<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 September 30, 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
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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)
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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
----- -----
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 JANUARY 23, 1997
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Common Stock, Par-Value 10,496,774
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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 September 30, 1996
and March 31, 1996 ...................................... 3
Statements of Operations for the
Six Months Ended September 30, 1996
and September 30, 1995................................... 5
Statements of Cash Flows for the
Six Months Ended September 30, 1996
and September 30, 1995................................... 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
<PAGE>
PART I
ITEM 1. FINANCIAL INFORMATION
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, 1996 March 31, 1996
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 2,622 $ 7,778
Accounts receivable 17,475 23,639
Inventory (Note 5) 5,891
Prepaid expenses and other
current assets 5,573 515
---------- ----------
Total current assets 31,561 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 19,034 10,072
---------- ----------
Net property 140,137 9,927
---------- ----------
OTHER 3,541 4,375
---------- ----------
TOTAL ASSETS $ 175,239 $ 46,234
---------- ----------
---------- ----------
See accompanying notes to financial statements
3
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS CONTINUED
September 30, 1996 March 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 540,063 $ 313,620
Notes payable (Note 4) 323,371 205,470
Deferred Salaries 3,224 8,073
----------- -----------
Total current liabilities 866,658 527,163
----------- -----------
Long term note payable
Total liabilities 866,658 527,163
----------- -----------
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 September 30, 1996
and March 31, 1996 respectively 23,248 23,356
Additional paid in capital 6,987,583 6,851,145
Accumulated deficit (7,702,250) (7,355,430)
----------- -----------
Net shareholders' equity (691,419) (480,929)
----------- -----------
TOTAL $ 175,239 $ 46,234
----------- -----------
----------- -----------
See accompanying notes to financial statements
4
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MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Month Period Six Month Period
Ended September 30, Ended September 30,
------------------------ ----------------------
1996 1995 1996 1995
---- ---- ---- ----
REVENUES: $ 28,190 $ 8,548 $ 74,633 $ 21,951
EXPENSES:
General and Administrative 82,403 38,567 222,146 69,020
Sales and Marketing 99,607 38,802 199,486 84,866
Operations 86,443 89,853
Total expenses 268,453 77,369 511,485 153,886
---------- ----------- ---------- ----------
Operating loss (240,263) (68,821) (436,852) (131,935)
OTHER INCOME:
Interest income 7 34
Other Income 90,000 90,000
---------- ----------- ---------- ----------
Total other income 90,007 90,034
Net loss (150,256) (68,821) (346,818) (131,935)
---------- ----------- ---------- ----------
Net Loss per share of
common stock (0.02) (0.01) (0.04) (0.03)
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
Weighted average number of
common shares outstanding 9,456,407 5,419,890 8,014,829 4,282,607
See accompanying financial statements
5
<PAGE>
MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTH PERIOD ENDED
September 30,
1996 1995
---- ----
CASH FLOWS (USED BY) OPERATING ACTIVITIES:
Net loss $ (346,818) $ (131,935)
Adjustments to reconcile net income (loss) to net
cash from (used) by operating activities:
Depreciation and amortization 9,796 2,143
(Increase) decrease in assets:
Accounts receivable 6,164
Inventory (5,891)
Prepaid expenses and other current
assets (5,058) 542
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 221,594 12,275
---------- ----------
Total cash provided (used) by operating activities (120,213) (116,975)
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 117,901
Payment on long term debt (6,000)
Payment of note payable (103,806)
Issuance of common stock 136,328 208,192
---------- ----------
Total cash from (used by) financing activities 254,229 98,386
Increase (decrease) in cash and cash equivalents (5,156) (13,589)
Cash and cash equivalents at beginning of period 7,778 14,212
---------- ----------
Cash and cash equivalents at end of period $ 2,622 $ 623
---------- ----------
---------- ----------
6
<PAGE>
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
September 30, 1996 and March 31, 1996, and the results of operations and
its cash flows for the six month periods ended September 30, 1996 and
September 30, 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 September 30, 1996 the Company has net operating
loss carryforwards of approximately $2,201,000, 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 September 30, 1996 and March 31, 1996
consists of the following:
<TABLE>
September 30, 1996 March 31, 1996
Unaudited
------------------ --------------
<S> <C> <C>
Unsecured note payable to Company director
bearing interest at 10% per annum,
$10,000 together with accrued interest
and $15,000 together with accrued
interest, is payable upon the Company
obtaining $100,000 and $500,000 in
equity financing, respectively. $ 25,000 $ 25,000
Unsecured note payable to 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. 18,401 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. 50,000 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
-------- --------
Total $286,871 $205,470
Less current portion 286,871 205,470
-------- --------
Long-term portion $ 0 $ 0
-------- --------
</TABLE>
8
<PAGE>
NOTE PAYABLE
Notes payable to related parties consist of the following:
<TABLE>
September 30, 1996 March 31, 1996
Unaudited
------------------ --------------
<S> <C> <C>
Unsecured note payable to an outside party
Bearing interest at 12% per annum
Due and payable on March 5, 1997. $ 25,000 $ 0
-------- --------
Total $ 25,000 $ 0
Less Current portion 25,000 0
-------- --------
Long-term portion $ 0 $ 0
-------- --------
Total short-term debt $311,871 $205,470
-------- --------
</TABLE>
As of September 30, 1997, all notes are considered current.
