<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
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 No. 0-18568
MEDTRAK ELECTRONICS, INC.
-------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0238889
- ------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8484 Wilshire Blvd., Ste. 215
Beverly Hills, CA 90211
--------------------------------------------
(Address of principal executive offices)
(213) 655-4427
---------------
(Issuer's telephone number)
Sun Tech Enterprises
1787 East Ft. Union Blvd., #106, Salt Lake City, UT 84121
---------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) 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 _____
As of July 31, 1996, 2,520,000 shares of Common Stock of the issuer were
outstanding.
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MEDTRAK ELECTRONICS, INC.
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
- June 30, 1996 (unaudited) and December
31, 1995 (audited). . . . . . . . . . . . . . . . . . . 3
Unaudited Condensed Consolidated Statements
of Operations - For the three months ended
June 30, 1996 and 1995. . . . . . . . . . . . . . . . . 4
Unaudited Condensed Consolidated Statements
of Cash Flows - For the three months ended
June 30, 1996 and 1995. . . . . . . . . . . . . . . . . 5
Notes to Unaudited Condensed Financial Statements. . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . 7
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . 7
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDTRAK ELECTRONICS, INC.
Balance Sheet
JUNE 30, 1996 DECEMBER 31, 1995
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Current Assets
Cash $ 5,156 $ 19,485
Accounts Recievable, net of allowance for
uncollectible accounts of $2,805,546 at 5,210,301 2,035,353
6-30-96 and 1,095,959 at 12-31-95
Due from related party 285,000 -
Inventories 323,431 323,421
Prepaid Taxes - 977
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Total Current Assets $5,823,888 $2,379,246
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------------ ------------
Property and Equipment
Machinery & Equipment 897,491 897,491
Vehicles 31,581 31,581
Furniture & Fixtures 16,641 16,641
Leasehold Improvements 23,491 23,491
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$ 969,204 $ 969,204
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Less Accumulated Depreciation & Amortization 643,322 588,272
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Net Property and Equipment $325,882 $380,932
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Other Assets
Investment in Subsidiaries $1,500,000 $ -
Organizational Costs, net of
accumulated amortization of $965 350 481
Security Deposits 2,741 2,741
Goodwill 17,840 -
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Total Other Assets $1,520,931 $ 3,222
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Total Assets $7,670,701 $2,763,400
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See accompanying notes to financial statements
3
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MEDTRAK ELECTRONICS, INC.
Balance Sheet
Liabilities & Stockholders' Equity
JUNE 30, 1996 DECEMBER 31, 1995
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Current Liabilities
Accounts Payable $ 12,300 $ 46,949
Payroll Taxes Payable 4,847 -
Income Taxes Payable 1,299,798 -
Deferred Taxes Payable 10,819 10,819
Notes Payable 2,000,000 -
Current Portion of Long-Term Debt 6,480 6,480
------------ ------------
Total Current Liabilities $3,334,244 $ 64,248
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Long Term Liabilities
Long-Term Debt 19,439 21,059
Less: Current Portion (6,480) (6,480)
Officer's Loans 55,773 92,849
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Total Long Term Liabilities $ 68,732 $107,428
------------ ------------
Total Liabilities $3,402,976 $171,676
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Stockholders' Equity
Common Stock, $.001 par value $ 2,520 $ 2,500
Additional Paid in capital 862,059
Retained Earnings 3,403,146 2,662,851
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2,665,351
Treasury Stock, 8,334 shares at cost 0 73,627
Total Stockholders' Equity $4,267,725 $2,591,724
------------ ------------
Total Liabilities and
Stockholders' Equity $7,670,701 $2,763,400
------------ ------------
------------ ------------
See accompanying notes to financial statements
4
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MEDTRAK ELECTRONICS, INC.
