<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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
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NEUROCORP., LTD.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 22-2813990
- - ------------------------------ ---------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
45 KNOLLWOOD ROAD, ELMSFORD, NEW YORK 10523
- - --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(914) 345-2057
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
--------------------------------------------------------------------------
(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 [XX] NO [ ]
THE ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR WERE $419,431.
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES COMPUTED
BY REFERENCE TO THE AVERAGE BID AND ASKED PRICES OF SUCH STOCK AS OF FEBRUARY
29, 2000 WAS $8,798,754.
THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON EQUITY AS OF FEBRUARY
29, 2000 WAS 11,731,672.
<PAGE>
PART 1
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 ANNUAL REPORT ON FORM 10-KSB 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.
ITEM 1. BUSINESS
NeuroCorp, Ltd. ("The Company"), formerly known as Tamarac Ventures, Ltd., was
incorporated in the State of Nevada on March 18, 1987 and completed an initial
public offering in September 1987.
The Company has two wholly owned subsidiaries, HZI Research Center, Inc. ("HZI")
and Memory Centers-TM- of America, Inc. ("MCAI"). HZI is in the business of
contracting clinical research and performing data analysis for the Company and
MCAI provides non-medical management to medical practitioners, licensed
physicians and entities that operate centers intended for the diagnosis and
treatment of memory related disturbances.
The Company has incurred losses over the past five years totaling $11,673,176.
The Company has been able to remain in business solely because of its ability to
raise investment capital. Its ability to continue to raise capital to support
its operations is hampered by the continuing and growing losses. For the year
ending December 31, 1999 the Company reported a net loss of $1,723,543. This
loss can be attributed to a number of factors, including the following: HZI has
not started any major new research contracts in two years and had substantially
finished all contracts prior to 1998; the Company incurred substantial costs
during the construction of a "Signature Memory Center" for MCAI; prior to July
1998 the Company failed to create a successful marketing plan for MCAI and
therefore did not generate significant revenues from MCAI; the Company had
attempted to create and develop a number of different products and services that
stretched its resources and personnel in many different directions and despite
the reduction in revenue and work the Company did not reduce overhead costs and
payroll levels until the third quarter of 1998. The Company has worked to reduce
overhead and staffing levels and has achieved significant monthly savings but
has still not been able to generate revenues to support its monthly expense
base. As a result it has depended on investment capital to support the monthly
losses. If the Company is unsuccessful in launching the
<PAGE>
Memory Centers of America business and if HZI Research Center, Inc. can not
secure contract research, then the Company will need to raise further investment
capital to continue to fund the Company. As of December 31, 1999 the Company
believes it has enough capital to fund operations for the year 2000, however,
this depends on revenue growth of approximately 150%. There is no assurance the
Company will be successful in generating this projected revenue growth.
MEMORY CENTERS-TM- OF AMERICA, INC.
MCAI provides non-medical management, educational, consultation and marketing
services to medical practitioners, licensed physicians, and entities controlled
by them and, supplies the diagnostic testing, training and communication
equipment used in Memory Centers. These physicians offer professional
diagnostic, preventive and treatment services for patients whose memory
disturbances range from "benign" age-related forgetfulness to different brain
disturbances and Alzheimer's disease.
In general, MCAI plans to establish Memory Centers with the offices of
physicians, skilled nursing care facilities, hospitals or other similarly
equipped medical centers. These facilities will have the necessary physician
supervision, medical equipment and technologies and office space to allow for
more economical start-up costs. Currently there are three centers operating; one
of which is the Company's Signature Center in Manhattan, NY. In April 2000 two
additional centers will open in Brooklyn, NY which will bring the total to five
Memory Centers operating in the New York City metropolitan area. The Company is
in negotiations with hospitals and other medical groups and expects to open
three to nine more Memory Centers by the end of 2000.
MCAI expects to operate Memory Centers in a structural environment that will
resemble medical practice management companies, where local physicians or
professional corporations conduct all aspects of the medical services practice,
and MCAI will provide certain management, administrative, marketing and
professional support services. For example, MCAI will provide sophisticated,
proprietary, high technology diagnostic testing and training systems to each
Memory Center. All Memory Centers will have the ability to communicate via a
tele-neuropsychiatry system with a central facility where medical experts will
evaluate tests and provide diagnostic reports.
COMPETITION
To the best of the Company's knowledge, there is no other commercial enterprise
that is attempting to create an identifiable national network of medically-based
facilities offering preventive, diagnostic and therapeutic services for memory
disturbances. Historically, a number of neurologists, psychiatrists and
psychologists have developed memory-oriented clinics, but these have all focused
on conducting research. While MCAI is not aware of any existing or proposed
programs that offer the services provided by Memory Centers, the neurological
departments of any hospital, Alzheimer's clinics and even well-equipped
neurologists in private practice will potentially compete with the services
Memory Centers offer. Since memory disturbances are generally not considered an
illness, or a diagnostic category, doctors and hospitals have a tendency to
belittle or ignore the
<PAGE>
problem, and patients themselves generally hesitate to address the problem until
it becomes more severe. Patients with severe memory disturbances, such as
Alzheimer's disease, will generally go to specialized Alzheimer's centers,
neurology clinics or hospitals. However, for patients with light to moderate
memory disturbances, there are currently no professional organizations available
to help them. Memory Centers offer a unique set of services for this group of
people, and MCAI intends to capitalize on the potential for Memory Centers to
prevent memory disturbances that might otherwise occur, particularly given the
increasing size of the population aged 65 or older.
MARKETING
MCAI management plans to market Memory Centers to patients, third-party payers,
corporations and community service and government organizations. MCAI plans to
initiate an aggressive, concentrated advertising effort to inform potential
patients that memory disturbance can be objectively diagnosed and that early
treatment may slow or even stop further memory deterioration. This media
campaign will include print, radio and direct mail sources as well as the
Internet. MCAI will also make presentations at local organizations and community
groups that include whose members largely consist of potential patients.
MCAI will also market Memory Centers to physicians, both to inform them about
Memory Centers and the services they offer and to help build a network of
potential affiliates. By developing relationships with physicians, Memory
Centers will also build credibility and develop an important source of referral
business.
MCAI recognizes that it must develop a relationship with third party payers to
penetrate the managed care market and develop an affiliation with HMO's and
similar entities. In addition, to the extent the availability of coverage from
third party payers will significantly affect its patient base, it will be
important for MCAI to help third party payers become comfortable with the nature
of the services Memory Centers provide, and the billing patterns they employ.
MCAI also plans to market Memory Centers to corporations who can sponsor
wellness programs for their executives that include the services Memory Centers
offer.
Finally, MCAI intends to build relationships with community service groups and
government organizations. For example, local groups such as assisted living
centers, rehabilitation providers, senior centers and Alzheimer's Associations,
all deal with populations that will be particularly interested in the services
Memory Centers provide. MCAI will also try to build relationships with
government organizations to create interest and support among government leaders
to fund programs that utilize Memory Centers. MCAI expects to be involved in the
public debate on issues such as third party payment, professional practice
standards and the regulation of telemedicine.
HZI RESEARCH CENTER INC. AND CONTRACT RESEARCH SERVICES
The Company's contract research business specializes in clinical studies (Phase
I-IV) of compounds that affect the central nervous system for drug companies and
research organizations in the U.S. and abroad. These contracts include studies
conducted at both a
<PAGE>
single location and across multiple locations; they include both asymptomatic
volunteer studies (Phase I and Phase Ib special studies with healthy subjects)
and symptomatic volunteer studies (Phase II-IV studies on patients).
