UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A#1
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-17973
MEDCROSS, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2291344
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13751 S. Wadsworth Park Drive, Suite 200, Draper, Utah 84020
(Address of principal executive offices)
(801) 576-5000
(Issuer's telephone number)
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 issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at May 15, 1997
Common Stock, par value $0.007 10,607,597
Traditional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<PAGE> 1
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
<CAPTION>
MEDCROSS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(unaudited)
ASSETS
March 31
1997
Current assets:
<S> <C>
Cash and cash equivalents $ 2,196,343
Accounts receivable less allowance of $754,014 2,680,490
Certificate of deposit - restricted 208,500
Inventory less allowance of $260,033 557,996
Other current assets 176,753
----------
Total current assets 5,820,082
----------
Property and equipment:
Property and equipment 6,625,280
Less accumulated depreciation ( 2,888,844)
----------
Net property and equipment 3,736,436
----------
Other assets:
Intangible assets, net of amortization of $358,098 2,834,700
Certificate of deposit - restricted 1,742,711
Other assets 85,182
----------
Total other assets 4,662,593
----------
Total assets $ 14,219,111
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 3,678,134
Accrued litigation settlement 821,000
Notes payable - related party 88,000
Notes payable - other 1,052,852
Current portion of long-term debt - related party 43,554
Current portion of long-term debt - other 404,429
Current obligations under capital lease 187,047
----------
Total current liabilities 6,275,016
----------
Long-term debt 2,320,450
Obligations under capital leases 194,248
Minority interest equity in consolidated subsidiaries 319,687
----------
Total liabilities 9,109,401
----------
Commitments and contingencies
Stockholders' equity:
Preferred stock 2,475,000
Common stock 74,253
Additional paid-in capital 31,178,161
Common stock to be issued 2,414,583
Accumulated deficit (31,032,287)
----------
Total stockholders' equity 5,109,710
----------
Total liabilities and stockholders' equity $ 14,219,111
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 2
<TABLE>
<CAPTION>
MEDCROSS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues:
Telecommunication service revenue $ 2,147,216 $ -
Health care service revenue 597,257 592,180
Other revenue - 17,026
--------- ---------
Net operating revenue 2,744,473 609,206
--------- ---------
Operating costs and expenses:
Telecommunication network expense 2,891,082 98,233
Selling, general and administrative 2,647,144 994,603
Provision for doubtful accounts 135,225 41,244
Depreciation and amortization 401,495 329,373
Provision for inventory valuation and write-down
of property and equipment 213,944 -
Acquired in-process research and development - 4,777,943
Research and development 111,088 -
--------- ---------
Total operating costs and expenses 6,399,978 6,241,396
--------- ---------
Operating loss (3,655,505) (5,632,190)
--------- ---------
Other income (expense):
Interest expense (346,357) (992,639)
Interest and other income 86,032 15,527
--------- ---------
Total other expense (260,325) (977,112)
--------- ---------
Loss before minority interest in net loss
(income) of consolidated subsidiaries (3,915,830) (6,609,302)
Minority interest in net loss (income) of
consolidated subsidiary 9,089 (1,943)
--------- ---------
Net loss $(3,906,741) $(6,611,245)
========= =========
Loss per common share after preferred dividends $( 0.40) $( 2.24)
========= =========
Weighted average common shares outstanding 10,607,597 2,971,400
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 3
<TABLE>
<CAPTION>
MEDCROSS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,906,741) $(6,611,245)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 401,495 329,373
Provision for doubtful accounts 135,225 41,244
Imputed interest on convertible notes 320,000 945,000
Acquired in-process research and development - 4,777,943
Provision for inventory valuation and
write-down of property and equipment 213,944 -
Minority interest in net income (loss) of
consolidated subsidiaries (9,089) 1,943
Increase (decrease) from changes in:
Accounts receivable (878,713) (60,623)
Inventory (960) (304)
Other assets 121,060 (180,029)
Other current assets (41,264) (9,087)
Accounts payable and accrued expenses 1,137,424 153,041
------------ ------------
Net cash used by operating activities (2,507,619) ( 612,744)