Statement of Operations
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
6-30-96 6-30-95 6-30-96 6-30-95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $5,097,806 $971,028 $5,256,053 $1,592,532
Operating Expenses 2,103,449 576,138 2,297,117 1,002,479
---------- ---------- ---------- ----------
Income before Taxes $2,994,357 $394,890 $2,958,936 $590,053
Provisions for Income Taxes 1,299,975 5,924 1,300,775 8,851
---------- ---------- ---------- ----------
Net Income $1,694,382 $388,966 $1,658,161 $581,202
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income Per Common Share 1.17 23.34 $2.27 $34.87
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted Average Number of
Shares Outstanding(*) 1,447,411* 16,667 732,039 16,667
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
* Reflects a 1 : 100 reverse split as of May 8, 1996
See accompanying notes to financial statements
5
<PAGE>
MEDTRAK ELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 1,658,161 $ 581,202
ADJUSTMENTS TO RECONCILE NET INCOME TO
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION
55,181 105,524
DECREASE (INCREASE) IN:
PRIOR YEAR ADJUSTMENT
ACCOUNTS RECEIVABLE (3,174,948) (360,230)
LOANS - OTHER (285,000) (199,487)
PREPAID TAXES 977 (18,320)
DEPOSITS (52,741)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE (34,649) (22,369)
NOTES PAYABLE 2,000,000 (2,854)
PAYROLL TAXES PAYABLE 4,847
INCOME TAXES PAYABLE 1,299,798 264
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,524,367 $ 30,979
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CASH FLOWS FROM INVESTING ACTIVITIES
PURCHASE OF INVESTMENTS
$(1,500,000) $ (4,579)
PURCHASE OF PROPERTY AND EQUIPMENT (52,126)
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NET CASH USED BY INVESTING ACTIVITIES $(1,500,000) $ (56,704)
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CASH FLOWS FROM FINANCING ACTIVITIES
PAYMENTS OF SHORT AND LONG-TERM DEBT $ (1,620) $ (35,391)
PROCEEDS FROM (PAYMENTS TO) OFFICERS'S LOAN (37,076) 107,144
----------- ----------
NET CASH PROVIDED (USED) IN FINANCING
ACTIVITIES $ (38,696) $ 71,753
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NET INCREASE IN CASH AND CASH EQUIVALENTS $ 14,329 $ 46,027
CASH AT BEGINNING OF PERIOD 19,485 18,349
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CASH AT END OF PERIOD - JUNE 30, 1996 $ 5,156 $ 64,376
SUPPLEMENT DISCLOSURE:
CASH PAID DURING THE PERIOD FOR:
INTEREST $ 0 $ 0
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INCOME TAXES $ 0 $ 8,587
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
6
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MEDTRAK ELECTRONICS, INC.
(A Development Stage Company)
Notes to the Unaudited Condensed Financial Statements
June 30, 1996
1. GENERAL
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1995 balance sheet data was
derived from audited financial statements but does not include all disclosures
required by generally accepted accounting principles. In the opinion of
management, the interim financial statements reflect all adjustments of a normal
recurring nature necessary for a fair statement of the results for the interim
periods presented.
2. On May 15, 1996, the Company acquired all of the issued and outstanding
shares of Medcentrex, Inc., a Nevada corporation in exchange for $500,000 in
cash, a $1,000,000 non-interest bearing promissory note and 1,320,000 shares of
the Company's common stock. For financial reporting purposes, the acquisition
has been treated as a recapitalization of the Company with Medcentrex, Inc. as
the acquirees. The transaction was therefore accounted for as a purchase under
the "reverse acquisition" method. The resulting excess of cost over net assets
acquired is being amortized over ten years with no amortization for the current
quarter.
As a result of the foregoing, these statements include the accounts of the
Company and Medcentrex, Inc. on a consolidated basis for the three months and
six months ended June 30, 1996, the financial statements for all other periods
reflect only the accounts of Medcentrex, Inc.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULT OF OPERATIONS
THREE MONTHS ENDED JUNE 30
Revenues for the three months ended June 30, 1996 increased $4,126,778 or
425% to $5,097,806 from $971,028 for the three months ended June 30, 1995. This
increase in revenues is attributable to a seasonal increase in patient care
services, as well as an increase in the client base.
Operating expenses for the three months ended June 30, 1996 increased
$1,527,311 or 265.1% to $2,103,449 from $576,138 for the three months ended June
30, 1995. This increase in operating expenses in attributable to the costs
associated with the increase of patient care services. These costs include
cardiac equipment, technical and administrative staff, and supplies. In
addition, the Company incurred $210,283 of costs and expenses in connection with
its bridge financing during the three months ended June 30, 1996.
Net income for the three months ended June 30, 1996 increased $1,305,416 or
335.6% to $1,694,382 from $388,966 for the three months ended June 30, 1995.