The Company conducts trials in Phase I to IV studies and also monitors the
studies conducted in other organizations, it supervises data collection and it
analyzes both data and progress study reports. The Company's research studies
adhere to strict federal and local rules and regulations and they are supervised
by accredited institutional review boards, drug companies, and the local and
federal offices of the FDA.
COMPETITION
The contract research industry is extremely competitive and many competitors
have considerably more resources at their disposable than the Company. The
Company has made only nominal efforts to advertise or promote its contract
research business and as a result, the Company had not started any major new
studies since 1997. However, the Company believes that contract research is a
growing industry in the United States. Major drug companies in the United
States, Europe and Japan all conduct clinical research in the United States
since, given the high level of regulatory oversight in the United States, the
results of clinical tests performed in this country, are generally held in high
regard. Moreover, the Company believes that drug companies will increasingly
subcontract clinical research projects, and that many of these projects will
increasingly focus on central nervous system drugs.
As far as the Company's proprietary technology is concerned, such as its
Quantitative Pharmaco-EEG (QPEEG-TM-) method or its Brain Function Monitoring
(BFM) System-TM-, few of the Company's competitors in the United States have
similar technology. Since the FDA guidelines do not require them, drug companies
in the United States do not routinely conduct QPEEG studies. QPEEG is a method
developed by HZI to evaluate a drug's effect on the central nervous system using
its unique Computer-analyzed EEG (CEEG-TM-) technology. HZI statistically
analyzes the before and after effects of a drug and correlates the changes with
information in HZI's CEEG drug data base to determine the optimal time or dosage
window to yield particular central nervous system effects. Given the increasing
cost pressure on drug company executives, the Company believes that there will
be growing interest in clinical studies that rely on the QPEEG method to
determine therapeutic opportunities for psychotropic drugs in a cost-effective
manner.
MARKETING STRATEGY
The Company's contract research has traditionally been dependent on the
publications by and personal contacts of its staff to develop and generate
contracts for clinical research studies.
In addition to the contacts developed by its professional staff, the Company
plans to make coordinated marketing efforts with other companies and will make
joint presentations to medical, pharmaceutical and biotechnology companies. The
Company also plans to more aggressively advertise its research capabilities in
professional journals
<PAGE>
and will continue to participate in meetings of the professional scientific
community, and present the results of its clinical research studies.
PERSONNEL
The Company has 14 full-time employees, including five executives.
ITEM 2. PROPERTIES
PROPERTY
The Company owns three parcels of vacant land in Florida held for investment.
The Company's offices have been located at 45 Knollwood Road, Elmsford, New York
since August 1, 1999. The lease is for three years and requires annual lease
payments of $17,314 the first two years and $17,613 the third year. In addition,
on August 3, 1997, MCAI entered into a lease for its Signature Memory Center in
Manhattan. The five-year lease requires annual lease payments of $110,000 during
the first two years, and $120,000 the remaining three years. The Company has the
option to renew the lease for an additional five years. Office rent and payments
for non-cancelable equipment leases totaled $161,880 for the year ending
December 31, 1999.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings other than ordinary routine litigation
incidental to the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has traded on the NASD OTC Bulletin Board under the
symbol "NURC" since March 2, 1995.
The table below sets forth the high and low range of quotations for the
Company's Common Stock for the quarters indicated as reported by the NASD:
<TABLE>
<CAPTION>
1998 HIGH LOW
---- ---
<S> <C> <C>
First Quarter 8 3/4 5
Second Quarter 9 4 5/8
Third Quarter 7 4 1/2
Fourth Quarter 6 3/8 4
1999
First Quarter 4 3/4 1 1/4
Second Quarter 2 1/4 1 1/4
Third Quarter 1 7/8 3/8
Fourth Quarter 2 15/16 0.29
2000
First Quarter (Through 2/29/00) 1 1/2 9/16
</TABLE>
Such over-the-counter market quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions. The Company's Common Stock has not been actively traded.
On February 29, 2000 the last bid price reported on the NASD Over-the-Counter
Bulletin Board for the Common Stock was $ 3/4 per share. On February 29, 2000
the Company had 11,731,672 shares of Common Stock outstanding and 152
stockholders of record.
The Company has never declared or paid cash dividends on its Common Stock. The
current policy of the Board of Directors is to retain any earnings to provide
for the development and growth of the Company. Consequently, no cash dividends
are expected to be paid in the foreseeable future on Shares of Common Stock. The
Company is obligated to pay dividends at the rate of $15,000 per year in cash or
Shares of Common Stock on its outstanding shares of Class B, Series 1 Preferred
Stock.
The Class B, Series C Preferred Stock accrues cumulative cash dividends at an
annual rate equal to 8% of the monies paid for the purchase of the shares as
original principal. The dividend accrues and is paid quarterly. The Company has
the option, but only with the prior written consent of the investor, to pay the
cumulative dividends by the issuance of additional shares of the Series C
Preferred Stock. The stock dividend is payable upon the same terms as the cash
dividends payable provided that such stock dividends are
<PAGE>
payable at annual rate of 13% of the monies paid to purchase the Preferred
Stock. The stock dividends shall be paid at a valuation rate equal to the lesser
of the closing price for the Common Stock on the last day of the quarterly
period for which a dividend is due or three ($3.00) dollars per share, thereby
establishing the number of shares of stock to be issued. The Company has the
received the permission of the holders of the Class B, Series C Preferred Stock
to pay the dividends in stock and has done so for all stock dividends paid in
1999.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company reported a net loss of $1,723,543 for the year ended December 31,
1999 as compared to a net loss of $5,654,834 for the year ended December 31,
1998.
Net sales for the years ended December 31, 1999 and 1998 amounted to $419,431
and $199,954, respectively, an increase of $219,477. Gross profit for 1999
amounted to $243,463 compared to a negative gross profit of $621,507 for 1998.
The increase in sales can be attributed to the Company securing two consulting
contracts in 1999.
General and administrative expenses for the year ended December 31, 1999
totaled $2,050,424 as compared to the year ended December 31, 1998 total of
$3,655,517 or a decrease of $1,605,093. The decrease is the result of the
Company's efforts to reduce overhead, personnel and administrative costs. The
Company has been effective in eliminating personnel and not being adversely
impacted in performance of duties. However, further reductions in staffing are
not expected, as management believes it has cut staffing to the lowest possible
levels. In addition bad debt expenses were $714,000 lower for 1999 as compared
to 1998 and legal and professional fees were reduced by $294,000.
Interest income for the years ended December 31, 1999 and 1998 totaled $14,640
and $16,002, respectively.
Other income totaled $84,886 for the year ended December 31, 1999 as compared to
$4,025 for the year ended December 31, 1998, respectively. The increase is the
result of the Company renegotiating several outstanding debts.
Interest Expense for the years ended December 31, 1999 and 1998 totaled $16,108
and $23,830. The decrease in interest expense can be attributed to a reduction
in the Company's level of indebtedness.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999 the Company had working capital of $245,383 compared to
December 31, 1998 when the Company had negative working capital of $194,671.
