UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
|_| 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: 33-2205-D
NeuroCorp., Ltd.
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(Exact name of registrant as specified in its charter)
Nevada 22-2813990
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45 Knollwood Road, Elmsford. New York 10523
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(Address of principal executive offices) (Zip Code)
(914) 631-3315
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 11,731,672 shares as of October 31,
1999.
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PART 1- FINANCIAL INFORMATION:
ITEM I - FINANCIAL STATEMENTS
Page
number
------
Consolidated Balance Sheets at September 30, 1999
(unaudited) and December 31, 1998 1
Consolidated Statements of Operations (unaudited) for the
three months ended September 30, 1999 and 1998 2
Consolidated Statements of Operations (unaudited) for the
nine months ended September 30, 1999 and 1998 3
Consolidated statement of Stockholders' Equity (unaudited)
for the nine months ended September 30, 1999 4
Consolidated statements of cash flows (unaudited) for the
nine months ended September 30, 1999 and 1998 5
Notes to consolidated financial statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION 12
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 509,779 $ 795,739
Accounts receivable, net 50,978 6,400
Inventory 5,686
Prepaid expenses and other current assets 63,775 27,785
------------ ------------
Total current assets 630,218 829,924
------------ ------------
PROPERTY AND EQUIPMENT, net 538,388 583,974
OTHER ASSETS 148,597 145,162
------------ ------------
$ 1,317,203 $ 1,559,060
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 470,328 $ 544,770
Accrued expenses 209,880 179,825
Unearned Revenue 7,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 24,000
Current obligations under capital leases 3,941
Stockholder demand notes payable 300,000 300,000
------------ ------------
Total current liabilities 1,015,149 1,024,595
------------ ------------
LONG TERM LIABILITIES
Obligations under capital leases 6,647 --
COMMITMENTS (Note 3) -- --
STOCKHOLDERS' EQUITY
Cumulative, convertible preferred stock, Class B, Series C,
$.001 par value, 20,000,000 shares authorized 17,071 733
Cumulative, non-convertible preferred stock, Class B, Series 1,
no par value, 5,000,000 shares authorized 150,000 150,000
Common stock, $.001 par value, 100,000,000 shares authorized 11,731 11,225
Additional paid-in-capital 11,250,113 9,172,919
Stock Subscriptions Receivable (962,500)
Deficit (10,171,008) (8,800,412)
------------ ------------
295,407 534,465
------------ ------------
$ 1,317,203 $ 1,559,060
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-1-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
------------ ------------
NET SALES $ 115,341 $ 91,383
COST OF SALES, including amortization expense
of $-0- and $22,218, respectively 36,845 515,948
------------ ------------
Gross profit (loss) 78,496 (424,565)
GENERAL AND ADMINISTRATIVE EXPENSES 524,349 906,608
------------ ------------
Loss from operations (445,853) (1,331,173)
OTHER INCOME (EXPENSE)
Interest income 1,700 988
Other income 81,726 (1,443)
Interest expense (4,082) (9,081)
------------ ------------
79,344 (9,536)
------------ ------------
Loss before benefit from
income taxes (366,509) (1,340,709)
BENEFIT FROM INCOME TAXES -- --
Net loss $ (366,509) $ (1,340,709)
============ ============
(LOSS) PER COMMON SHARE $ (0.03) $ (0.12)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 11,731,672 11,213,806
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
-2-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
------------ ------------
NET SALES $ 314,123 $ 300,711
COST OF SALES, including amortization expense
of $-0- and $156,438, respectively 131,646 733,766
------------ ------------
Gross profit (loss) 182,477 (433,055)
GENERAL AND ADMINISTRATIVE EXPENSES 1,618,517 2,515,121
------------ ------------
Loss from operations (1,436,040) (2,948,176)
OTHER INCOME (EXPENSE)
Interest income 7,528 8,189
Other income 84,242 (3,068)
Interest expense (14,938) (29,608)
------------ ------------
76,832 (24,487)
------------ ------------
Loss before benefit from
income taxes (1,359,208) (2,972,663)
BENEFIT FROM INCOME TAXES -- --
Net loss $ (1,359,208) $ (2,972,663)
============ ============