------------ ------------
Cash flows from investing activities
Purchase of property and equipment (88,275) (6,827)
Proceeds from maturity of certificate of
deposit - restricted - 60,000
Cash received from purchase of FTI 435,312 -
------------ ------------
Net cash provided by investing activities 347,037 53,173
------------ ------------
Cash flows from financing activities:
Repayment of note payable - related party - (73,333)
Proceeds from notes payable - other - 1,040,000
Repayment of notes payable - other (90,378) (74,435)
Repayment of long-term debt (10,465) (42,075)
Payment of capital lease obligations (42,457) (73,289)
Issuance of common stock - 124,296
------------ ------------
Net cash provided (used) by financing
activities (143,300) 901,164
------------ ------------
Effect of foreign currency translation on cash flows - 1
------------ ------------
Increase (decrease) in cash and cash equivalents (2,303,882) 341,594
Cash and cash equivalents at beginning of period 4,500,225 80,157
------------ ------------
Cash and cash equivalents at end of period $ 2,196,343 $ 421,751
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 4
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Financial Statements
The interim financial data are unaudited; however, in the opinion of the
management of Medcross, Inc. and Subsidiaries (the "Company"), the interim
data includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of (a) the results of operations for the
three-month periods ended March 31, 1997 and March 31, 1996, (b) the financial
position at March 31, 1997, and (c) cash flows for the three-month periods
ended March 31, 1997 and March 31, 1996. The financial statements should be
read in conjunction with the Company's annual report of Form 10-KSB for the
year ended December 31, 1996 and its quarterly report on Amendment #1 to Form
10-QSB for the three months ended March 31, 1996 (amended in May 1997).
The unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The results of operations
for the three-month period ended March 31, 1997 are not necessarily indicative
of those to be expected for the entire year.
Certain balances in the March 31, 1996 financial statements as amended have been
reclassified to conform with the current period presentation. These changes
had no effect on previously reported net loss, total assets, liabilities or
stockholders' equity.
Note 2 - Supplemental cash flow information
In February 1996, the Company acquired all of the issued and outstanding stock
of I-Link Worldwide, Inc. in exchange for the issuance of an aggregate of
4,000,000 shares of common stock of the Company, of which 2,600,000 shares
were held in escrow as of March 31, 1996.
In February 1996, a holder of Class A Preferred Stock converted 40,000 shares
into 978,891 shares of common stock of the Company.
In January 1997, the Company agreed to issue 400,000 shares of common stock
to acquire all of the issued and outstanding stock of Family Telecommunications
Inc. ("FTI") effective January 1, 1997.
Note 3 - Acquisition of subsidiary
On January 13, 1997, pursuant to the terms of a Share Exchange Agreement for
the Acquisition of Family Telecommunications Incorporated by Medcross, Inc.
effective as of January 1, 1997 (the "Exchange Agreement"), the Company acquired
the outstanding stock of Family Telecommunications Incorporated, a Utah
corporation ("FTI"), from the stockholders of FTI, namely Robert W. Edwards, Jr.
and Jerald L. Nelson. The consideration for the transaction consists of an
aggregate of 400,000 shares of the Company's common stock to be issued by the
Company upon the satisfaction of certain conditions including approval by the
Company's shareholders of an amendment to the Articles of Incorporation
authorizing an increase in the number of shares of common stock from 20 million
to 50 million and no material breach of any representation by the former
stockholders. The purchase price was determined upon the negotiated value of
the assets and operations of FTI. The acquisition has been accounted for using
the purchase method of accounting in the quarter ended March 31, 1997. FTI is
an FCC licensed long-distance carrier and provider of telecommunications
services.
John W. Edwards, President, a Director and Chief Executive Officer of the
Company, and Robert W. Edwards, Jr., the principal shareholder and one of the
two shareholders of FTI, are brothers. There was no affiliation or relationship
between the Company, its affiliates, officers or directors or associates of
such persons and FTI or any if it's officers, directors or stockholders prior
to the execution of the Exchange Agreement except as set forth herein.
