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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 June 30, 1997
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- ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-16286
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MEDPLUS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 95-4082020
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(State or other jurisdiction of (IRS Employer identification number)
incorporation or organization)
8 S. Nevada Ave., Ste. 204, Colorado Springs, Colorado 80903
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(address of principle executive offices) (Zip Code)
719-575-0044
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(Registrants telephone number, including area code)
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Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution requirements under a plan
confirmed by a court. Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 18, 1997
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Common Stock, Par-Value
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$.001 per share 6,234,923
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MEDPLUS CORPORATION
REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I PAGE NUMBER
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ITEM 1. - FINANCIAL INFORMATION
Balance Sheets at June 30, 1997
and March 31, 1997 . . . . . . . . . . . . . . 3
Statements of Operations for the
Three Months Ended June 30, 1997
and June 30, 1996. . . . . . . . . . . . . . . 5
Statements of Cash Flows for the
Three Months Ended June 30, 1997
and June 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. . . . . . . . . . . . . . .12
Signature Page . . . . . . . . . . . . . . . .14
2
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PART I
ITEM 1. FINANCIAL INFORMATION
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS June 30, 1997 March 31, 1997
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ (4,309) $ 1,920
Accounts receivable 27,180 24,870
Prepaid expenses and other
current assets 6,261 9,851
Inventory 3,172
Note receivable from Shareholder 20,000 20,000
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Total current assets 52,304 56,641
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PROPERTY:
Office Equipment 41,729 46,729
Furniture and Fixtures 21,262 21,264
Leasehold Improvements 87,785 87,785
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Total 150,776 155,778
Less accumulated depreciation 36,260 34,045
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Net property 114,516 121,733
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TOTAL ASSETS $ 166,820 $ 178,374
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See accompanying notes to financial statements
3
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MEDPLUS CORPORATION
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CONSOLIDATED BALANCE SHEETS CONTINUED
June 30, 1997 March 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 964,335 $ 869,590
Notes payable to related parties (Note 4) 359,435 358,725
Deferred Salaries 93,327 65,954
Convertible note payable - net of
discount (Note 4) 37,500 25,000
Notes payable 105,339 84,072
Line of credit 4,759 4,327
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Total liabilities 1,564,695 1,407,668
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SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par value;
authorized 2,000,000 shares;
no shares outstanding
Common stock, $.001 par value;
authorized, 30,000,000 shares;
issued and outstanding, 9,529,740
and 8,895,278 shares at December 31, 1996
and March 31, 1996 respectively 8,322 8,322
Additional paid in capital 7,493,561 7,459,561
Accumulated deficit (8,899,758) (8,697,177)
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Net shareholders' equity (1,397,875) (1,229,294)
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TOTAL $ 166,820 $ 178,374
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See accompanying notes to financial statements
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MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Month Period
Ended June 30,
-------------------------
1997 1996
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PATIENT FINANCE REVENUES: $ 5,640 $ 46,444
EXPENSES:
General and Administrative 102,417 166,339
Sales and Marketing 76,275 67,752
Total expenses 178,692 234,091
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Loss from Operations (173,053) (187,647)
Loss from Continuing Operations (173,053)
Loss from Discontinued Operations of
Occupational Health Clinic (29,528)
Net loss (202,581) (187,647)
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Loss Per Share From Continuing Operations (.03) (0.03)
From Discontinued Operations (.00)
Total (.03) (0.03)
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Weighted average number of
common shares outstanding 6,234,923 6,913,021
See accompanying financial statements
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MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTH PERIOD ENDED
June 30,
1997 1996
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CASH FLOWS (USED BY) OPERATING ACTIVITIES:
Net loss ($ 202,581) ($ 187,647)
Adjustments to reconcile net income (loss) to net
cash from (used) by operating activities:
Depreciation and amortization 7,634 1,667
(Increase) decrease in assets:
Accounts receivable (2,310) (1,878)
Inventory 0
Prepaid expenses and other current
assets 2 (5,057)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 94,745 (5,853)
Deferred Salaries 27,373 (4,849)
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Total cash provided (used) by operating activities (75,137) (203,617)
CASH FLOWS FROM (USED BY) INVESTING ACTIVITIES:
Investment in property, plant and equipment (6,308)
Proceeds from sale of equipment 0
Additions to property, plant and equipment 0 0
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Total cash provided (used) by investing activities 0 (6,308)
CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES:
Purchase of short term debt 67,591 44,000
Purchase of long term debt 0 0
Payment on short term debt 0 (27,000)
Payment of note payable (32,683) 0
Issuance of common stock 34,000 203,829
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Total cash from (used by) financing activities 68,908 220,829
Increase (decrease) in cash and cash equivalents (6,229) 10,904
Cash and cash equivalents at beginning of period 1,920 7,778
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Cash and cash equivalents at end of period $ (4,309) $ 18,682
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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, 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.
