UNITED STATES
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 28, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-24768
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MEDIX RESOURCES, INC.
--------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-1123311
-------- ----------
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
7100 E. Belleview Ave, Suite 301, Englewood, CO 80111
------------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(303) 741-2045
---------------
(Issuer's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the
past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of August 12, 1998.
Common Stock, $0.001 par value 21,350,724
---------------------------------- ----------
Class Number of Shares
MEDIX RESOURCES, INC.
---------------------
INDEX
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PART I. FINANCIAL INFORMATION PAGE NO.
---------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheets --
June 28, 1998 (Unaudited) and
December 28, 1997 3
Unaudited Consolidated Statements
of Operations -- For the Three Months
Ended and the Six Months
Ended June 28, 1998 and June 29, 1997 4
Unaudited Consolidated Statements of
Cash Flows -- For the Six Months
Ended June 28, 1998 and June 29, 1997 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION 16
------------------
SIGNATURES 18
Index to Exhibits 19
<PAGE>
MEDIX RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 28, December 31,
1998 1997
---------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ - $ 158,000
Accounts receivable, net 4,133,000 4,559,000
Notes receivable 98,000 491,000
Prepaid expenses and other 97,000 99,000
---------- ----------
Total current assets 4,328,000 5,307,000
Property and equipment, net 297,000 302,000
Other assets
Intangible assets, net 5,961,000 4,491,000
Other 32,000 40,000
---------- ----------
Total assets $10,618,000 $10,140,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Checks written in excess of cash $ 144,000 $ -
Current portion of long-term debt 255,000 35,000
Current portion of capital lease obligation 7,000 25,000
Line-of-credit 2,991,000 3,543,000
Preferred stock subject - repurchase
agreement 675,000 -
Accounts payable 694,000 649,000
Accrued payroll tax, interest and penalty 1,327,000 468,000
Other accrued expenses 819,000 919,000
----------- ----------
Total current liabilities 6,912,000 5,636,000
Stockholders' equity
Preferred stock, 10% cumulative
convertible, $1 par value, 488 shares
authorized, 8.0 and 26.25 issued and
outstanding at June 28, 1998 and December
28, 1997, respectively, liquidation
preference $10,000 per share - -
Preferred stock, 0% cumulative
convertible, $1 par value, 290 shares
authorized, 15.5 and 100.5 issued
and outstanding at June 28, 1998 and
December 28, 1997, respectively,
liquidation preference $10,000 per share - -
Common stock, $0.001 par value; 25,000,000
shares authorized, 20,994,661 and
12,843,567 issued and outstanding
at June 28, 1998 and December 28, 1997,
respectively 21,000 13,000
Dividends payable with common stock 35,000 39,000
Additional paid-in capital 12,805,000 12,191,000
Accumulated deficit (9,155,000) (7,739,000)
---------- ----------
Total stockholders' equity 3,706,000 4,504,000
---------- ----------
Total liabilities and
stockholders' equity $10,618,000 $10,140,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MEDIX RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Six Months Ended
June 28, 1998 and June 28, 1998
June 29, 1997 and June 29, 1997
-------------------- ------------------------
1998 1997 1998 1997
-------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Net revenues $5,128,000 $6,961,000 $10,162,000 $13,624,000
Direct costs of services 3,854,000 5,320,000 7,763,000 10,445,000
---------- ---------- ---------- ----------
Gross Margin 1,274,000 1,641,000 2,399,000 3,179,000
Selling, general and
administrative expenses 1,632,000 1,514,000 3,187,000 2,920,000
(Loss) on sale of
divisions (Note 8) (223,000) - (223,000) -
---------- ---------- ---------- ----------
Net (loss) income from
operations (581,000) 127,000 (1,011,000) 259,000
Interest expense, net 225,000 228,000 405,000 400,000
---------- ---------- ---------- -----------
Net (loss) $ (806,000) $ (101,000) $(1,416,000) $(141,000)
=========== ========== =========== =========
Basic loss
per common share
(Note 7) $ (0.04) $ (0.01) $ (0.07) $ (0.10)
========== ========== =========== =========
Weighted average
shares outstanding 20,919,061 8,062,336 20,148,289 7,582,488
========== ========== =========== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MEDIX RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended June 28,
1998 and June 29, 1997
---------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
Cash flows from (used in)
operating activities
Net income (loss) $(1,416,000) $ (141,000)
Adjustment to reconcile net
income (loss) to net cash flows
from (used in) operating activities
Depreciation and amortization 339,000 311,000
Impairment of goodwill 573,000 0
Net changes in current
assets and current liabilities 1,129,000 (593,000)
----------- ----------
Net cash flows from
(used in) operating activities 625,000 (423,000)
----------- ----------
Cash flows used in investing activities
Purchase of property and equipment (19,000) (106,000)
Business acquisition costs,
net of cash acquired (39,000) (2,116,000)
----------- ----------
Net cash flows (used
in) investing activities (58,000) (2,222,000)
----------- -----------
Cash flows from (used in)
financing activities
Advances, net (552,000) 557,000
Payments on capital leases and debt (48,000) (667,000)
Proceeds from convertible debt - 1,000,000
Net proceeds from exercise of Unit option - 200,000
Net proceeds from issuance(redemption)
of preferred stock (125,000) 1,555,000
Net proceeds from issuance of
common stock - -
----------- ----------
Net cash flows from (used
in) financing activities (725,000) 2,645,000
----------- ----------
Net (decrease) increase in cash
and cash equivalents (158,000) -
Cash and cash equivalents,
at beginning of period 158,000 -
----------- -----------
Cash and cash equivalents,
at end of period $ - $ -
============ ===========
</TABLE>
Non-cash investing and financing activities for the six months ended June 28,
1998:
1. Issuance of 1,436,916 shares of common stock upon conversion of 5 and
18.25 units of 1997 and 1996 convertible preferred stock,
respectively.