<PAGE> 5
Note 3 - Acquisition of subsidiary - continued
The acquisition cost of $2,415,000 (representing the fair value of the 400,000
shares to be issued ) was allocated to the net liabilities of $135,000 (based
on their fair market value) with the balance of $2,550,000 allocated to
intangible assets including goodwill. The fair value of assets acquired and
liabilities assumed in conjunction with this acquisition was as follows:
Current assets (including cash of $435,312) $ 1,740,000
Long-term assets 3,716,000
Current liabilities (1,330,000)
Long-term liabilities (1,711,000)
---------
Net purchase price $ 2,415,000
=========
Proforma financial information concerning revenues, loss and loss per share of
the Company and FTI, as applicable for the three months ended March 31, 1997
and 1996 assuming such transaction had occurred on March 20, 1996 (date of
inception of FTI) is not presented as the impact to either period is not
significant.
As part of the common stock acquisition of FTI, the Company assumed current
and long-term obligations in the amount of $1,991,000 as of December 31, 1996
to a long-distance provider for FTI's line costs. The note was increased
approximately $700,000 for long-distance usage for January 1997. The note
bears interest at 7% per annum. The note calls for payments of $50,000 per
month beginning May 5, 1997 increasing to $75,000 on April 5, 1998 and $150,000
on October 5, 1998 with the balance of $1,100,000 due on April 5, 1999.
Remaining principal payments under this specific note as of March 31, 1997 are
as follows:
March 31, 1998 $ 404,000
March 31, 1999 455,000
March 31, 2000 1,832,000
---------
Total $ 2,691,000
=========
Note 4 - Imputed Interest on Convertible Notes
Simultaneous with the closing of the Company's offering of Class C Preferred
Stock in September 1996, the Company issued an aggregate of $717,000 in
principal amount of Convertible Promissory Notes. The Company has recorded
interest expense (non-cash) of $320,000 related to these promissory notes in
the three months ended March 31, 1997. The interest expense is calculated as
the difference between the conversion price per common share per the promissory
notes as compared to the market price for the common stock on the date the
notes were issued. The interest expense was recognized over the period between
the date the promissory notes were issued and the date the promissory notes
could first be converted.
Note 5 - Commitments and Contingencies
In February 1996, the Company agreed to issue 4,000,000 shares of common stock
to acquire the common stock of I-Link Worldwide Inc. As of March 31, 1997 the
Company has issued 3,000,000 shares. The remaining 1,000,000 shares are to be
released upon the first to occur of the following:
(i) The monthly revenue derived from subscribers serviced by I-Link and
revenue derived from the sale of related products and/or services
equals or exceeds $1,000,000; or
(ii) The number of subscribers serviced by I-Link exceeds 100,000 one year
from the date of receipt by the Company of gross proceeds equal to
$4,000,000 from the sale of its securities pursuant to one or more
private or public offerings.
<PAGE> 6
Note 6 - Income Taxes
The Company recognized no income tax benefit for the losses generated in 1997
and 1996.
Note 7 - Loss Per Common Share After Preferred Dividends
Loss per common share is calculated as the net loss for the respective period
plus cumulative preferred stock dividends not paid in current period of $289,147
and $32,154 for the three months ended March 31, 1997 and 1996 respectively,
divided by the weighted average number of common shares outstanding. Options,
warrants and convertible preferred stock are excluded from the calculation
when their effect would be antidilutive.
Note 8 - Options and Warrants
During the first quarter of 1997 the Company granted 324,000 options to
employees and a consultant of the Company at a price equal to the common stock
price on the day of grant. No options or warrants were exercised during the
first quarter of 1997.
Note 9 - Subsequent Events
A complaint was filed on April 12, 1996 by JW Charles Financial Services, Inc.