The cash balance at December 31, 1999 and December 31, 1998 was $1,003,180 and
$795,739, respectively. Accounts receivable (net) at December 31, 1999 and
December
<PAGE>
31, 1998 totaled $38,352 and $6,400, an increase of $31,952. Prepaid
expenses at December 31, 1999 and December 31, 1998 amounted to $52,742 and
$27,785, respectively, an increase of $24,957.
Current liabilities amounted to $848,891 and $1,024,595 at December 31, 1999 and
December 31, 1998, respectively, a decrease of $175,704. Included in current
liabilities are stockholder loans of $300,000. These loans were due December 15,
1998. The Company has not made any payments against the loans.
For the years ended December 31, 1999 and 1998, the Company used cash from
operating activities of $1,872,086 and $2,615,445, respectively, resulting in a
decreased use of cash from operations of $743,359.
For the years ended December 31, 1999 and 1998, the Company used cash from
investing activities of $13,588 and $460,553, respectively, a decrease of
$437,098. Investing activities primarily included investment in the MCAI
Manhattan office in 1998.
For the years ended December 31, 1999 and 1998, net cash provided by financing
activities was $2,093,115 and $2,296,578, respectively, a decrease of $203,463.
The Company issued 506,400 and 411,466 shares of Common Stock in 1999 and 1998,
respectively, and in return the Company received proceeds of $ 68,900 and
$411,466 in 1999 and 1998, respectively. In addition, the Company issued
16,200,000 and 733,333 shares of Class B, Series C Convertible Preferred
Stock in 1999 and 1998 resulting in proceeds of $2,025,000 and $2,000,000,
respectively for the years ended December 31, 1999 and 1998.
MANAGEMENT'S PLANS
GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. For the years ended December
31, 1999 and 1998, the Company incurred losses of $1,723,543 and $5,654,834,
respectively. Additionally, the Company generated negative cash flows from
operations of $1,872,086 and $2,615,445 for the years ended December 1999 and
1998, respectively. 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 and intended expansion. These matters raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include adjustments that might result
from the outcome of this uncertainty. Management's plans to mitigate the
Company's financial problems are outlined below.
Regarding current operations, in order to maintain its liquidity and economic
viability in the interim, the Company is continuing its ongoing marketing
efforts to setup affiliate Memory Center clients and obtain contracts for its
contract research division and has implemented several measures to reduce
current expenses. Further reductions in monthly
<PAGE>
expenses beyond current levels could have adverse effects on the Company's
ability to function as further reductions would most likely occur in payroll
costs which could hamper the ability of the Company to develop and market
products and service customers.
The Company anticipates the Memory Center business to generate significant
revenue growth and cash flows and also expects the contract research division to
produce revenues and cash flows sufficient to support the Company's overhead in
the short term.
EFFECTS ON INFLATION AND EXCHANGE RATES
The Company has not been materially effected by inflation or changes in foreign
exchange rates. However, there can be no assurance that the Company's business
will not be effected by inflation or foreign exchange rates in the future.
ITEM 7. FINANCIAL STATEMENTS:
See Index to Consolidated Financial Statements Appearing in the Consolidated
Financial Statement Annexed Hereto
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by this item is contained in a current report of Form
8-K, filed on March 10, 1999, which is incorporated here by reference.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The directors and the executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- - ---- --- ---------------------
<S> <C> <C>
Vernon L. Wells 42 Chief Executive Officer, President and
Director
Pierre LeBars 46 Chief Operating Officer
Kurt Z. Itil 41 Executive Vice President and Director
Emin Eralp 42 Vice President
James Coady 51 Director
Turan M. Itil 76 Director
Paul Lerman 58 Director
</TABLE>
Each director is elected for a period of one year, expiring on the date of the
next annual meeting and thereafter until his or her successor shall have been
elected and qualified or until his or her death, resignation or removal.
Officers are appointed and serve at the will of the Board of Directors subject
to the terms of any employment agreements. Each non-employee director of the
Company is entitled to receive an annual director's fee of $2,000 plus $350 for
each board meeting attended.
VERNON L. WELLS became President and Chief Executive Officer of the Company in
July 1998. He was the Vice President and General Manager for Quest Diagnostics,
Inc. in Teterboro, NJ, from 1984 to 1997. Quest is the largest clinical
laboratory testing company in the United States with annual revenues in excess
of $1.4 billion. Mr. Wells was responsible for an annual budget of approximately
$180 million. He has an undergraduate degree from the University of Southern
California and a Masters degree from the J.L. Kellogg School of Management at
Northwestern University.
PIERRE LE BARS, M.D., Ph.D. was named Chief Operating Officer and Vice President
Medical and Clinical Research and Development of the Company in 1998 and has
been Executive Vice President and Chief of Research and Development of HZI since
1994.
Dr. Le Bars obtained his M.D. in 1978 in France. Subsequently, he obtained his
Ph.D. in Neurophysiology from the University of Picardie and Pierre et Marie
Curie in France. He became a Research Fellow in 1989 at New York Medical
College.
<PAGE>
Dr. Le Bars also had an appointment as a Research Fellow at Massachusetts
Mental Health Center of the Harvard Medical School from 1992 to 1995 and
became Assistant Research Professor in Psychiatry at New York University from
1994 to present.
KURT Z. ITIL, Ph.D. (Honorary) has been a Director of the Company since November
23, 1994 and was President of HZI between 1983 and 1998. In 1998, Dr. Itil was
named Executive Vice President of NeuroCorp, Ltd. In 1981, Dr. Itil graduated
from Boston University (B.A. - Psychology). He received an honorary Doctorate of
Philosophy from Medicina Alternativa based on his publications and his
contribution to science. He was Vice President of HZI from 1977-1980.
He has served as President of HZI and he is responsible for HZI's sales,
promotion and marketing of services and products and administration. Dr. K. Itil
is a Fellow of Academia, Medicinae and Psychiatriae Foundation and a Member of
the American Psychiatric Electrophysiology Association. Dr. Itil has more than
45 scientific publications to his credit. Dr. Kurt Itil is the son of Dr. Turan
Itil.
EMIN ERALP is the Vice President of Technical Operations. He is a graduate of
the University of Akron. He has been with the Company for over 20 years and has
been a co-author on more than 25 scientific publications.
JAMES COADY has been Treasurer and a Director of Pioneer Ventures Corp. and a
manager of Ventures Management Partners, LLC, the General Partner of Pioneer
Ventures Associates Limited Partnership since their founding in July 1997. From
1984 to 1988, Mr. Coady served as President and Registered Principal of
Constitution Securities, Inc. (a Broker Dealer licensed by the National
Association of Securities Dealers and the Securities and Exchange Commission).
This company is no longer active as a Broker Dealer.
TURAN M. ITIL, M.D. was Chairman of the Board of the Company until his
resignation on May 15, 1999. Dr. Itil is a neurologist/psychiatrist with special
interests in electrophysiology (brain electrical activity studies) and
psychopharmacology (psychotropic drug treatment and research). He is currently a
paid consultant for the Company.