(LOSS) PER COMMON SHARE $ (0.12) $ (0.27)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 11,397,628 10,969,490
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
-3-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Class B, Series C Class B, Series 1 Common Stock
Shares Amount Shares Amount Shares Amount
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 733,333 $ 733 150,000 $ 150,000 11,225,272 $ 11,225
Issuance of common stock in
connection with exercise of
stock option -- -- -- -- 6,400 6
Issurance of preferred stock 8,200,000 8,200
Issurance of preferred stock 800,000 800
Sale of preferred stock subscribed 7,200,000 7,200
Sale of common stock subscibed 500,000 500
Preferred stock dividends 138,260 138 -- -- -- --
Net loss -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance, September 30, 1999 17,071,593 $ 17,071 150,000 $ 150,000 11,731,672 $ 11,731
============ ============ ============ ============ ============ ============
<CAPTION>
Additional Stock Total
Paid-in Subscriptions Stockholders'
Capital Receivable Deficit Equity
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998 $ 9,172,919 $ -- $ (8,800,412) $ 534,465
Issuance of common stock in
connection with exercise of
stock option 6,394 -- 6,400
Issurance of preferred stock 1,016,800 1,025,000
Issurance of preferred stock 99,200 100,000
Sale of preferred stock subscribed 892,800 (900,000) --
Sale of common stock subscibed 62,000 (62,500) --
Preferred stock dividends -- (11,388) (11,250)
Net loss -- (1,359,208) (1,359,208)
------------ ------------ ------------ ------------
Balance, September 30, 1999 $ 11,250,113 $ (962,500) $(10,171,008) $ 295,407
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-4-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,359,208) $(2,972,663)
Adjustments to reconcile net loss to net
cash used in operating activities:
Bad debt expense (recovered) 8,014
Depreciation and amortization 62,191 274,663
Decrease (increase) in:
Accounts receivable (52,592) 242,054
Prepaid expenses
other current assets (35,990) 97,886
Inventories (5,686) (1,514)
Due from affiliates 14,744
Other Assets (3,436) --
Increase (decrease) in:
Accounts payable (74,441) 152,934
Accrued expenses 18,805 (73,034)
Unearned revenue 7,000
Billings in excess of costs 24,000 --
----------- -----------
Net cash used in operating activities (1,411,343) (2,264,930)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized database development costs (14,353)
Purchases of property and equipment (16,605) (336,325)
----------- -----------
Net cash used in investing activities (16,605) (350,678)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable 10,588 --
Repayment of stockholder loans (83,965)
Proceeds from issuance of stock and warrants 1,131,400 1,742,662
----------- -----------
Net cash provided by financing activities 1,141,988 1,658,697
----------- -----------
NET DECREASE IN CASH (285,960) (956,911)
CASH AND CASH EQUIVALENTS, beginning of period 795,739 1,575,159
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 509,779 $ 618,248
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 8,188 $ 22,858
Income taxes 5,347 1,625
NON CASH INVESTING AND FINANCING ACTIVITIES
Issuance of preferred stock in lieu of
dividend on preferred stock 138,260 --
Accrued dividends 11,250 11,250
Acquisition of leased equipment 10,588 --
The accompanying notes are an integral part of
these consolidated financial statements.
- 5 -
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The interim consolidated financial statements for the three and nine
months ended September 30, 1999 and 1998 have been prepared by NeuroCorp,
Ltd. (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC") for interim financial
reporting. These consolidated statements are unaudited and, in the opinion
of management, include all adjustments (consisting only of normal
recurring accruals) and disclosures necessary to present fairly the
consolidated balance sheets, consolidated results of operations and
consolidated cash flows for the periods presented in accordance with
generally accepted accounting principles. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
in accordance with the rules and regulations of the SEC. These
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements, and accompanying notes,
included the Company's Annual Report on Form 10-K for the period ended
December 31, 1998.