("JWC") against the Company in which JWC alleged that the Company breached the
terms of a warrant to purchase 331,126 shares of the Company's common stock
("warrant") by failing to prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement covering the common stock underlying
the JWC warrant. JWC was seeking specific performance, i.e. registering the
shares with the SEC, and monetary damages. On April 11, 1997 the Company
reached an agreement in principle relating to settlement of the lawsuit. The
lawsuit was dismissed upon payment of $600,000 to JWC in consideration for the
warrant. The JWC warrant was purchased by an investor group led by the
Company's general counsel and its treasurer and chief financial officer. The
Company's funds were not utilized in the settlement. In connection with the
purchase of the JWC warrant, the Company granted additional consideration to
the investor group including new warrants to purchase 175,000 shares of common
stock at an exercise price of $2.50 with certain reset provisions. Such
warrants have registration rights and anti-dilutive provisions. The Company
recorded on its financial statements for the year ended December 31, 1996 a
liability and related expense for the settlement of litigation in the amount
of $821,000 representing the estimated difference between the warrant price
and the value of the warrant.
Note 10 - Changes in Stockholders' Equity
During the quarter ended March 31, 1997 changes in stockholders equity were as
follows:
Additional paid in capital increased $303,251, which was associated with the
balance of amortization of interest expense associated with the issuance of
convertible notes at a discount in 1996.
Common stock to be issued in the amount of $2,414,583 was recorded in
relation to the acquisition of FTI. The amount is recorded as common stock
to be issued as the Company does not presently have sufficient authorized
shares to issue to FTI.
Accumulated deficit increased by $3,906,741 which was the net loss for the
quarter ended March 31, 1997.
<PAGE> 7
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
The following discussion should be read in conjunction with the information
contained in the financial statements of the Company and the notes thereto
appearing elsewhere herein and in conjunction with the Management's Discussion
and Analysis set forth in the Company's Form 10-KSB for the year ended December
31, 1996.
Forward Looking Information
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs of management as well as
assumptions made by and information currently available to management. When
used in this document, the words "anticipate", "believe", "estimate", "expect",
and "intended" and similar expressions, as they relate to the Company or its
management, are intended to identify forward-looking statements. Such
statements reflect the current view of the Company respecting future events
and are subject to certain risks, uncertainties, and assumptions, including
the risks and uncertainties noted. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected, or intended.
Operations
Prior to 1997 the Company's primary source of revenue was related to health care
services. The primary expenses of the Company prior to 1997 were related to
delivery of health care services and the development of a proprietary data
communication network. With the Company's acquisition of FTI (effective
January 1, 1997), a regional long-distance telecommunications carrier with
nation-wide delivery of telecommunications services over traditional switched
telecommunications networks, the Company launched its marketing efforts
and began to obtain customers for its long-distance telecommunications services.
The Company is expanding its customer base through its marketing activities and
plans to expand through strategic acquisitions of existing customer bases. In
the second quarter of 1997, the Company began to organize a multi-level
marketing line of business which the Company anticipates will result in
increasing revenues beginning in the latter part of the second quarter.
Financial Condition
Working Capital
The working capital position of the Company was a deficit of $454,934 at March
31, 1997 and $1,579,501 at December 31, 1996. Cash on hand at March 31, 1997
was $2,196,343 as compared to $4,500,227 as of December 31, 1996. The decrease
in cash on hand was primarily attributable to cash flow used by operating
activities during the three months ended March 31, 1997. Cash flow used by
operating activities was $2,507,619 in the first quarter of 1997 compared to
cash flow used by operating activities of $612,744 for the same period in 1996.
Cash flow used by operating activities includes approximately $580,000
attributable to the inclusion of FTI in the first quarter of 1997.
Investing Activities
Effective January 1, 1997, the Company entered into an agreement to acquire all
of the outstanding shares of Family Telecommunications, Inc. (FTI) in exchange
for 400,000 shares of the Company's common stock. The acquisition is
conditioned upon the satisfaction of certain conditions, at which time the
shares will be issued. FTI is an FCC licensed long-distance carrier and
provider of telecommunication services and as such provides the Company with
an existing customer base and related revenues.
Investing activities during the first quarter of 1997 provided net cash of
$347,037. The primarily source of cash flow was cash acquired in the amount
of $435,312 included in the acquisition of FTI. The Company expended $88,275
for acquisition of property and equipment during the first quarter of 1997.