PAUL LERMAN, Ph.D., has been the Dean of the Silberman College of Business
Administration at Fairleigh Dickinson University, in Teaneck, NJ, since 1990. He
is also a Director for the New Jersey Trade Development Corporation, Intio
Acquisitions Corp., and Compass Knowledge Group.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash and cash equivalent forms of
compensation paid by the Company during the last three fiscal years for services
in all
<PAGE>
capacities to those persons who were as of December 31, 1999, the Chief
Executive Officer and each of the most highly compensated officers, to the
extent each earned more than $100,000 in salary and bonus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
---------------------------------- ----------------------------------
Name and Other Annual Securities Under- All Other
Principal Position Year Salary Bonus Compensation Lying Options (1) Compensation
- - ------------------ ---- -------- ------- --------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Vernon L. Wells 1999 $179,425 $45,000 $3,000 (2) 1,500,000 ---
CEO & President 1998 $88,425 --- --- --- ---
Pierre LeBars 1999 $120,000 --- --- 500,000 ---
Chief Operating 1998 $139,640 $110,500 --- --- ---
Officer 1997 $121,000 --- --- --- ---
Kurt Z. Itil 1999 $110,833 --- --- --- ---
Executive 1998 $116,130 --- --- --- ---
Vice President 1997 $108,500 --- --- --- ---
Turan Itil 1999 $150,000 --- --- --- ---
Former Chief 1998 $219,792 --- --- --- ---
Executive Officer 1997 $250,000 --- --- --- ---
Jonathan Raven 1998 $57,925 --- --- --- ---
Former CEO and 1997 $150,150 --- --- --- ---
President of MCAI
</TABLE>
(1) Indicates number of shares of common stock underlying options.
(2) Car allowance of $1,000 per month beginning October 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date
- - ---- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
V Wells 1,500,000 56% $0.50 9/30/06
P LeBars 500,000 19% $0.50 9/30/06
</TABLE>
EMPLOYMENT AGREEMENTS
Vernon Wells entered into an employment agreement with the Company effective,
March 1, 1999, providing for a base salary of $175,000 per year plus stock
options, bonus and an automobile allowance. The agreement is for two years and
provides for a base salary in the second year of $225,000.
STOCK OPTION PLAN
<PAGE>
On November 23, 1994 the Company adopted a stock option plan (the "Plan")
providing for the granting of options to purchase up to 1,500,000 shares of the
Company's Common Stock. The plan was modified September 8, 1999 to increase the
number of options to purchase shares of the Company's Common Stock to 4,000,000.
Options granted pursuant to the Plan may be either incentive options or
non-qualified stock options. Incentive stock options may be granted to persons
who are employees or officers of the Company. Non-statutory stock options may be
granted to employees, officers, non-employee directors and consultants to the
Company.
The Plan provides for its administration by a committee chosen by the Board of
Directors which committee shall have full discretionary authority to determine
the number of shares to be granted and the individuals to whom, the times at
which, and the exercise price for which options will be granted. In the case of
statutory stock options the committee's authority to establish the terms and
conditions of such options including, but not limited to their exercise price,
shall be subject to restrictions imposed by Section 422 of the Internal Revenue
Code. Options to purchase 2,690,000 and 100,000 shares of the Company's Common
Stock were granted in 1999 and 1998, respectively.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the Company's knowledge, the following table sets forth information regarding
ownership of the Company's outstanding Common Stock as of February 29, 2000 by
(i) beneficial owners of more than 5% of the outstanding shares of Common Stock,
(ii) each director of the Company, each executive officer of the Company and
(iii) by all directors and officers as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner (1,2) Beneficial Owner (2,8) of Class (8)
- - ---------------------- ---------------------- ------------
<S> <C> <C>
Vernon L. Wells (6) 100,000 0.85%
President, CEO and Director
Pierre LeBars (3) 210,000 1.79%
Chief Operating Officer
Kurt Z. Itil (3) 1,138,800 9.71%
Executive Vice President and
Director
Emin Eralp (3) 84,000 0.72%
Vice President
Aileen Kunitz (3) 86,000 0.73%
Vice President
Turan M. Itil (3) 897,200 7.65%
Director
Eleonore Itil (3,4) 522,000 4.45%
Yasmin Itil LeBars (3) 723,000 6.16%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Lancer Partners LP (5) 12,759,488 63.85%
Lancer Offshore Fund Inc
Lancer Voyager Fund Inc
The Orbiter Fund Inc
Michael Lauer, General Partner
375 Park Avenue
NewYork, NY 10152
Pioneer Ventures Associates Limited Partnership (7) 9,414,742 45.60%
651 Day Hill Road
Windsor, CT 06095
All Directors and Officers as a Group 2,516,000 21.26%
</TABLE>
(1) Unless otherwise noted, the addresses of all persons listed above are in
care of the Company.
(2) Each of the persons named in the table disclaims beneficial ownership of
the shares of the Company's Common Stock owned by such person's spouse or
by his or her children.
(3) Each of theses persons are party to a Voting and Shareholders Agreement,
pursuant to which each shareholder must obtain the consent of Pioneer
Ventures Associates Limited Partnership to transfer or sell any shares that
such shareholder owns or controls. The agreement also specifies that the
Company shall cause the nomination and election of two nominees to the
Board of Directors and if the Company defaults on the cumulative preferred
stock held by Pioneer and does not cure such default within 30 days, PVALP
shall nominate and the Company shall use its best efforts to have elected a
number of individuals to be added to the board to be a sufficient number to
constitute a majority of the total number of directors for PVALP.
(4) Mrs. Eleonore Itil is the wife of Turan Itil and Ms. Yasmin Itil is the
daughter of Turan and Eleonore Itil.
(5) Includes all shares owned by Lancer Partners LP, Lancer Offshore Fund Inc,
The Orbital Fund Inc, Lancer Voyager Fund Inc and Michael Lauer. This also
includes 8,251,988 shares of the Class B, Series C Convertible Preferred
Stock currently convertible into 8,251,988 shares of the Company's Common
Stock by those named above.
(6) Mr. Wells has the right to acquire 100,000 shares of the Company's Common
Stock upon the exercise of 100,000 vested stock options. (7) This includes
8,914,742 shares of the Class B, Series C Convertible Preferred Stock
currently convertible into 8,914,742 shares of the Company's Common Stock.
(8) The number of shares and percentage calculation for each of the named
persons or entities is based upon the number of common shares outstanding
as of February 29, 2000 plus the number of shares underlying options,
warrants, or conversion privileges held by the identified person or group
exercisable within sixty days of the date of this report.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1999, the Company received proceeds of $1,062,500 from Pioneer Ventures
Associates Limited Partnership (Pioneer), $625,000 from Lancer Offshore Inc.,
$300,000 from Lancer Partners, L.P. and $100,000 from The Orbital Fund Ltd. In
return the Company issued 500,000 shares of the Company's Common Stock and
8,000,000, 5,000,000, 2,400,000 and 800,000 shares of Class B, Series C Senior
Convertible Preferred Stock, $.001 par value. Each share of preferred stock is
convertible into one
<PAGE>
share of common stock subject to adjustment as set forth in the investment
agreement. The stock is entitled to an 8% cumulative quarterly cash dividend or
a 13% stock dividend and a liquidation preference equal to $2 per share subject
to adjustment as set forth in the investment agreement.
During 1998, the Company received proceeds of $2,000,000 from Pioneer and issued
733,333 shares of Class B, Series C Senior Convertible Preferred Stock, $.001
par value.
In June 1998, Lancer exercised 400,000 warrants resulting in the Company
receiving proceeds of $400,000 and issuing 400,000 shares of Common Stock.