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 June
30, 1997 and March 31, 1997, and the results of operations and its cash
flows for the three month periods ended June 30, 1997 and June 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 three months ended June 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.
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.
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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
June 30, 1997 and March 31, 1997:
June 30, 1997 March 31, 1997
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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. 137,970 157,763
Unsecured note payable to shareholders of the
Company bearing interest at 10% per
annum. The note is payable on demand. 109,780 103,962
Unsecured note payable to shareholder of the
Company bearing interest at 11% per
annum. The note is payable on demand. 12,185 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. 34,000 19,000
Total $ 359,435 $ 358,725
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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 July 24, 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:
June 30, 1997 March 31, 1997
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Unaudited
Unsecured note payable to an individual
bearing interest at 12%, interest
payable monthly and due August 1997. 47,108 49,072
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. 33,231 35,000
Unsecured $5,000 line of credit bearing
interest at 15%. 4,759 4,327
Total $ 110,098 $ 88,399
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997 the Company had working capital of ($1,512,391) 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 three months ended
June 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.
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 $ 2,000,000 in equity or debt financing in order to
sustain operations for the next twelve months following the period ended June
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. Sands Brothers & Co., Inc. has informed the company that they
will commence its fund raising activities immediately upon the filing of the
company's Form 10-QSB. 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 June 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 $5,640 for the three month period ended June 30, 1997 as
compared to $46,444 in operating revenue for the three month period ended
June 30, 1996. The Company's revenue decrease over the three month period
ended June 30, 1996 is primarily attributable to nonpayment of the Company's
revenue from United States Bank of Oregon. The Company's loan volumes
generated to United States Bank of Oregon have increased. However, United
States Bank of Oregon has unilaterally decided to withhold the revenues owed
the Company. The Company is currently in dispute with United States Bank of
Oregon, and with Care Card Northwest, over the withholding of the Company's
revenues and is exploring remedies to this dispute including the possibility
of legal action. Revenue derived from discontinued operations was $70,179
for the three month period ended June 30, 1997. There was no income from
discontinued operations for the three month period ended June 30,1996.
General and administrative expenses from continued operations decreased 38%
from $166,339 during the three month period ended June 30, 1996 to $102,417
during the three month period ended June 30, 1997. The decrease of 38%
during the three month period ended June 30, 1997 is due primarily to
decreases in personnel after the United States Bank withholding the company's
revenues as stated above.
10
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Sales and marketing expenses for continued operations increased 13% from
$67,752 during the three month period ended June 30, 1996 to $76,275 during
the three month period ended June 30, 1997. The increase of 13% during the
three month period ended June 30, 1997 is primarily due to the addition of
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.
11
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Form 10-KSB regarding litigation no changes for period ending June 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 or about March 3, 1997 with the program commencing on May 9th 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.
Associates, 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.
On April 8, 1997, the Company executed a three year exclusive investment
banking agreement (the "Letter") with Sands Brothers located in New York. As
spelled out in the agreement Sands Brothers' duties may include, but will not
necessarily be limited to: (i) advice regarding formation of corporate
goals and their implementation; (ii) advice regarding the financial
structure of the Company, its divisions or subsidiaries or any programs and
projects undertaken by the Company; (iii) advice regarding the securing,
when necessary and if possible, of financing (other than with respect to a
Financing
12
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Transaction); (iv) advice regarding corporate organization, personnel and
selection of needed specialty skills; and (v) review of possible joint
venture, merger, acquisition or similar proposals for the Company (other than
with respect to an Acquisition Transaction).
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 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.
As a subsequent event, in July, 1997 the company raised $150,500 through
two accredited investors through a promissory note. As a part of this
agreement the company issued warrants to purchase shares of common stock in
the amounts of 45,000 shares and 25,000 shares. The warrants issued are
exersisable at $ .50 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
13
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDPLUS CORPORATION
Date: August 20,1997 \By\Tim C. DeHerrera
-----------------------------
Tim C. DeHerrera
Chief Executive Officer
Date: August 20, 1997 \By\Jim Harding
-----------------------------
Jim Harding
Chief Financial Officer
14
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> (4,309)
<SECURITIES> 0
<RECEIVABLES> 27,180
<ALLOWANCES> 0
<INVENTORY> 3,172
<CURRENT-ASSETS> 52,304
<PP&E> 150,776
<DEPRECIATION> 36,260
<TOTAL-ASSETS> 166,820
<CURRENT-LIABILITIES> 1,564,695
<BONDS> 0
0
2,000,000
<COMMON> 8,322
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (1,397,875)
<SALES> 5,640
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 178,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (202,581)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (202,581)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
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