5. INVENTORIES
Inventories on hand at September 30, 1996 consist of operating supply
inventory for the Company's occupational health care clinic the components
of which are the following:
<TABLE>
September 30, 1996 March 31, 1996
Unaudited
------------------ --------------
<S> <C> <C>
Medical supplies $ 5,891 $ 0
-------- --------
Total Inventories $ 5,891 $ 0
-------- --------
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of ($ 835,097) compared
to working capital of ($ 483,690) at March 31, 1996. The decline in working
capital is primarily due to the Company's net loss for the six months ended
September 30, 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 September 30,
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 of 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
September 30, 1996 there were no known demands, commitments 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 230% from
$8,548 during the three month period ended September 30, 1996 to $ 28,190 during
the three month period ended September 30, 1996 and increased 240% from $ 21,951
during the six month period ended September 30, 1995 to $74,633 during the six
month period ended September 30, 1996. The Company's revenue increase during the
three month period ended September 30, 1996 is due primarily to $ 19,112 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 $ 19,112 in revenues, mentioned
above, represents the clinic's first two months of operations. Revenues derived
from sales of the Company's health care credit card services increased slightly
to $ 9,078 during the three month period ended September 30, 1996 form $ 8,548
during the three month period ended September 30, 1995. Although revenues
realized from sales of the Company's health care credit card services increased
slightly during the three month period ended September 30, 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-TM-, over the withholding of the
Company's revenues and is exploring remedies to this dispute including the
possibility of legal action. (See Item 5. Other information)
10
<PAGE>
The increase in revenues during the six month period ended September 30, 1996 is
due primarily to the $19,112 in revenues generated by the Company's occupational
health care clinic during its first two months of operation along with an
increase of 153% in revenues realized from sales of the Company's health care
credit card services from $ 21,951 during the six month period ended September
30, 1995 to $ 55,521 during the six month period ended September 30, 1996.
General and administrative expenses increased 114% from $ 38,567 during the
three month period ended September 30, 1995 to $ 82,403 during the three month
period ended September 30, 1996 and increased 222% from $ 69,020 during the six
month period ended September 30, 1995 to $ 222,146 during the six month period
ended September 30, 1996. The increase of 114% and 222% during the three month
and six month periods ended September 30, 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 157% from $ 38,802 during the three month
period ended September 30, 1995 to $ 99,607 during the three month period ended
September 30, 1996 and increased 135% from $ 84,866 during the six month period
ended September 30, 1995 to $ 199,486 during the six month period ended
September 30, 1996. The increase of 157% and 135% during the three and six
month periods ended September 30, 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 $ 86,443 for the three month period ended September 30,
1996 and $ 89,853 for the six month period ended September 30, 1996 represents
personnel and related expenses to operate the Company's occupational health care
clinic for the first two months of operation during the three month period ended
September 30, 1996.
Other income of $ 90,000 for the three month and six month periods ended
September 30, 1996 represents a one time recognition of income realized from the
default on funds deposited by Pacific Corporate Equities, Inc. to the Company
in anticipation a capital infusion of $10 million dollars by Pacific Corporate
Equities and Starboard Holding Co. As reported in the Company's report on Form
10-Q for the period ended June 30, 1996 Pacific Corporate Equities and Starboard
Holding were unable to perform the anticipated $ 10 million dollar financing
therefore under the terms of the letter of intent between the Company and
Pacific Corporate Equities the Company retained the $ 90,000 deposited with the
Company to hold its exclusivity with regards to the $ 10 million dollar
financing.
11
<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 November 14, 1996 the Company entered into a letter of intent
with Fringe Benefits Management Company ("FBMC"), located in Tallahassee,
Florida, to form a strategic alliance relationship to combine products and
relationships in a joint effort. Under the terms of the letter FBMC will work
with the Company to integrate FBMC's line of employee benefits programs and
other relationships or products with the Company's private label credit card
and bank card , bank card relationships, electronic data information network and
other relationships or products. It is anticipated by both FBMC and the Company
that such a strategic relationship would significantly enhance the value and
marketability of both FBMC and the Company's products.
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.
12
<PAGE>
On or about January 23, 1997 signed a letter of intent with American
Insurance Marketing Corporation ("AIMC") and Maryland Southern Life Insurance
("MSLI"), a Global Health Services/The Southern Group JV, to integrate the
Company's line of health care financial service products with AIMC and MSLI's
line of employee fringe benefits products. Under the terms of the letter the
Company will work towards providing AIMC and MSLI access to the Company's
health care credit card capabilities, bank credit card relationships , credit
processing relationships, health care claims processing relationships among
other financial and health care products or services. AIMC and MSLI will work
towards integrating the Company's health care credit card with AIMC's line of
benefits products along with access to AIMC's laser card relationship, laser
card software technology, plan administration and benefits administration and
other products or relationships. AIMC and MSLI market a Erisa Trust Health
Plan and a discount PPO group to employers and associations in six
Mid-Atlantic States. The health plan lives associated with AIMC and MSLI are
projected to be 1.8 million.
13
<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
August 11, 1994 James W. Snyder
----------------------------------
James W.. Snyder, President and
Chief Executive Officer
August 11, 1994 Robert T. Ryman
----------------------------------
Robert T. Ryman, Vice President
of Finance; Chief Financial Officer;
Secretary and Treasurer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2622
<SECURITIES> 0
<RECEIVABLES> 17475
<ALLOWANCES> 0
<INVENTORY> 5891
<CURRENT-ASSETS> 31561
<PP&E> 159171
<DEPRECIATION> 19034
<TOTAL-ASSETS> 175239
<CURRENT-LIABILITIES> 866658
<BONDS> 0
0
2000000
<COMMON> 23248
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (691419)
<SALES> 28190
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 268453
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (150256)
<INCOME-TAX> 0
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<CHANGES> 0
<NET-INCOME> 150256
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