CONSOLIDATION
The consolidated financial statements include the accounts of NeuroCorp,
Ltd. (NeuroCorp), and its wholly-owned subsidiaries, HZI Research Center,
Inc. (HZI) and Memory Centers of America, Inc. (MCAI). Telemap, Inc. is a
wholly-owned subsidiary of HZI and has no material operations. All
material intercompany balances and transactions have been eliminated in
consolidation.
NATURE OF OPERATIONS
The Company performs clinical research data analysis for health agencies,
research organizations, and pharmaceutical companies and manages a
facility, which diagnoses and treats memory disorders and provides
education and consultation to individuals who suffer from memory
impairment. In addition, as an outgrowth of its research activities, the
Company also designs diagnostic testing software and equipment for
neuropsychiatric applications and performs neurological testing services
for hospitals and physicians.
CHANGE IN REPORTING ENTITY
New York Institute for Medical Research, Inc. (NYI) is a not-for-profit
private foundation that in prior years' was controlled by board members
that also controlled NeuroCorp. During 1998, the composition of
NeuroCorp's board members changed resulting in the deconsolidation of NYI.
All prior periods have been restated to reflect this change in reporting
entity.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as
6
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
USE OF ESTIMATES - CONTINUED
of the date of the consolidated financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
EARNINGS PER COMMON SHARE
For the nine months ended September 30, 1999 and 1998, 17,071,593 and 0
shares respectively, of the Class B Series C convertible preferred stock
and 330,000 and 0 options were excluded from the calculations, as their
effect would have been antidutive.
NOTE 2 - GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company's
ability to continue as a going concern is currently dependent on its
ability to successfully attain profitability and positive cash flows from
operations as well as obtain capital or other financing to fund future
losses. These factors raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include
adjustments relating to the recoverability and realization of assets and
classification of liabilities that might be necessary should the Company
be unable to continue as a going concern.
Management's plans to mitigate the Company's financial problems are
outlined below.
During 1999, the Company completed two investments with Pioneer Ventures
Associates Limited Partnership pursuant to the July 30, 1998 investment
agreement. In May 1999, the Company received $100,000 from Pioneer and
issued 800,000 shares of the Company's Series C 8% Convertible Preferred
Stock. In June 1999, the Company issued Pioneer 7,200,000 shares of the
Company's Series C 8% Convertible Preferred Stock and 500,000 shares of
common stock for a total of $962,500. The proceeds were placed in a
restricted bank account for the Company in October 1999, and will be
disbursed to the Company based on certain financial measures, on a monthly
basis.
In May 1999, the Company received $1,025,000 from entities managed by
Lancer Management Group LLC (Lancer) and issued 8,200,000 shares of the
Company's Series C 8% Convertible Preferred Stock and issued warrants to
purchase 500,000 shares of Common Stock at a price of $1.00 per share.
These warrants will be exercisable for a period of five years
Regarding current operations, the Company is continuing its ongoing
marketing efforts to obtain contracts for its contract research division
and has implemented several measures to reduce current expenditures. Such
reductions include salary deferrals, staff cuts, reducing office space and
equipment leases and reductions in other expenses. The Company expects
that the proceeds from Pioneer, together with current cash and projected
cash from operations will be sufficient to fund its activities for the
next twelve to eighteen months.
7
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 3 - COMMITMENTS AND CONTINGENCIES
a) Operating leases
The Company and its subsidiaries have entered into lease agreements for
administrative offices and certain equipment under noncancellable
operating leases expiring in various dates through December 2002. The
administrative office leases contain a provision for additional rent which
is equal to the Company's pro rated share of future real estate taxes.
A schedule of future minimum rental payments at September 30, 1999 is as
follows:
Year ended December 31,
-----------------------
1999 $134,779
2000 144,120
2001 147,729
2002 142,565
2003 134,174
--------
$703,367
========
Rent expense under all operating leases for the nine months ended
September 30, 1999 and 1998 was $141,559 and $118,715, respectively.
b) Concentration of credit risk
For the nine months aided September 30, 1999, approximately 70%,
respectively, of net sales were derived from three unrelated customers,
respectively who are in the pharmaceutical and psychiatric industries. As
of September 30, 1999 and December 31, 1998, approximately 88% and 100%
respectively, of accounts receivable are due from three and one unrelated
customers.
