1,076,232 527,163
------------ ------------
Long term note payable 85,000 0
Total liabilities 1,076,232 527,163
------------ ------------
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, 9,529,740
and 8,895,278 shares at
December 31, 1996 and
March 31, 1996 respectively 23,248 23,356
Additional paid in capital 7,013,334 6,851,145
Accumulated deficit (7,933,723) (7,355,430)
------------ ------------
Net shareholders' equity (897,141) (480,929)
------------ ------------
TOTAL $ 179,091 $ 46,234
------------ ------------
------------ ------------
See accompanying notes to financial statements
4
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Month Period Nine Month Period
Ended December 31, Ended December 31,
-------------------- ---------------------
1996 1995 1996 1995
--------- -------- --------- ---------
REVENUES: $ 45,692 $ 17,211 $ 120,325 $ 39,162
EXPENSES:
General and Administrative 96,806 26,642 318,373 95,793
Sales and Marketing 68,832 50,606 262,602 135,472
Operations 117,278 207,684
Total expenses 282,916 77,248 788,659 231,265
--------- -------- --------- ---------
Operating loss (237,224) (60,037) (688,334) (192,103)
OTHER INCOME:
Interest income 8 41
Other Income 0 90,000
--------- -------- --------- ---------
Total other income 8 90,041
Net loss (237,216) (60,037) (598,293) (192,103)
--------- -------- --------- ---------
Net Loss per share of
common stock (0.02) (0.01) (0.07) (0.04)
--------- -------- --------- ---------
--------- -------- --------- ---------
Weighted average number of
common shares outstanding 9,807,078 6,157,874 8,856,953 4,795,442
See accompanying financial statements
5
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTH PERIOD ENDED
December 31,
1996 1995
--------- ---------
CASH FLOWS (USED BY) OPERATING ACTIVITIES:
Net loss $(578,293) $(192,103)
Adjustments to reconcile net income (loss) to net
cash from (used) by operating activities:
Depreciation and amortization 17,180 3,585
(Increase) decrease in assets:
Accounts receivable (2,105)
Inventory (3,804)
Prepaid expenses and other current
assets (5,058) 1,223
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 306,229 39,783
--------- ---------
Total cash provided (used) by operating activities (265,851) (147,512)
CASH FLOWS FROM (USED BY) INVESTING ACTIVITIES:
Proceeds from sale of equipment 5,000
Additions to property, plant and equipment (139,172)
--------- ---------
Total cash provided (used) by investing activities (139,172) 5,000
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES:
Purchase of short term debt 163,768
Purchase of long term debt 85,000
Payment on short term debt (5,928) (6,000)
Payment of note payable (104,257)
Issuance of common stock 162,081 240,710
--------- ---------
Total cash from (used by) financing activities 404,921 130,453
Increase (decrease) in cash and cash equivalents (102) (12,059)
Cash and cash equivalents at beginning of period 7,778 14,212
--------- ---------
Cash and cash equivalents at end of period $ 7,676 $ 2,153
--------- ---------
--------- ---------
6
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MEDPLUS CORPORATION
NOTES TO 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, 1996, the Company has incurred significant losses from
operations during the years ended March 31, 1996, 1995 and 1994 and at
March 31, 1996, 1995 and 1994 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.
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, 1996 and March 31, 1996, and the results of operations and its
cash flows for the nine month periods ended December 31, 1996 and December
31, 1995. 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, 1996 the Company has net operating loss
carryforwards of approximately $2,440,000, 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.
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, 1996, 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. NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at December 31, 1996 and March 31, 1996
consists of the following:
<TABLE>
December 31, 1996
Unaudited March 31, 1996
----------------- --------------
<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 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 former shareholder
and officer of the Company. 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 $123,868 payable in
May 1997. This note has been discounted
$24,868 and $46,256 at September 30, 1996
and March 31, 1996, respectively, to reflect
an effective interest rate of 18%. Payments
on this note are currently in default. 137,970 139,970
Unsecured note payable to a employee of the
Company bearing interest at 11% per
annum. 17,818 0
Secured note payable to a employee of the
Company bearing interest at 10%
per annum. Due and payable on
December 29, 1996. Note is secured
with stock owned by an officer and
director of the Company. 45,000 0
Secured note payable to a employee of the
Company bearing interest at a variable
rate. Due and payable June 5, 1997.