2. Issuance of $800,000 payable for redemption of 80 units of 1997
convertible preferred stock.
3. Cymedix merger:
<TABLE>
<CAPTION>
Non-Cash Consideration Purchase Price Allocation
- ------------------------------- -------------------------------
<S> <C> <C> <C>
Common stock issued $1,418,000 Cash $ 5,000
Debt assumed 548,000 Fixed assets 21,000
Current liabilities Excess purchase price
assumed 353,000 over net assets
acquired 2,349,000
----------
Deferred acquisition
costs 12,000
----------
Subtotal 2,331,000 Total $ 2,375,000
===========
Cash payment 25,000
Acquisition costs 19,000
----------
Subtotal cash portion 44,000
----------
Total consideration $2,375,000
==========
</TABLE>
See notes to consolidated financial statements.
MEDIX RESOURCES, INC.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -- ----------------------------------------------
The consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The consolidated
financial statements as of December 28, 1997 have been derived from audited
financial statements, the report on which included an explanatory paragraph
describing uncertainties concerning the Company's ability to continue as a
going concern. The consolidated financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company's Form 10-KSB for the fiscal year ended December 28, 1997. The
results of operations for the six
months ended June 28, 1998 are not necessarily indicative of the results for
the entire fiscal year ending December 27, 1998.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130), which establishes
standards for reporting and display of comprehensive income, its components
and accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS 130 requires that all
items that are required to be recognized under current accounting standards
as components of comprehensive income, be reported in a financial statement
that is displayed with the same prominence as other financial statements.
Currently the Company's only component, which would compromise
comprehensive income, is its results of operations.
Also, in June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
(SFAS 131), which supersedes Statement of Financial Accounting Standards
No. 14, "Financial REporting for Segments of a Business Enterprise." SFAS
131 establishes standards for the way that public companies report information
about operating segments in interim financial statements issued to the
public. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS 131 defines operating
segments as components of a company about which separate financial information
is available that is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing performance.
SFAS 131 will require the Company to disclose such segment data in its
audited financial statements in the future.
SFAS 130 and 131 are effective for financial statements for periods beginning
after December 15, 1997, and requires comparative information for earlier
periods to be restated.
3. ACQUISITIONS
- -- ------------
In January 1998, the Company consummated a merger with Cymedix Corporation
(Cymedix). In conjunction with the merger the Company acquired all of the
issued and outstanding common shares of Cymedix for $2,375,000. To finance
the acquisition, the Company issued 6,980,000 shares of common stock valued at
$1,418,000. assumed liabilities of $901,000, and paid $25,000 in cash. The
Company also incurred $31,000 in acquisition costs. The merger has been
accounted for as a purchase. The purchase price has been allocated as
follows:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 5,000
Property and equipment 21,000
Excess of cash over net assets
acquired 2,349,000
----------
$2,375,000
==========
</TABLE>
4. EQUITY TRANSACTIONS
- -- --------------------
In April 1998, the Company repurchased 80 of its outstanding units of
convertible preferred stock and warrants from the 1997 private placement for
$800,000 to be paid by September 1998. The Company did not make the first
payment due under the repurchase agreement by May 1, 1998. As provided in the
repurchase agreement, the missed payment caused the entire $800,000 to be
immediately due and payable, however, the sole obligation of the Company is to
issue shares of its common stock at a purchase price of 75% of the average
last price quoted for ten days prior to the payment deadline. In June 1998
the Company made payments of $125,000 per share the repurchase agreement. The
balance due under the repurchase agreement at June 28, 1998 is $675,000 which
may be converted to approximately 1,929,000 Shares at a purchase price of
$0.35.