<PAGE> 8
Financing Activities
In the first quarter of 1997, the Company reduced its notes payable, long-term
debt and capital lease obligations by $143,300. These reductions include
payments in the amount of $60,378 on indebtedness acquired in the acquisition
of FTI. The inclusion of FTI in the first quarter of 1997 increased notes
payable by $693,333, and notes payable to others of $104,575.
The Company will require additional financing in order to successfully
integrate the business of FTI, to fund the Company's cash flow operating
deficit, to expand its business and to discharge outstanding indebtedness.
The Company continues to investigate the availability of additional sources of
equity, third-party debt or similar financing for development of its
telecommunications infrastructure, research and development and ongoing
operations. The availability of capital resources to support the Company's
financial requirements will depend on prevailing market conditions, interest
rates, and financial position and results of operations of the Company.
Therefore, there can be no assurance that such financing will be available or
that the Company will not be required to issue significant debt or equity
securities in order to obtain such financing.
Results of Operations
Comparison of First Quarter 1997 to First Quarter 1996
Two significant events affect the comparability of the Company's results of
operations for the first quarters of 1997 and 1996. First, the acquisition of
I-Link in February 1996 which resulted in expense recognition of $4,777,943
related to acquired in-process research and development which did not recur in
the first quarter of 1997. Second, the acquisition of Family Telecommunications
Inc (FTI) in January 1997 (effective January 1, 1997) which for the first time
provided the Company with revenue from long-distance telecommunications
services. Prior to January 1, 1997, operations consisted primarily of health
care service revenue. Therefore the Company's results of operations for the
three months ended March 31, 1997 includes three months of long-distance
telecommunications service revenue and related costs of service and
administrative costs whereas the three months ended March 31, 1996 includes no
revenue or related costs from the long-distance telecommunications services.
Therefore, results of operations for the three months ended March 31, 1997 and
1996 are not comparable.
Telecommunication Service Revenue
Telecommunication service revenue in the first quarter of 1997 was $2,147,216.
There was no such revenue in the first quarter of 1996 as this revenue began
with the acquisition of FTI in January 1997.
Health Care Service Revenue
Health care service revenue increased $5,077 in the first quarter of 1997 to
$597,257 as compared to $592,180 in the same quarter of 1996. The increase
was primarily due to the addition of a management contract, offset by a
decrease in the operating revenue generated from the diagnostic imaging
facilities which decrease was due to the loss of certain service contracts
with hospital clients in February 1997. The Company intends to pursue the
retail segment of the MRI market to compensate for the loss of the hospital
contracts. In the retail segment of the MRI market, the revenue per procedure
is considerably higher than the revenue per procedure realized under the
hospital service contracts. The Company believes its revenue from the
retail segment of the MRI market will be adequate to replace the revenue lost
by the expiration of the hospital contracts.
Other Revenue
Other revenue decreased $17,026 in the first quarter of 1997 to $0 as compared
to $17,026 in the same quarter of 1996. The decrease is primarily due to
internet service provider revenues in 1996 that did not recur in 1997.
<PAGE> 9
Telecommunication Network Expenses
Telecommunication network expenses increased $2,792,849 in the first quarter
of 1997 to $2,891,082 as compared to $98,233 for the same quarter of 1996.
These expenses include costs relative to the continuing development and
deployment of the Company's communications network. The increase is primarily
due to the inclusion of FTI operations during 1997 which includes significant
expenses such as line costs.
Selling, General and Administrative
Selling, general and administrative expenses increased $1,652,541 to $2,647,144
in the first quarter of 1997 as compared to $994,603 in the first quarter of
1996. The increase is primarily due to the inclusion of FTI in 1997 and three
months worth of expenses from I-Link in 1997 as compared to 1-1/2 months in 1996
(I-Link was acquired in February 1996).
Provision for Doubtful Accounts
Provision for doubtful accounts increased $93,981 to $135,225 in the first
quarter of 1997 as compared to $41,244 in the same quarter of 1996. The
increase is primarily due to a provision related to telecommunications revenues
in 1997 which did not exist in 1996.
Depreciation and Amortization
Depreciation and amortization increased $72,122 to $401,495 in the first
quarter of 1997 as compared to $329,373 in the first quarter of 1996. The
increase is primarily due to increased depreciation associated with assets
acquired and related amortization of intangible assets (including goodwill)
related to the FTI acquisition in 1997.