Note is secured with stock owned by a
director of the Company. 15,000 0
8
<PAGE>
Loans from officers of the Company
Non interest bearing to be repaid
upon completion of equity financing 32,950 0
Total $ 314,238 $ 205,470
Less current portion 314,238 205,470
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Long-term portion $ 0 $ 0
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NOTE PAYABLE
Notes payable to non-related parties consist of the following:
December 31, 1996
Unaudited March 31, 1996
----------------- --------------
Unsecured note payable to an outside party
Bearing interest at 12% per annum
Due and payable on March 5, 1997. 24,072 0
Unsecured note payable to an outside party
Bearing interest at 12% per annum
Due and payable on 25,000 0
Unsecured convertible notes payable from
Wall Street Connection bearing interest
at 8% per annum due and payable
on 2006 85,000 0
Total $ 134,072 $ 0
Less Current portion 49,072 0
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Long-term portion $ 85,000 $ 0
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Total short and long term debt $ 448,310 $ 205,470
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</TABLE>
9
<PAGE>
5. INVENTORIES
Inventories on hand at December 31, 1996 consist of operating supply
inventory for the Company's occupational health care clinic the components
of which are the following:
December 31, 1996
Unaudited March 31, 1996
----------------- --------------
Medical supplies $ 3,804 $ 0
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Total Inventories $ 3,804 $ 0
------------- -------------
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996 the Company had working capital of ($1,033,435) compared
to working capital of ($495,231) at March 31, 1996. The decline in working
capital is primarily due to the Company's net loss for the nine months ended
December 31, 1996. The Company's current liabilities are higher than its
assets due primarily to borrowings in the form of promissory notes from
related parties along with accrued payables and expenses.
The Company's liquidity position is severely strained. Liquidity needs are
currently being met from revenues and short-term borrowing in the form of
promissory notes. 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 $750,000 to $1,000,000 in equity or debt financing in
order to sustain operations for the next twelve months following the period
ended December 31, 1996. On or about January 20, 1997 the Company received a
proposal from R.M. Stark & Company, located in Delray Beach, Florida, with
respect to a proposed Public Offering of the Company's common stock in the
amount of $5 million dollars. Also under terms of a previous letter or
intent Wall Street Connections and R.M. Stark & Company will assist the
Company in raising approximately $800,000 to $1,000,000 in bridge financing
in the form of issuance of promissory notes convertible into the Company's
common stock. 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. 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 December 31, 1996 there were no known
demands, commitment or uncertainties affecting cash flows other than normal
accounts payable demands. (See Item 5. 'Other Information.)
RESULTS OF OPERATIONS
Revenue derived from the sale of the Company's services increased 165% from
$17,211 during the three monthly period ended December 31, 1996 to $45,692
during the three month period ended December 31, 1996 and increased 207% from
$39,162 during the nine month period ended December 31, 1996 to $120,325
during the nine month period ended December 31, 1996. The Company's revenue
increase during the three month period ended December 31, 1996 is due
primarily to $45,692 in revenues derived from the Company's occupational
health care clinic, located in Colorado Springs, Colorado. The Company
opened its occupational health care clinic on or about August 1, 1996 and the
$45,692 in revenues, mentioned above, represents the clinic's first five
months of operations. Revenues derived from sales of the Company's health
care credit card services decreased to $0 during the three month period
ended December 31, 1996 from $17,211 during the three month period ended
December 31, 1996. Although revenues realized from sales of the Company's
health care credit card services decreased during the three month period
ended December 31, 1996. The Company's loan volumes generated to United
States Bank of Oregon from the sales of its health care credit card services
have increased significantly. However, United States Bank of Oregon has
unilaterally decided to withhold the revenues owed the Company on this
increase in loan volume generation in order to increase its reserve pool for
bad debt. The Company is currently in dispute with United States Bank of
Oregon, and with Card Northwest, over the withholding of the Company's
revenues and is exploring remedies to this dispute including the possibility
of legal action.
11
<PAGE>
The increase in revenues during the nine month period ended December 31, 1996
is due primarily to the $64,803 in revenues generated by the Company's
occupational health care clinic during its first five months of operation.
General and administrative expenses increased 263% from $26,642 during the
three month period ended December 31, 1995 to $96,806 during the three month
period ended December 31, 1996 and increased 239% from $95,793 during the nine
month period ended December 31, 1995 to $318,373 during the nine month period
ended December 31, 1996. The increase of 263% and 239% during the three month
and nine month periods ended December 31, 1996 is due primarily to increases in
personnel to support the Company's occupational health care clinic in Colorado
Springs and personnel to support the Company's health care credit card services
in California.