Additionally, in April 1998, the Company exchanged 1,759,000 warrants from the
1996 and 1997 private placements for 175,900 newly issued shares of the
Company's common stock.
5. STOCK OPTIONS
- -- --------------
On April 15, 1998, the Company granted 1,000,000 options to purchase common
stock at $0.50 per share under the Company's 1996 Stock Incentive Plan, all of
which were granted to officers, directors, and employees. During the first
quarter of 1998, in conjunction with the Cymedix merger the Company authorized
1,200,000 and granted 1,046,500 options to purchase common stock, at $0.25 per
share, all of which were granted to officers, employees and outside
consultants.
<PAGE>
6. LITIGATION
- -- ----------
1. In January 1997, the Company was named as a party in a lawsuit filed by
a former patient in San Antonio, Texas. The complaint alleges that a
respiratory therapist employed by a subsidiary of the Company was negligent in
his duties resulting in bodily injuries and mental anguish suffered by the
patient. In a separate but related matter, the client/hospital at which the
alleged incident occurred has paid $100,000 to the plaintiff in exchange for
being released as a party to the lawsuit and has demanded that the Company
indemnify the hospital as the hospital alleges is stipulated in the contract
between the Company and the hospital. The Company does not believe it has an
obligation to indemnify its client hospital under its contract as the Company
was not a party to the settlement. On July 22, 1998, all parties to the
litigation, including the Company and its subsidiary settled the litigation
and the Company and its subsidiary agreed to make certain payments to the
plaintiffs. All such payments are being made on behalf of the Company and its
subsidiary by the Company's liability insurance carrier. Plaintiffs executed
a release agreement that released the defendants and related parties in this
matter. The Court entered a final judgment consistent with the settlement.
2. In April 1997, Ellis Home Care Services, Inc. ("EHCSI") filed a
complaint in the United States District Court, Southern District of New York,
against the Company. The complaint alleges that the Company has breached
certain obligations it undertook in connection with the acquisition of the
Ellis assets by the Company. EHCSI sought a judgment of $421,705, which
represents the difference between the asset purchase price of $1,060,063 and
the total of (i) the aggregate sales proceeds EHCSI received from the sale of
all of its shares of the Company's stock and (ii) a cash payment of $60,000
made by the Company to EHCSI. In addition to the amount of $421,705, the
complaint seeks interest on such amount at nine percent (9%) per annum and
attorney's fees. On August 1, 1997 the Company agreed to a settlement of this
matter and agreed to pay EHCSI $435,397 plus interest at the rate of nine
percent (9%) per annum in an initial payment of $60,000 and monthly payments
of $19,722 with the last payment due April 1, 1999. On September 23, 1997 a
judgment was entered against the Company in this matter as a result of the
Company's failure to make the initial payment of $60,000, although all monthly
payments had been made. The judgment was entered in the amount of $391,731
plus interest at the rate of nine percent (9%) until paid. The Company is
continuing to negotiate this matter with EHCSI and to pay its agreed monthly
payments. It has paid the delinquent $60,000 and EHCSI has made no effort to
date to execute the judgment against the Company. The balance payable at June
28, 1998 is approximately $190,000.
3. During 1997, a subsidiary of the Company was named as defendant in two
suits in Harris County, Texas, entitled Verdell Cooper v. National Care
Resources-Texas, Inc., Harris District Court, 97-21951, and Vanessa Felix v.
National Care Resources-Texas, Inc., Harris District Court, 97-50337. Both
matters involve claims of racial discrimination arising out of the termination
of employment of the plaintiff by the subsidiary. In June of 1998, the
Company settled the two suits by paying an aggregate of $20,000. The Company
denied the claims and obtained releases from any further action, and the Court
dismissed each suit.
<PAGE>
4. On or about November 7, 1997, an action was filed against the Company
in the Eastern District of New York under the caption New York Healthcare,
Inc. v. International Nursing Services, Inc., et al., alleging, among other
things, breach of contract against the Company and seeking damages in excess
of $175,000 plus court costs and attorney fees. The Company filed answers and
counterclaims in this action. The Company intends to vigorously defend this
action and to press its counterclaim. The Company does not expect any
possible resolution of this matter to have a material effect on the Company's
financial condition.