This increase in net income is attributable to higher revenues which were
partially offset by higher operating expenses and a higher provision for income
taxes. The provision for income tax increased disproportionately because the
Company was a S Corp. for the prior year.
SIX MONTHS ENDED JUNE 30
Revenues for the six months ended June 30, 1996 increased $3,663,521 or
230% to $5,256,053 from $1,592,532 for the six months ended June 30, 1995. This
increase in revenues is attributable to an increase in the client base and wider
industry acceptance.
Operating expenses for the six months ended June 30, 1996 increased
$1,294,639 or 129.1% to $2,297,117 from $1,002,479 for the six months ended June
30, 1995. This increase in operating expenses is attributable to the costs
associated with the increase of patient care services and the costs of expenses
incurred in connection with the bridge financing.
Net income for the six months ended June 30, 1996 increased $1,076,959 or
185.3% to $1,658,161 from $581,202 for the six months ended June 30, 1995. This
increase in net income is attributable to higher revenues which were partially
offset by higher operating expenses and a higher provision for income taxes.
The provision for income taxes increased disproportionately because the Company
was an S Corp. for the prior year.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its capital requirements and operating
results through loans from related parties. However, with the acquisition of
Medcentrex, the Company is funding its operations through operating cash and
third party debt for the acquisition. As of June 30, 1996, the Company had a
cash balance of $19,485 and working capital of $2,489,644.
Net cash provided by operating activities increased to $1,524,367 from
$30,979 for the six months ended June 30, 1996 and 1995, respectfully. The
increase in cash used in operations results principally from an increase in net
income and accounts payable which was partially offset by an increase in
receivables.
Net cash used in investing activities increased to $1,500,000 from
$(56,704) for the six months ended June 30, 1996 and 1995, respectfully. This
increase is attributable to the expenditure for the acquisition of Medcentrex,
Inc.
8
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Net cash used in investing activities increased to $38,696 from ($71,753)
for the six months ended June 30, 1996 and 1995, respectfully. This increase is
attributable to repayment of officer loans as opposed to the receipt of
additional loans from officers.
At June 30, 1996, the Company had long-term debt of $19,439. This debt
requires monthly principal payments of $540 plus interest at 11% of the
outstanding balance.
Although the Company is generating sufficient earnings to cover its
operating activities and capital requirements, its ability to survive and
prosper is dependent on its ability to collect its receivables. Without the
ability to collect its receivables, the Company will have insufficient capital
to carry out its business plan.
PART II - OTHER INFORMATION
ITEM 5. OTHER EVENTS
On May 15, 1996, the Company acquired all of the issued and outstanding
shares of Medcentrex, Inc. a California corporation engaged in medical
diagnostic support services for cardiac risk patients. The issued and
outstanding shares of Medcentrex, Inc. were acquired for $500,000 in cash, a
non-interest bearing promissory note of $1,000,000 (which is convertible into
480,000 shares of common stock of the Company) and the issuance of $1,320,000
shares of the Company. On the same day, the Company also borrowed $1,000,000
from two non-affiliated lenders to finance the acquisition.
On July 18, 1996, the Company filed Articles of Amendment to the Articles
of Incorporation to change its name from Sun Tech Enterprises to MedTrak
Electronics, Inc.
9
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: August 22, 1996 MEDTRAK ELECTRONICS, INC.
By: /s/ Scott Sands
-----------------------------------------
Scott Sands, President and Chief
Executive Officer
By: /s/ Leon Meyberg
----------------------------------------
Leon Meyberg, Chief Financial
Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10 QSB
FOR JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,156
<SECURITIES> 0
<RECEIVABLES> 8,015,847
<ALLOWANCES> 2,805,546
<INVENTORY> 323,431
<CURRENT-ASSETS> 5,823,888
<PP&E> 969,204
<DEPRECIATION> 643,322
<TOTAL-ASSETS> 7,670,701
<CURRENT-LIABILITIES> 3,324,244
<BONDS> 0
0
0
<COMMON> 2,520
<OTHER-SE> 4,265,205
<TOTAL-LIABILITY-AND-EQUITY> 7,670,701
<SALES> 5,097,806
<TOTAL-REVENUES> 5,097,806
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,103,449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,994,357
<INCOME-TAX> 1,299,975
<INCOME-CONTINUING> 1,694,382
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,694,382
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