Provision for Inventory Valuation and Write-down of Property and
Equipment
The provision for inventory valuation and write-down of property and equipment
in the first quarter of 1997 (none in the same quarter of 1996) includes a
valuation allowance for inventory of $55,341 and a write off of tenant
improvements abandoned when I-Link moved corporate headquarters in January 1997
in the amount of $158,603.
Acquired In-Process Research and Development
In 1996 the Company recorded an expense of $4,777,943 related to acquired
in-process research and development costs acquired in the acquisition of I-Link
in February 1996. No such costs were incurred in 1997.
Research and Development
Research and development increased $111,088 to $111,088 in the first quarter
of 1997 as compared to $0 in 1996. The increase is associated with the
Company's continuing telecommunication network research and development efforts.
Interest Expense
Interest expense decreased $646,282 to $346,357 in the first quarter of 1997
as compared to $992,639 in the same quarter of 1996. The decrease is primarily
due to a decrease in imputed interest expense (non-cash) of $625,000 to
$320,000 in the first quarter of 1997 as compared to $945,000 in the same
period of 1996. The imputed interest was related to certain convertible
promissory notes issued in 1996.
Interest and Other Income
Interest and other income increased $70,505 to $86,032 in the first quarter of
1997 as compared to the first quarter of 1996. The increase was primarily due
to an increase in interest income of $66,788 in 1997 over 1996 due to an
increased average balance of cash on hand as a result of proceeds from the
Company's sale of Class C Preferred Stock in 1996.
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
A complaint was filed on April 12, 1996 by JW Charles Financial Services, Inc.
("JWC") against the Company in which JWC alleged that the Company breached the
terms of a warrant to purchase 331,126 shares of the Company's common stock
("warrant") by failing to prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement covering the common stock
underlying the JWC warrant. JWC was seeking specific performance, i.e.
registering the shares with the SEC, and monetary damages. On April 11, 1997
the Company reached an agreement in principle relating to settlement of the
lawsuit. The lawsuit was dismissed upon payment of $600,000 to JWC in
consideration for the warrant. The JWC warrant was purchased by an investor
group led by the Company's general counsel and its treasurer and chief
financial officer. The Company's funds were not utilized in the settlement.
In connection with the purchase of the JWC warrant, the Company granted
additional consideration to the investor group including new warrants to
purchase 175,000 shares of common stock at an exercise price of $2.50 with
certain reset provisions. Such warrants have registration rights and anti-
dilutive provisions. The Company recorded on its financial statements for the
year ended December 31, 1996 a liability and related expense for the settlement
of litigation in the amount of $821,000 representing the estimated difference
between the warrant price and the value of the warrant.
Item 6(a) - Exhibits
None
Item 6(b) - Reports on Form 8-K
A report on Form 8-K dated January 13, 1997 was filed by the Company regarding
the acquisition of the securities of Family Telecommunications Incorporated
("FTI").
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
MEDCROSS, INC.
(Registrant)
Date: September 4, 1997 By: /s/ John W. Edwards
John W. Edwards
President, Chief Executive Officer
By: /s/ Karl S. Ryser, Jr.
Karl S. Ryser, Jr.
Chief Financial Officer, Treasurer
<PAGE> 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS DATED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2196343
<SECURITIES> 0
<RECEIVABLES> 3434504
<ALLOWANCES> 754014
<INVENTORY> 557996
<CURRENT-ASSETS> 5820082
<PP&E> 6625280
<DEPRECIATION> 2888844
<TOTAL-ASSETS> 14219111
<CURRENT-LIABILITIES> 6275016
<BONDS> 0
0
2475000
<COMMON> 74253
<OTHER-SE> 2560457
<TOTAL-LIABILITY-AND-EQUITY> 14219111
<SALES> 2744473
<TOTAL-REVENUES> 2744473
<CGS> 0
<TOTAL-COSTS> 6399978
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 346357
<INCOME-PRETAX> (3906741)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3906741)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3906741)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> (.40)
</TABLE>