Lancer had received the warrants in December 1997.
During December 1994, the Company issued 150,000 shares of Cumulative
Non-Convertible Preferred Stock Class B, Series 1, no par value which has a
liquidation preference of $1 per share. Dividends accrue on such stock
commencing January 1, 1996 at a rate of 10% of the liquidation value and are
payable semi-annually in cash or stock. As of December 31, 1999 and 1998 accrued
dividends in arrears amounted to $30,000 and $15,000, respectively.
STOCKHOLDER NOTES AND LOANS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
--------- ---------
<S> <C> <C>
Note payable bearing interest
of 9% $ 100,000 $ 100,000
Non interest bearing note payable 200,000 200,000
Non interest bearing loans and payables 341,649 341,649
Less: Allowance for loan reserves (341,649) (341,649)
--------- ---------
Total Stockholder Notes Payable $ 300,000 $ 300,000
========= =========
</TABLE>
The non-interest bearing loans and payables represent advances made to Turan
Itil, Manhattan Westchester P.C., New York Institute, Neuro-Care Inc. and
Academia, Medicinae and Psychiatrie Foundation. These entities are or were
under the direction and or control of Turan Itil at the time of the loan or
advance.
CONSULTING AGREEMENT
The Company entered into a consulting agreement with Turan Itil effective July
30, 1998. The contract specifies that Dr. Itil will be retained by the Company
as a consultant and be paid $150,000 per annum until September 20, 2002 subject
to continuance until September 20, 2005 if certain specified objections are
satisfied and if they are not satisfied the Agreement is subject to earlier
termination.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
27 (a) Exhibits
(2) (a) Agreement and Plan of Reorganization between Company and HZI
(3) (a) Certificate of Incorporation as amended*
(b) Certificate of Amendment to Certificate of Incorporation**
(c) By-Laws*
(4) (a) Form of Common Stock Certificate
(b) Form of Class B Common Stock Purchase Warrant
(c) Form of Class B Common Stock Purchase Warrant
(10) (a) Stock Option Plan ***
(c) Employment Agreement between the Company and Dr. Turan M. Itil
(c)(i) Employment Agreement between the Company and Vernon Wells******
(c)(ii) Employment Agreement between the Company and Dr. Pierre LeBars
dated July 31, 1998******
(c)(iv) Employment Agreement between the Company and Aileen Kunitz
(k) Financing Documents between the Company, Trinity American
Corporation and Elvena, Inc.
(m) Investment Agreement dated as of July 30, 1998 between the
Company and Pioneer Ventures Associates Ltd.****
(m)(i) First Modification to Investment Agreement dated
December 4, 1998****
Voting and Shareholders Agreement dated as of July 30, 1998****
(n)(i) First Modification to Voting and Shareholders Agreement dated as
of October 30, 1998****
(o) Response Letter from Scarano & Tomaro, P.C. regarding a change
in the Company's certifying accountants*****
* incorporated by reference to Registration Statement on Form S-18 No.
33-2205-D declared effective on July 28, 1987
** incorporated by reference to the Company's Annual Report on Form 10-K
for the period ending September 30, 1994
*** incorporated by reference to Registration Statement on Form SB-2 No.
333-1462 filed in February, 1996
**** incorporated by reference to the Company's Quarterly Report on Form
10-Q for the period ending September 30, 1998
***** incorporated by reference to the Form 8-K filed March 10, 1999
****** to be supplied by amendment
(b) REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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 on the 30th day of March 2000.
(REGISTRANT) NEUROCORP, LTD.
BY(SIGNATURE AND TITLE) /s/ VERNON L, WELLS
--------------------------
Vernon L. Wells,
President, Chief Executive Officer,
Acting Chief Financial Officer and Director
Date: March 30, 2000
In accordance with the requirements of the Securities and Exchange Act
of 1934, this report has been signed by the following persons in the capacities
and on the dates indicated:
<TABLE>
<S> <C>
s/VERNON L. WELLS s/DONALD J. ALBERTIE
- - ----------------------------- ------------------------------------
Vernon L. Wells, President, Donald J. Albertie, Controller
Chief Executive Officer, Acting Chief Financial (Principal Accounting Officer)
Officer (Principal Financial Officer) and Date: March 30, 2000
Director
Date: March 30, 2000
s/JAMES COADY s/KURT Z. ITIL
- - ----------------------------- ------------------------------------
James Coady, Director Kurt Z. Itil, Director
Date: March 30, 2000 Date: March 30, 2000
s/PAUL LERMAN
- - -----------------------------
Paul Lerman, Director Turan Itil, Director
Date: March 30, 2000 Date:
</TABLE>
<PAGE>
NEUROCORP, LTD.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL
STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
TOGETHER WITH
INDEPENDENT AUDITORS' REPORT
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Changes in Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
NeuroCorp., Ltd.
We have audited the consolidated balance sheets of NeuroCorp, Ltd. and
subsidiaries (Company) as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NeuroCorp, Ltd. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 8 to the
consolidated financial statements, the Company has suffered recurring losses and
negative cash flows from operations. These matters raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 8. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ DiSanto Bertoline & Company, P.C.
Glastonbury, Connecticut
February 18, 2000
-1-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,003,180 $ 795,739
Accounts receivable, net of allowance for doubtful
accounts of $37,600 in 1999 and $122,500 in 1998 38,352 6,400
Prepaid expenses and other current assets 52,742 27,785
------------------- -------------------
Total current assets 1,094,274 829,924
------------------- -------------------
PROPERTY AND EQUIPMENT, net 625,462 685,974
OTHER ASSETS 24,750 43,162
------------------- -------------------
$ 1,744,486 $ 1,559,060
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 307,201 $ 544,770
Accrued expenses 199,401 179,825
Deferred revenue 38,980 -
Current portion of obligation under capital lease 3,309 -
Stockholder demand notes payable 300,000 300,000
------------------- -------------------
Total current liabilities 848,891 1,024,595
------------------- -------------------
OBLIGATION UNDER CAPITAL LEASE, less current portion 5,773 -
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 11,150,419 9,088,363
Deficit (10,439,399) (8,715,856)
------------------- -------------------
889,822 534,465
------------------- -------------------
$ 1,744,486 $ 1,559,060
=================== ===================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
-2-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------------- ---------------
<S> <C> <C>
NET SALES $ 419,431 $ 199,954
COST OF SALES 175,968 821,461
---------------- ---------------
Gross profit (loss) 243,463 (621,507)
GENERAL AND ADMINISTRATIVE EXPENSES 2,050,424 3,655,517
LOSS ON CAPITALIZED DATABASE AND
PRODUCT DEVELOPMENT COSTS - 1,614,007
---------------- ---------------
Loss from operations (1,806,961) (5,891,031)
OTHER INCOME (EXPENSE)
Other, net 84,886 4,025
Interest income 14,640 16,002
Interest expense (16,108) (23,830)
---------------- ---------------
83,418 (3,803)
---------------- ---------------
Loss before benefit from income taxes (1,723,543) (5,894,834)
BENEFIT FROM INCOME TAXES - (240,000)
---------------- ---------------
Net loss $ (1,723,543)$ (5,654,834)
================ ===============
LOSS PER COMMON SHARE $ (0.15)$ (0.51)
================ ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 11,483,306 11,138,016
================ ===============
</TABLE>
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 YEARS ENDED DECEMBER 31, 1999 AND 1998
<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, 1997,
as originally reported -- $ -- 150,000 $ 150,000 10,813,806 $ 10,814
Adjustment to reflect
liquidating dividends
for preferred stock -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997,
as restated -- -- 150,000 150,000 10,813,806 10,814
Issuance of common stock in
connection with exercise of
Class B warrants -- -- -- -- 411,466 411
Sale of preferred stock 733,333 733 -- -- -- --
Preferred stock dividends -- -- -- -- -- --
Net loss -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 733,333 733 150,000 150,000 11,225,272 11,225
Issuance of common stock -- -- -- -- 506,400 506