NOTE 4 - RELATED PARTY TRANSACTIONS
Stockholder notes and loans payable
Stockholder notes and loans payable consisted of the following at:
September
30, 1999 December
(Unaudited) 31, 1998
--------- ---------
Non-interest bearing loans,
(See (i) below) $ 200,000 $ 200,000
Notes payable bearing an interest of
5% to 9% (See below) 100,000 100,000
--------- ---------
$ 300,000 $ 300,000
========= =========
8
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 4 - RELATED PARTY TRANSACTIONS -CONTINUED
Stockholder notes and loans payable - continued
i) On May 24, 1996, the Company entered into an agreement with a
shareholder to borrow $200,000. The note is non-interest bearing and
was payable within one year or is payable out of the first proceeds
resulting from any exercise of outstanding Class B and Class C
warrants, whichever comes first. During June 1997, the original
maturity date of May 24, 1997 was extended to December 15, 1998.
ii) On July 16,1996, the Company entered into two loan agreements
amounting to $200,000 with two unrelated shareholders. Each note was
for $100,000, bears interest at 9% per annum and was due at the
earlier of one year or payable from any of the proceeds of a sale of
the Company's securities including the exercise of Class B and C
Warrants. On April 30, 1997, the Company liquidated one note
amounting to $100,000 and extended the second note's maturity date
to December 15, 1998.
As of September 30, 1999, the above loans remain outstanding without
extension.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Regarding Forward Looking Information
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking information made on behalf of the Company.
Certain statements in this quarterly report on Form 10-QSB are
"forward-looking statements". These forward-looking statements include,
but are not limited to, statements about our plans, objectives,
expectations and intentions and other statements contained in this annual
report that are not historical facts. When used in this annual report, the
words "expect," "anticipate," "intend," "plan," "believe," "seek,"
"estimate," and similar expressions are generally intended to identify
forward-looking statements. Because these forward-looking statements
involve risks and uncertainties, there are important factors that could
cause actual results to differ materially from those expressed or implied
by these forward-looking statements, including our plans, objectives,
expectations, and intentions and other factors discussed in this report.
We assume no obligation to update such forward-looking statements
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
The Company reported a net loss of $366,509 for the three months ended
September 30, 1999 as compared to a net loss of $1,340,709 for the three
months ended September 30, 1998.
9
<PAGE>
Revenues for the three months ended September 30, 1999 and 1998 amounted
to $115,341 and $91,383 respectively. Revenues increased by $23,958 or 26%
for the three months ended September 30, 1999 as compared to the three
months ended September 30, 1998. Gross (loss) profit for the three months
ended September 30, 1999 and 1998 amounted to $78,496 and $(424,565),
respectively or a net increase of $503,061. The Company included in the
cost of sales, amortization of its database and computer system product
development costs for the three months ended September 30, 1998. The
Company wrote-off the remaining value of database and computer system
product development costs as of December 31, 1998. For the three months
ended September 30, 1999 and 1998 amortization charges amounted to $0 and
$22,218, respectively.
The increase in sales and gross profit is attributable to the Company
focusing its efforts on developing the Memory Center business and the
Company's ability to secure consulting work related to prior contract
research business for HZI.
General and administration expenses include overhead, administration
salaries, selling and consulting costs.
General and administrative expenses for the three months ended September
30, 1999 were $524,349 as compared to the three months ended September 30,
1998 of $906,608 or a decrease of $382,259 or 42%. The decrease in general
and administrative expenses for the three months ended September 30, 1999
is primarily due to a Company restructuring which included a reduction in
employee staffing and other cost reduction strategies.
Other Income (Expense) for the three months ended September 30, 1999 and
1998 amounted to $79,344 and $(9,536), respectively, an increase of
$88,880. The increase is a result of miscellaneous income of $81,726 from
negotiated decreases in accounts payable
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
The Company reported a net loss of $1,359,208 for the nine months ended
September 30, 1999 as compared to a net loss of $2,972,663 for the nine
months ended September 30, 1998.
