<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 December 31, 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 identification 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 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 February 19, 1998
----- --------------------------------
Common Stock, Par-Value $.001 per share 10,272,954
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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 December 31, 1997 . . . . .3
Statements of Operations for the
Three Months Ended December 31, 1997
and December 31, 1996 . . . . . . . . . . . .5
Statements of Cash Flows for the
Three Months Ended December 31, 1997
and December 31, 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
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PART I
ITEM 1. FINANCIAL INFORMATION
MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 1997
(Unaudited)
-----------------
CURRENT ASSETS:
Cash and cash equivalents 2,618
Accounts receivable 53,629
Prepaid expenses and other
current assets 5,428
Inventory 3,172
Note receivable from Shareholder 15,000
-------
Total current assets 79,847
PROPERTY:
Office Equipment 41,729
Furniture and Fixtures 26,365
Leasehold Improvements 87,785
-------
Total 155,879
Less accumulated depreciation (51,545)
-------
Net Property 104,334
=======
TOTAL ASSETS 184,181
See accompanying notes to financial statements
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MEDPLUS CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
December 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Accounts payable and accrued expenses 1,068,035
Notes payable to related parties (Note 4) 370,542
Deferred Salaries 89,075
Convertible note payable - net of
discount (Note 4) 37,500
Notes payable 298,411
Line of credit 5,053
---------
Total liabilities 1,868,616
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 8,711,364 shares at March 31, 1997
and December 31, 1997 respectively 8,322
Additional paid in capital 7,635,558
Accumulated deficit (9,328,315)
Net shareholders' equity (1,684,435)
TOTAL 184,181
=========
See accompanying notes to financial statements
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MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Month Period Nine Month Period
Ended December 31, Ended December 31,
1997 1996 1997 1996
---- ---- ---- ----
PATIENT FINANCE REVENUES: 2,210 0 9,272 55,521
EXPENSES:
General and Administrative 88,401 96,806 284,350 318,373
Sales and Marketing 51,507 68,832 244,805 262,602
Total expenses 139,908 165,638 529,155 580,975
Loss from Operations (137,698) (165,638) (519,883) (525,454)
Loss from Continuing
Operations (137,698) (165,638) (519,883) (525,454)
Loss from Discontinued
Operations of
Occupational
Health Clinic (45,691) (71,586) (111,255) (142,880)
-------- -------- -------- --------
Operating Loss (183,389) (237,224) (631,138) (668,334)
Total Other Income 0 8 0 90,041
Net loss (183,389) (237,216) (631,138) (578,293)
Loss Per Share From
Continuing Operations (0.02) (0.01) (0.07) (0.06)
From Discontinued Operations (0.01) (0.01) (0.02) (0.01)
-------- -------- -------- -------
Total (0.03) (0.02) (0.09) (0.07)
======== ======== ======== =======
Weighted average number
of common shares
outstanding 7,917,697 9,807,078 7,182,320 8,856,953
See accompanying financial statements
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MEDPLUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTH PERIOD ENDED
December 31,
1997 1996
---- ----
CASH FLOWS (USED BY) OPERATING
ACTIVITIES:
Net loss (631,138) (578,293)
Adjustments to reconcile net income
(loss) to net cash from (used)
by operating activities:
Depreciation and amortization 17,500 17,180
(Increase) decrease in assets:
Accounts receivable (28,759) (2,105)
Inventory (3,172) (3,804)
Prepaid expenses and other current
assets 9,423 (5,058)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses 221,566 306,229
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Total cash provided (used) by
operating activities (414,580) (265,851)
CASH FLOWS FROM (USED BY) INVESTING
ACTIVITIES:
Investment in property, plant and
equipment (101) (139,172)
Proceeds from sale of equipment 0 0
Additions to property, plant and
equipment 0 0
------- --------
Total cash provided (used) by
investing activities (101) (139,172)
CASH FLOWS FROM (USED BY) FINANCING
ACTIVITIES:
Purchase of short term debt 239,382 163,768
Purchase of long term debt 0 85,000
Payment on short term debt 0 (5,928)
Payment of note payable 0 0
Issuance of common stock 175,997 162,081
------- --------
Total cash from (used by) financing
activities 415,379 404,921
Increase (decrease) in cash and cash
equivalents 698 (102)
------- --------
Cash and cash equivalents at beginning
of period 1,920 7,778
Cash and cash equivalents at end of
period 2,618 7,676
======= ========
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MEDPLUS CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements of MEDPLUS CORPORATIONcontain all
adjustments (consisting of only normal recurring
adjustments) which, in the opinionof management are
necessary to present fairly the financial position
of the Company as of theperiods ended December 31,
1997 and March 31, 1997, and the results of
operations and its cash flows for the nine month
periods ended December 31, 1997 and December 31,
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 nine months ended December 31,
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 current success at
solving 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 December
31, 1997 and March 31, 1997:
December 31, 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. 106,129 103,962
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. 41,150 19,000
Total $370,542 $358,725
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CONVERTIBLE NOTES PAYABLE
During 1996, 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 February 19, 1988.