Issuance of preferred stock 16,200,000 16,200 -- -- -- --
Preferred stock dividends 138,260 138 -- -- -- --
Net loss -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 17,071,593 $ 17,071 150,000 $ 150,000 11,731,672 $ 11,731
============ ============ ============ ============ ============ ============
<CAPTION>
Additional Total
Paid-in- Stockholders'
Capital Deficit Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1997,
as originally reported $ 6,762,597 $ (3,091,022) $ 3,832,389
Adjustment to reflect
liquidating dividends
for preferred stock (30,000) 30,000 --
------------ ------------ ------------
Balance, December 31, 1997,
as restated 6,732,597 (3,061,022) 3,832,389
Issuance of common stock in
connection with exercise of
Class B warrants 411,055 -- 411,466
Sale of preferred stock 1,999,267 -- 2,000,000
Preferred stock dividends (54,556) -- (54,556)
Net loss -- (5,654,834) (5,654,834)
------------ ------------ ------------
Balance, December 31, 1998 9,088,363 (8,715,856) 534,465
Issuance of common stock 68,394 -- 68,900
Issuance of preferred stock 2,008,800 -- 2,025,000
Preferred stock dividends (15,138) -- (15,000)
Net loss -- (1,723,543) (1,723,543)
------------ ------------ ------------
Balance, December 31, 1999 $ 11,150,419 $(10,439,399) $ 889,822
============ ============ ============
</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 YEARS ENDED DECEMBER 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,723,543) $ (5,654,834)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 83,967 67,225
Bad debt expense 37,615 809,918
Loss on capitalized database and product development costs - 1,614,007
Loss on sale of property and equipment - 30,588
Decrease in deferred income taxes - (240,000)
Changes in operating assets and liabilities:
Increase in deferred revenue 38,980 -
Decrease in other assets 18,412 288,801
Increase (decrease) in accrued expenses 4,576 (59,827)
Decrease in inventories - 132,727
(Increase) decrease in prepaid expenses and
other current assets (24,957) 186,823
Increase in accounts receivable (69,567) (165,813)
(Decrease) increase in accounts payable (237,569) 374,940
--------------------- --------------------
Net cash used in operating activities (1,872,086) (2,615,445)
--------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized database and product development costs - (13,930)
Purchases of property and equipment (13,588) (446,623)
--------------------- --------------------
Net cash used in investing activities (13,588) (460,553)
--------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock 2,093,900 2,411,466
Payments on obligations under capital lease (785) -
Dividends paid - (28,556)
Payments on stockholder demand notes payable - (86,332)
--------------------- --------------------
Net cash provided by financing activities 2,093,115 2,296,578
--------------------- --------------------
NET INCREASE (DECREASE) IN CASH 207,441 (779,420)
CASH AND CASH EQUIVALENTS, beginning of year 795,739 1,575,159
--------------------- --------------------
CASH AND CASH EQUIVALENTS, end of year $ 1,003,180 $ 795,739
===================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 7,108 $ 344
Income taxes 5,347 -
NON CASH INVESTING AND FINANCING ACTIVITIES
Preferred stock dividends 138 -
Increase in obligations under capital leases 9,867 -
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
-5-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 has developed software programs that are used to
treat individuals suffering from memory disorders. The Company
is marketing these programs with other products and services
which are packaged and licensed to customers. The Company
performs clinical research data analysis for health agencies,
research organizations, and pharmaceutical companies. 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. The Company also
manages a facility which diagnoses and treats memory disorders
and provides education and consultation to individuals who
suffer from memory impairment.
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 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.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company
defines cash equivalents as highly liquid instruments purchased
with original maturities of three months or less. The Company
had cash equivalents totaling $400,129 and $170,651 at December
31, 1999 and December 31, 1998, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and
amortization are computed using the straight-line method over
the estimated useful lives of the related assets, or, in the
case of leasehold improvements and leased property under capital
lease, over the remaining term of the related lease or estimated
useful life of the related asset, whichever is shorter.
Expenditures which substantially increase the useful lives of
the related assets are capitalized. Maintenance, repairs and
minor renewals on property and equipment are charged to
operations as incurred.
-6-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DATABASE AND PRODUCT DEVELOPMENT COSTS
The recoverability of the carrying value of database and product
development costs is evaluated by management on a recurring
basis. Net realizable value is measured by estimating future
sales of these products and reducing them by the estimated costs
of completing and disposing of the products, including the costs
of performing maintenance and support required under the sales.
In management's opinion, the net realizable value of the
unamortized database and product development costs exceeded the
net realizable value and therefore, management elected to write
off these amounts during 1998.
REVENUE RECOGNITION
The Company recognizes revenue and costs from its research
contracts under the percentage of completion method. Cost of
revenues include all direct material and labor costs and those
indirect costs related to contract performance. General and
administrative expenses are accounted for as period costs and
therefore, are not included in the calculation of the estimates
to complete contracts in progress. Changes in each contracts'
performance, conditions and estimated profitability, including
those arising from contract penalty provisions, and final
contract settlements may result in revisions to costs and
revenue and are recognized in the period in which the revisions
are determined. In addition, losses are recognized in full when
determinable. All other revenues are recognized as services are
rendered.
INCOME TAXES
The Company files consolidated federal and combined state
corporate income tax returns. Tax credits are recorded as a
reduction of income taxes in the year realized. The Company
recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
consolidated financial statements or tax returns. Deferred tax
liabilities and assets are determined based on the differences
between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
STOCK OPTIONS
The Company accounts for stock options in accordance with
Statement of Financial Accounting Standards (SFAS) No. 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION", which establishes a
fair value based method of accounting for an employee stock
option or similar equity instrument. SFAS No. 123 gives entities
a choice of recognizing related compensation expense by adopting
the fair value method or to measure compensation using the
intrinsic value approach under Accounting Principles Board (APB)
Opinion No. 25, the former standard. If the former standard for
measurement is elected, SFAS No. 123 requires supplemental
disclosure to show the effects of using the new measurement
criteria. The Company uses the measurement prescribed by APB
Opinion No. 25.
-7-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
The Company accounts for earnings per share in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128,
"EARNINGS PER Share". Net loss per common share was computed
based upon 11,483,306 and 11,138,016 weighted average shares
outstanding during the years ended December 31, 1999 and 1998,
respectively. Diluted earnings per share was not presented as
the potentially dilutive convertible preferred stock and stock
purchase options are antidilutive.
SEGMENT INFORMATION
Statement of Financial Accounting Standards (SFAS) No. 131,
"DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION," was issued effective for fiscal years ending after
December 15, 1998. The Company measures its operations on a
consolidated basis and, therefore, has not adopted the reporting
requirements of this Statement.