Sales and marketing expenses increased 36% from $50,606 during the three month
period ended December 31, 1995 to $68,832 during the three month period ended
December 31, 1996 and increased 93% from $135,472 during the nine month period
ended December 31, 1995 to $262,602 during the nine month period ended December
31, 1996. The increase of 36% and 93% during the three and nine month periods
ended December 31, 1996 is primarily due to the addition of sales and marketing
personnel and related expenses to promote the Company's occupational health
care clinic along with an increase in sales and marketing personnel and related
expense for the Company's health care credit card services field offices in
California.
Operations expense of $117,278 for the three month period ended December 31,
1996 and $207,684 for the nine month period ended December 31, 1996 represents
personnel and related expenses to operate the Company's occupational health care
clinic for the first five months of operation during the nine month period ended
December 31, 1996.
12
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is in litigation with a former president of the Company who
alleges failure of the Company to make certain payments under a promissory
note in the purported amount of $70,000 to $90,000. Management is vigorously
contesting this litigation, has denied any failure to pay and has asserted
certain counter claims against the former president. No amounts are recorded
in the financial statements of the Company, other than the $40,500 note
payable (and related accrued interest) to the former president, in
anticipation of any losses pursuant to this litigation.
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 or about January 10, 1997 the Company signed an agreement with Credit
Card Management Corporation of Evansville, Indiana ("CMC") whereby CMC will be
the exclusive provider of processing and support services for the Company's
private label credit card and merchant locations nationwide. In addition, CMC
will assist the Company in selecting one or more appropriate financial lending
institutions, with which CMC has an existing relationship, and act as a conduit
towards negotiating lending agreements between the Company and such financial
lending institutions. CMC provides processing and support services for small to
medium-sized banks who are credit card issuers but cannot be profitable
providing their own processing and support services due to low loan volume
generation. CMC contracts with First Data Corporation ("FDC"), the largest
credit card processor in the world, to provide the electronic data information
systems and networks to operate their programs. By having the ability to
contract and deal with more than one lending institution the Company will be in
a position control over its own program.
On or about January 20, 1997 the Company received a revised letter of
intent from R.M. Stark & Company with respect to a proposed Public Offering of
the Company's common stock in the amount of Five Million Dollars
($5,000,000.00) of which One Million Dollars ($1,000,000.00) will be offered
on a "firm commitment" basis and Four Million Dollars ($4,000,000.00) will be
offered on a "best efforts" basis. The proceeds from this offering will be
utilized to expand the Company's marketing activities, for future acquisitions
and to reduce the Company's debt.
13
<PAGE>
On or about March 3, 1997 signed an Affinity Agreement with Pullman Bank &
Trust Company. The Company and Bank intend to establish a Private Label and/or
MasterCard, and/or Visa Card account program generally referred to in the
industry as a "co-branded/affinity card", which provides the Company with
certain benefits paid by Bank to Company and/or certain benefits paid by Company
to Bank as a result of Company's members or customers using a Private Label
and/or MasterCard, and/or Visa Card issued by Bank to members who participate in
the program. The initial program issues a Private Label MedPlus Card to all
customers who apply.
On or about March 5, 1997 signed a Letter of Intent with R.J. Assocates,
Inc. R.J. Associates, Inc. is in the business of contracting and marketing
their own Preferred Provider Network (PPN), Health Payors Organization, LTD.,
and Competitive Health Plan, Inc. which together compose approximately 80,000
physicians, 2,000 medical surgical hospitals and 5,000 ancillary facilities,
most of whom are directly contracted. The Letter of Intent calls for the
Company and R.J. Associates, Inc. to enter into an agreement whereas the Company
can expand utilization of its credit card by marketing health insurance with its
credit card and utilize the discount for service PPN owned by R.J. Associates,
Inc.
14
<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
Tim C. DeHerrera
-------------------------------------
Tim C. DeHerrera, President and
Chief Executive Officer
Robert T. Ryman
-------------------------------------
Robert T. Ryman, Vice President
of Finance; Chief Financial
Officer; Secretary and Treasurer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,676
<SECURITIES> 0
<RECEIVABLES> 25,744
<ALLOWANCES> 0
<INVENTORY> 3,804
<CURRENT-ASSETS> 42,797
<PP&E> 159,171
<DEPRECIATION> 26,418
<TOTAL-ASSETS> 179,091
<CURRENT-LIABILITIES> 1,076,232
<BONDS> 0
0
2,000,000
<COMMON> 23,248
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (897,141)
<SALES> 45,692
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 282,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (237,224)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (237,216)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