Revenues for the nine months ended September 30, 1999 and 1998 amounted to
$314,123 and $300,711 respectively. Revenues increased by $13,412 or 4%
for the nine months ended September 30, 1999 as compared to the nine
months ended September 30, 1998. Gross (loss) profit for the nine months
ended September 30, 1999 and 1998 amounted to $182,477 and $(433,055),
respectively or a net increase of $615,532. The Company included in the
cost of sales, amortization of its database and computer system product
development costs for the nine months ended September 30, 1998. The
Company wrote-off the remaining value of database and computer system
product development costs as of December 31,1998. For the nine months
ended September 30, 1999 and 1998 amortization charges amounted to $0 and
$156,438 respectively.
General and administrative expenses for the nine months ended September
30, 1999 were $1,618,517 as compared to the nine months ended September
30, 1998 of $2,515,121 or a decrease of $896,604 or 36%. The decrease in
general and administrative expenses for the nine months ended September
30, 1999 is primarily due to a Company restructuring which included a
reduction in employee staffing and other cost reduction strategies.
Other Income (Expense) for the nine months ended September 30, 1999 and
1998 amounted to $76,832 and $(24,487), respectively, an increase of
$101,319. The increase is a result of a decrease in interest expense and
$81,726 of miscellaneous income from negotiated decreases in accounts
payable
10
<PAGE>
Income Taxes
The Company has not generated any taxable income the last four years and
therefore has not paid any federal income taxes for this period.
Utilization of the Company's net operating loss carryforwards may be
subject to certain limitations under section 382 of the Internal Revenue
Code. Due to uncertainties regarding realizability of the deferred tax
assets, the Company has provided a valuation allowance on the deferred tax
asset in an amount necessary to reduce the net deferred tax asset to zero.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999 and December 31, 1998, the Company had negative
working capital of $384,931 and $194,671 respectively. The Company's cash
balance at September 30, 1999 and December 31, 1998 amounted to $509,779
and $795,739, respectively. The Company's net accounts receivable amounted
to $50,978 at September 30, 1999 and $6,400 at December 31, 1998, an
increase of $46,178. Prepaid expenses at September 30, 1999 and December
31, 1998 amounted to $63,775 and $27,785, respectively, an increase of
$35,990.
As of September 30, 1999 and December 31, 1998 current liabilities
amounted to $1,015,149 and 1,024,595, respectively, a decrease of $9,445.
Included in these amounts is a $300,000 stockholder loan, which was due
December 31, 1998.
For the nine months ended September 30, 1999 and 1998, the Company used
cash for operations of $1,411,343 and $2,264,930 respectively, resulting
in decreased use of cash for operations by $853,587. The net decrease for
the nine months ended September 30, 1999 is the result of loss from
operations amounting to $1,436,040 compared to the loss from operations
for the nine months ended September 30, 1998 of $2,948,176 a decrease of
$1,512,136.
For the nine months ended September 30, 1999 and 1998 cash used by
investing activities amounted to $16,605 and $350,678, respectively, or a
net decrease in use of cash of $334,073. The decrease use in cash for
investing activities for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998 was attributable to a
reduction in capitalized database development costs to $0 from $14,353 for
the nine months ended September 30, 1999 and 1998, and further to a
decrease in purchases of fixed assets to $16,055 for September 30, 1999
from $336,325 for the nine months ended September 30, 1998.
For the nine months ended September 30, 1999 and 1998 cash provided by
financing activities amounted to $1,141,988 and $1,658,897, respectively.
For the nine months ended September 30, 1999, 6,400 shares were issued in
connection with exercise of 6,400 warrants and 16,200,000 shares of the
Class B, Series C preferred stock and 500,000 shares of common stock were
issued pursuant to an investment by Lancer Management Group LLC and
Pioneer Ventures Associates Limited Partnership.
During 1999, the Company completed two investments with Pioneer Ventures
Associates Limited Partnership pursuant to the July 30, 1998 investment
agreement. In May 1999, the Company received $100,000 from Pioneer and
issued 800,000 shares of the Company's Series C 8% Convertible Preferred
Stock. In June 1999, the Company issued Pioneer 7,200,000 shares of the
Company's Series C 8% Convertible Preferred Stock and 500,000 shares of
common stock for a total of $962,500. The proceeds were placed in a
restricted bank account for the Company in October 1999, and will be
disbursed to the Company based on certain financial measures, on a monthly
basis.