RECLASSIFICATIONS
Certain 1998 amounts were reclassified to conform to the 1999
presentation.
NOTE 2 - FINANCIAL INSTRUMENTS
CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivables:
- Cash and cash equivalents - The Company has cash
balances on deposit with banks at December 31, 1999 that
exceeded federal depository insurance limits by
$759,820.
- Trade accounts receivable - Total sales to individual
customers which exceeded ten percent of net sales during
each of the years ended December 31, 1999 and 1998
aggregated 74% (three customers) and 51% (four
customers), respectively. The Company performs ongoing
credit evaluations of its customers and generally does
not require collateral. Allowances for potential credit
losses are maintained and such losses have been within
management's expectations. The loss of one or more of
these major customers could have a material adverse
effect on the Company's business, results of operations
and financial condition.
-8-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 2 - FINANCIAL INSTRUMENTS (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107,
"FAIR VALUE OF FINANCIAL INSTRUMENTS," requires disclosure of
the fair value of financial instruments for which the
determination of fair value is practicable. SFAS No. 107 defines
the fair value of a financial instrument as the amount at which
the instrument could be exchanged in a current transaction
between willing parties.
The carrying amounts of the Company's financial instruments
approximates their fair value as presented below:
- Cash and cash equivalents, trade receivables, trade
payables - The carrying amounts approximate their fair
value due to the short maturity of these instruments.
- Stockholder demand notes payable - Management has
determined that it is not practicable to estimate the
fair value due to the lack of marketability of these
financial instruments.
The Company's financial instruments are held for other than
trading purposes.
NOTE 3 - PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Equipment $ 323,511 $ 301,606
Furniture and fixtures 212,466 211,616
Leasehold improvements 171,365 170,665
Land 102,000 102,000
------- -------
809,342 785,887
Less: accumulated depreciation and amortization 183,880 99,913
------- ------
$625,462 $ 685,974
======= =======
</TABLE>
Depreciation and amortization expense totaled $83,967 and
$67,225 for the years ended December 31, 1999 and 1998,
respectively.
NOTE 4 - STOCKHOLDER DEMAND NOTES PAYABLE
On May 24, 1996, the Company entered into a loan agreement with
a shareholder to execute a demand note payable for $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.
-9-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 4 - STOCKHOLDER DEMAND NOTES PAYABLE (CONTINUED)
On July 16, 1996, the Company entered into a loan agreement with
an unrelated shareholder to execute a demand note payable for
$100,000. The note bears interest at 9% per annum and was due at
the earlier of one year, or 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 extended the
note's maturity date to December 15, 1998.
As of December 31, 1999, the above loans remain outstanding
without extension.
NOTE 5 - STOCKHOLDERS' EQUITY
PREFERRED STOCK
During 1999, the Company received proceeds of $1,000,000 from
Pioneer Ventures Associates Limited Partnership (Pioneer),
$625,000 from Lancer Offshore Inc., $300,000 from Lancer
Partners, L.P. and $100,000 from The Orbital Fund Ltd. In return
the Company issued 8,000,000, 5,000,000, 2,400,000 and 800,000
shares of Class B, Series C convertible preferred stock, $.001
par value. Each share of preferred stock is convertible into one
share of common stock subject to adjustment as set forth in the
investment agreement. The stock is entitled to an eight-percent
cumulative quarterly cash dividend or a thirteen-percent stock
dividend and a liquidation preference equal to $2 per share
subject to adjustment as set forth in the investment agreement.
During 1998, the Company received proceeds of $2,000,000 from
Pioneer and issued 733,333 shares of Class B, Series C
convertible preferred stock, $.001 par value.
During December 1994, the Company issued 150,000 shares of
cumulative, non-convertible preferred stock Class B, Series 1,
no par value which has a liquidation preference of $1 per share.
Dividends accrue on such stock commencing January 1, 1996 at a
rate of 10% of the liquidation value and are payable
semi-annually in cash or stock. As of December 31, 1999 and
1998, accrued cash dividends in arrears amounted to $30,000 and
$15,000, respectively. The consolidated statement of changes in
stockholders' equity as of December 31, 1997 has been restated
to reflect proper accounting on liquidating dividends for
preferred stock.
COMMON STOCK
During 1999, the Company received proceeds of $62,500 from
Pioneer and issued 500,000 shares of common stock. Additionally,
the Company issued 6,400 shares of common stock in exchange for
$6,400 received in 1999.
STOCK OPTIONS
The Company has an incentive stock option plan that provides for
the granting of options to purchase up to 4,000,000 shares of
the Company's common stock that are intended to qualify either
as statutory stock options or non-statutory stock options. The
plan was modified as of September 8, 1999 to increase the number
of stock options eligible to be granted from 1,500,000 shares.
Options to purchase shares may be granted under the incentive
stock option plan to persons who are employees, consultants or
officers of the Company.
-10-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 5 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (CONTINUED)
The plan is administered by the Board of Directors which selects
the employees to whom the options are granted, determines the
number of shares to be subject to each option, determines the
time when the options may be exercised and establishes the fair
market value of the shares at the date of grant and exercise.
The plan provides that the purchase price under the option shall
be at least one-hundred percent of the fair market value of the
shares of the Company's common stock at the date of the grant.
The terms of each of the options are determined by the Board of
Directors and are generally five years but in no event may such
term exceed ten years. Incentive stock options generally vest
over a three-year period commencing on the date of the grant.
There are limitations on the exercise of such options. The
options are nontransferable.
A summary of the status of the Company's stock options as of
December 31, 1999, and 1998 and changes during the years then
ended is presented below:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
Outstanding Price Outstanding Price
----------- --------- ------------ -------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 350,000 $0.21 750,000 $4.70
Granted 2,690,000 0.59 100,000 0.50
Canceled - - (500,000) 7.00
---------- ---------
Outstanding at end of year 3,040,000 $0.55 350,000 $0.21
========== =========
</TABLE>
The weighted average remaining contractual life for options
outstanding at December 31, 1999 is 5.37 years.
The following is a summary of the stock options exercisable
under the Company's stock option plan as of December 31, 1999
and 1998:
<TABLE>
<CAPTION>
Exercise price Weighted average
Shares Range Per Share Exercise Price
--------- --------------- -----------------
<S> <C> <C> <C>
December 31, 1999 376,667 $0.10 - $4.00 $0.45
December 31, 1998 350,000 $0.10 - $0.50 $0.21
</TABLE>
-11-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 5 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (CONTINUED)
FASB Statement 123 requires the disclosure of certain proforma
information regarding net loss and net loss per share. This
information is required to be determined as if the Company had
accounted for its stock option plans under the fair value method
of that statement. The fair value of options granted in 1999 and
1998 has been estimated as of the date of grant, using the
minimum value method for valuing options with the following
assumptions:
<TABLE>
<S> <C>
Expected Life (in years) 7.0
Risk-free interest rate 30 Year Treasury bill rate at time of grant
Assumed dividend yield 0%
</TABLE>
The Company's relatively limited period of time as a public
company makes the determination of volatility difficult. For
purposes of proforma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting
periods.