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:
December 31, 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.
On November 1, 1997 a note
holder agreed to convert the
accrued interest of $3,938
and principle of $87,500 for
250,000 shares of common
stock. The transaction is
pending. 196,108 0
Unsecured note payable to an
individual bearing
interest at 12%,
interest payable monthly and
due August 1997. On November
1, 1997 the note holder
agreed to convert the accrued
interest of $1,500 and
principle of $25,000 for
100,000 shares of common
stock. The transaction is
pending. 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%. 5,053 4,327
Total $303,464 $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 December 31, 1997 the Company had working capital of
($1,788,769) 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 nine months ended
December 31, 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,
short-term borrowing in the form of promissory notes and
equity financing without which the Company's liquidity
position would be 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. As a subsequent event to the period ending
December 31, 1997, the Company was able to consummate a
private equity financing with RJC Investments LTD., a
private investor, which closed on February 6, 1998. In the
transaction, RJC invested $250,000 to purchase 1,470,588
shares of the Company's common stock. The securities were
issued relying upon the exemption from securities
registration afforded by Rule 506 under Regulation D and/or
Rule 4(2) as promulgated by the United States Securities and
Exchange Commission under the Securities Act of 1933, as
amended. The Agreement with RJC calls for an additional
investment of $250,000 on or before April 6, 1998 to
acquire the same number of shares outlined above and a
Warrant to purchase 1,250,000 shares of common stock for an
investment of $500,000. 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 and currently has agreements in place for additional
equity financing, 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, 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 $9,272 for the nine month period
ended December 31, 1997 as compared to $55,521 in operating
revenue for the nine month period ended December 31, 1996.
The Company's revenue decrease over the nine month period
ended December 31, 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
$208,540 for the nine month period ended December 31, 1997,
as compared to $19,112 for the nine month period December
31, 1996.
General and administrative expenses from continued
operations decreased 11% from $318,373 during the nine month
period ended December 31, 1996 to $284,350 during the nine
month period ended December 31, 1997. The decrease of 11%
during the nine month period ended December 31, 1997 is due
primarily to a reduction in support personnel.
Sales and marketing expenses for continued operations
decreased 7% from $262,602 during the nine month period
ended December 31, 1996 to $244,805 during the nine month
period ended December 31, 1997. The decrease of 7% during
the nine month period ended December 31, 1997 is primarily
due to a reduction in sales and marketing personnel.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Form 10-KSB regarding litigation. There were no
changes for period ending December 31, 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 December 23, 1997, the Company received a
commitment of up to $20 million to purchase health care
receivables through Capstone and Company, LLC a New
York based merchant banking company. The capital will
be contributed for the purchase of qualified
receivables generated by the Company's approved health
care providers at an amount of up to $5,000,000 per
calendar quarter. There can be no assurance that this
commitment will lead to a definitive operating line for
the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Reports on Form 8-k
None
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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: February 23, 1998 By:\s\Tim C. DeHerrera
-----------------------
Tim C. DeHerrera
Chief Executive Officer