11
<PAGE>
MANAGEMENT'S PLAN
The Company plans center on the following objectives; secure affiliate
Memory Centers(TM) business, turn the Signature Memory Center into a
profitable operation, and secure new contract research business.
The Company is aggressively pursuing affiliate Memory Centers business, as
it believes this will enable a less costly and quicker growth strategy.
Previously, the Company had focused on starting Company owned and run
Memory Centers offices, but the high cost associated with the construction
and startup of such sites prohibits that approach. The Company is in
negotiations with a number of entities to start such affiliations. The
Company is negotiating with enterprises that will be able to provide the
necessary medical office space and patient base, such as hospitals,
skilled nursing facilities and physician groups. The Company has entered
into four non-binding Letters of Intent with entities that are interested
in setting up Memory Centers in their facilities. The Company may need to
finance the acquisition of computer and medical equipment that will be
installed at each location. The amount of capital that may be needed
varies with each affiliation as some affiliates may purchase the equipment
up front and pay reduced management fees in exchange.
The Company is pursuing a marketing strategy intended to create awareness
of Memory Centers and its services to potential patients and large
existing healthcare providers such as, multi-specialty physician groups,
hospital consortiums, and large assisted living center organizations. The
Company has entered into a contract for marketing services with a highly
respected firm in the New York City metropolitan area with a reputation
for having relationships at the highest level of these organizations.
The Company has entered into a consulting agreement with a major customer
that will provide a minimum of $480,000 in revenues over the next two
years. This contract, which is a result of previous contract research with
the customer, began in May 1999.
The Company also entered into contract with a large U.S. pharmaceutical
company to provide consultative services for a period of two years
beginning in March 1999. This contract will provide a minimum of $96,000
in revenues over the next two years.
The Company continues its quest for new and continuing contract research
through its HZI operation. The Company is has started work on a research
contract for a clinical study that could generate as much $288,000 in
revenues. The Company is also negotiating additional contracts, which it
hopes to finalize in the fourth quarter of 1999.
The Company believes the Tele-Map(TM) business can be marketed and provide
a consistent growing revenue stream. The Company is pursuing several
options for the purpose of expanding its Tele-Map business including joint
venture opportunities.
PART II- OTHER INFORMATION
ITEM 1 - Legal Proceedings:
None
ITEM 2 - Changes in Securities:
None
12
<PAGE>
ITEM 3 - Defaults Upon Senior Securities:
None
ITEM 4 - Submission of Matters to a Vote of Security Holders:
None
ITEM 5 - Other Information:
None
ITEM 6 - Exhibits and Reports on Form 8-K:
a) Exhibits
None
b) Reports on Form 8-K
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEUROCORP, LTD. (Registrant)
Dated: November 15, 1999
By: /s/ VERNON L. WELLS
---------------------------------
Vernon L. Wells, President
Chief Executive Officer, Acting Chief
Financial Officer (Principal Financial
Officer) and Director
/s/ DONALD J. ALBERTIE
-------------------------------------
Donald J. Albertie, Controller
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of operations, Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 7 of this Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 509,779
<SECURITIES> 0
<RECEIVABLES> 58,992
<ALLOWANCES> 8,014
<INVENTORY> 5,686
<CURRENT-ASSETS> 630,218
<PP&E> 701,837
<DEPRECIATION> 163,449
<TOTAL-ASSETS> 1,317,203
<CURRENT-LIABILITIES> 1,015,149
<BONDS> 0
0
167,071
<COMMON> 11,731
<OTHER-SE> 116,605
<TOTAL-LIABILITY-AND-EQUITY> 1,317,203
<SALES> 314,123
<TOTAL-REVENUES> 314,123
<CGS> 131,646
<TOTAL-COSTS> 131,646
<OTHER-EXPENSES> 1,618,517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,938
<INCOME-PRETAX> (1,359,208)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,359,208)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,359,208)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