If the Company had elected to recognize compensation cost based
on the fair value of the options granted at grant date as
prescribed by SFAS No. 123, net loss and loss per share would
have been adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Net loss - as reported $ (1,723,543) $ (5,654,834)
------------ ------------
pro forma $ (1,878,548) $ (5,669,324)
------------ ------------
Basic EPS - as reported $ (.15) $ (.51)
======= =======
pro forma $ (.16) $ (.51)
======= =======
</TABLE>
ISSUANCE OF WARRANTS
The Board of Directors of the Company authorized the issuance of
Class B and Class C Warrants to all stockholders of the Company
of record as of November 1, 1994. The Warrants were distributed
on a one Warrant for one share of common stock basis and
comprised in the aggregate 800,000 Class B and 800,000 Class C
Warrants. The Class B Warrants were exercisable at $2.25 per
share and the Class C Warrants are exercisable at $2.75 per
share, and were to expire September 30, 1996. The exercise price
of the Warrants, may be adjusted downward or upward at any time
by the Company's Board of Directors. Further, the Warrants are
redeemable by the Company at any time upon thirty days written
notice, at a price of $.001 per Warrant.
During January 1996, the Company's Board of Directors reduced
the exercise price of the Class B and Class C Warrants from
$2.25 to $1.00 per share and from $2.75 to $2.00 per share,
respectively, and the expiration dates were extended to December
31, 1998. During 1998, 411,466 Class B Warrants were exercised
which resulted in the Company receiving proceeds of $411,466 and
issuing 411,466 shares. The Class B and Class C warrants both
expired as of December 31, 1998.
-12-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 6 - COMMITMENTS
OPERATING LEASES
The Company has entered into lease agreements for administrative
offices and certain equipment under noncancellable operating
leases expiring in various dates through December, 2003. 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.
Future minimum lease payments on all operating leases for each
of the years succeeding December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
2000 $130,647
2001 137,438
2002 130,274
2003 80,000
---------
$478,359
========
</TABLE>
Rent expense under all operating leases for the years ended
December 31, 1999 and 1998 totaled $161,880 and $235,815,
respectively.
OBLIGATION UNDER CAPITAL LEASE
The Company has entered into a lease agreement for computer
equipment under a noncancellable lease. The lease is for three
years and contains a purchase option equal to the fair market
value at the end of the lease. The equipment cost is $ 9,867 and
the amount financed totals $9,867 with interest payable at 12%.
At December 31, 1999 accumulated amortization totals $493.
Future minimum lease payments on the capital lease for each of
the years succeeding December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
2000 $3,309
2001 3,595
2002 2,178
--------
$9,082
======
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with its executive
officers and certain management personnel that provide for an
aggregate minimum annual base compensation of $672,500, expiring
on various dates through 2002. Certain agreements provide for
nonqualified stock options and a bonus based upon achieving
specified operational and financial goals. All agreements are
subject to extension upon expiration.
-13-
<PAGE>
NEUROCORP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 7 - INCOME TAXES
The benefit from income taxes for the years ended December 31,
1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
----- ----
<S> <C> <C>
Current $ -- $ --
Federal -- --
State -- --
--------- ----------
Deferred -- (240,000)
--------- ----------
$ -- $(240,000)
========= =========
</TABLE>
The alternative minimum tax (AMT) had no effect on the tax
provision for financial reporting purposes, as the Company's AMT
income was completely offset by application of AMT net operating
loss carryforwards and the AMT exemption. For 1999 and 1998, the
Company had no liability for state taxes based upon income.
State taxes accrued were based on net worth and, accordingly,
included in general and administrative expenses.
The provision for income taxes differs from the amount computed
by applying the statutory rate of 34% to the loss before income
taxes for the years ended December 31, 1999 and 1998. The
principal reasons for this difference are listed in the
following table:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Statutory federal income tax (34) % (34) %
Change in valuation allowance 48 50
Change in deferred tax liability - (4)
State and local income taxes, net of
federal income tax benefit (14) (16)
------------- -------------
- (4) %
============= =============
</TABLE>
The significant components of the deferred tax provision are as
follows:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Net operating loss - federal $ 628,000 $ 1,685,000
Net operating loss - state 197,000 427,000
Database and product development costs - (240,000)
Valuation allowance (825,000) (2,112,000)
-------------- --------------
$ - $ (240,000)
============== ==============
</TABLE>
-14-
<PAGE>
NEUROCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 7 - INCOME TAXES (CONTINUED)
The components of the net deferred tax accounts as of December
31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss - federal $ 3,445,000 $ 2,817,000
Net operating loss - state 625,000 428,000
Valuation allowance (4,070,000) (3,245,000)
----------- -----------
$ - $ -
========== ==========
</TABLE>
The Company has $10,134,000 of net operating losses for federal
income tax reporting purposes available for carryforward which
expire through 2019.
The Company continually reviews the adequacy of the valuation
allowance and recognizes a benefit from income taxes only when
reassessment indicates that it is more likely than not that the
benefits will be realized. In 1999, the Company increased the
valuation allowance applied against the net operating loss
carryforwards by approximately $825,000 based upon uncertainties
regarding future income projections.
NOTE 8 - GOING CONCERN
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. For the years ended December 31, 1999 and 1998, the
Company incurred losses of $1,723,543 and $5,654,834,
respectively. Additionally, the Company generated negative cash
flows from operations of $1,872,086 and $2,615,445 for the years
ended December 1999 and 1998, respectively. 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 and intended expansion. These
matters raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial
statements do not include adjustments that might result from the
outcome of this uncertainty. Management's plans to mitigate the
Company's financial problems are outlined below.
Regarding current operations, in order to maintain its liquidity
and economic viability in the interim, the Company is continuing
its ongoing marketing efforts to setup affiliate Memory Center
clients and obtain contracts for its contract research division
and has implemented several measures to reduce current expenses.
Further reductions in monthly expenses beyond current levels
could have adverse effects on the Company's ability to function
as further reductions would most likely occur in payroll costs
which could hamper the ability of the Company to develop and
market products and service customers.
The Company anticipates the Memory Center business to generate
significant revenue growth and cash flows and also expects the
contract research division to produce revenues and cash flows
sufficient to support the Company's overhead in the short term.
-15-
<PAGE>
NEUROCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
NOTE 9 - SUBSEQUENT EVENTS
The Company has entered into agreements to install Memory Center
medical and computer systems at four locations with two
customers. The agreements provide for revenue from the sale of
the systems and will provide revenue on a monthly basis from
software licensing and other services the Company will provide.
The Company is in negotiations with other entities to open sites
under similar conditions and terms, however each potential deal
is negotiated independently.
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from NeuroCorp,
Ltd's Consolidated Balance Sheet, Consolidated Statement of Operations,
Consolidated Statement of Cash Flows and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,003,180
<SECURITIES> 0
<RECEIVABLES> 75,952
<ALLOWANCES> 37,600
<INVENTORY> 0
<CURRENT-ASSETS> 1,094,274
<PP&E> 809,342
<DEPRECIATION> 183,880
<TOTAL-ASSETS> 1,744,486
<CURRENT-LIABILITIES> 848,891
<BONDS> 0
0
167,071
<COMMON> 11,731
<OTHER-SE> 711,020
<TOTAL-LIABILITY-AND-EQUITY> 1,744,486
<SALES> 419,431
<TOTAL-REVENUES> 419,431
<CGS> 175,968
<TOTAL-COSTS> 175,968
<OTHER-EXPENSES> 2,050,424
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,108
<INCOME-PRETAX> (1,723,543)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,723,543)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,723,543)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