5. On March 19, 1998, the Company announced that its wholly-owned
subsidiary Cymedix Lynx Corporation had submitted a formal demand to Andrx
Corporation for treble damages in the amount of $396.6 million, suffered by
Cymedix as a direct and proximate result of the alleged activities of Andrx,
its affiliate Cybear, Inc. and certain individuals. The demand alleges theft
and unlawful appropriation of Cymedix' computer medical software for remote
on-line healthcare providers and Cymedix' Internet medical communications
technology, commonly referred to as Lynx, for which a preliminary U.S. patent
was filed on October 15, 1996 and a final U.S. patent application was filed on
October 14, 1997. Andrx reportedly responded by denying the allegations and
stating that it intends to vigorously defend any litigation that Cymedix might
file in this matter. On April 2, 1998, Andrx and Cybear filed suit in the
Circuit Court of Broward County, Florida, Case No. 98-04613 CACE03, against
the Company and its wholly-owned subsidiary Cymedix Lynx Corporation, alleging
libel and slander, that the Company's claims are false and defamatory, and
that damages of such actions were in excess of $15,000. Plaintiffs stated
that they intend to seek recovery of punitive damages "at the appropriate
time". The Company intends to vigorously defend itself and proceed with its
claims against Andrx. On May 4, 1998, in response to the suit filed by Andrx,
the Company filed a motion to dismiss amended complaint. On June 22, 1998 the
libel and slander suit against Medix and Cymedix was dismissed without
prejudice. On July 1, 1998, Adrx refiled its second amended complaint for
which the Company's motion to dismiss was denied.
On June 2, 1998 the Company, and its subsidiary Cymedix Lynx Corporation,
filed suit in the Circuit Court of Hillsborough County, Florida, Case No.: CI
94-4621, against Andrx Corporation, its subsidiary Cybear, Inc., Elliot Hahn,
Richard Lucibella, and Jerry Cazzell.
The Company cannot foresee how this matter will proceed, how long it will take
to resolve, or what the ultimate impact of these matters will be on the
financial condition of the Company. Litigation in this matter could require
substantial resources from the Company and take up substantial amount of
management time for a period of several years. No assurance can be given that
the Company would receive an award adequate to compensate it for the use of
such resources and time, or that the ultimate outcome might not be that the
Company is required to pay damages as a result of a counterclaim.
6. On May 22, 1998, an action was filed against the Company in the Supreme
Court of the State of New York in Westchester County, Index No.: 98-08078
under the caption The Nais Corporation against Medix Resources, Inc. and
Lippert Heilshorn and Associates, Inc., alleging, among other things,
non-payment of a brokerage fee on asset sales. The Company filed answers and
counterclaims in this action. The Company intends to vigorously defend this
action and to press its counterclaim. The Company does not expect any
possible resolution of this matter to have a material effect on the Company's
financial condition
<PAGE>
7. LOSS PER SHARE
- -- ----------------
In accordance with the Securities and Exchange Commission's position on
accounting for preferred stock with convertible features that are in the money
at the time of issuance, the Company has imputed a value associated with such
conversion features and has recorded the value as a discount on the preferred
stock. The Company amortizes the imputed discount on the preferred stock over
the period from issuance of the preferred stock to the earliest period at
which the preferred stock becomes convertible. As the Company's 1997
preferred stock issuances are immediately convertible the Company has
amortized in the first quarter the entire imputed discount as a component of
dividends on preferred stock. The Company recorded additional dividends to
preferred stockholders of approximately $553,000 for the quarter ended June
29, 1997, which represents an imputed increase to the dividend yield and not
a contractual obligation on the part of the Company to pay such imputed
dividends.
Loss per share applicable to common stockholders is calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ -------------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Net (loss) $ (806,000) $ (101,000) $(1,416,000) $ (141,000)
Preferred stock
dividends - stated rate (2,000) (12,000) (7,000) (31,000)
Preferred stock dividends
- imputed discount - - - (553,000)
----------- ---------- ------------ -----------
Net (loss)
applicable to common
stockholders $ (808,000) $ (113,000) $(1,423,000) $ (725,000)
=========== =========== =========== ============
Basic (loss) per
common share $ (0.04) $ (0.01) $ (0.07) $ (0.10)
=========== =========== =========== ============
Weighted average
shares outstanding 21,042,137 8,062,336 20,264,602 7,582,488
=========== =========== =========== ============
</TABLE>
8. SUBSEQUENT EVENTS
- -- ------------------
In October 1997, the company entered into a definitive agreement to sell its
two remaining New York operations, for $2,080,000 in cash subject to New York
State licensing authorities and other closing conditions. On April 27, 1998
the Company signed a definitive agreement to sell the remaining three of its
staffing business subsidiaries, National Care Resources - Colorado, Inc.,
National Care Resources - Texas, Inc., and TherAmerica, Inc. for $5,000,000 in
cash and $2,000,000 in convertible preferred stock. The proceeds were payable
with $750,000 in non-refundable deposits in May 1998, $4,250,00 cash and
$2,000,000 stock at closing. Closing was scheduled for September 1998. In
June of 1998, the Company received $350,000 in non-refundable deposits. In
July of 1998, the agreements to sell the two New York operations and the three
subsidiaries were terminated for failure by the purchaser to comply with their
terms. The Company recognized a gain of $350,000 in June 1998 on this
forfeiture.
In July of 1998, the Company signed a letter of intent to sell the two New
York operations for approximately $1,600,000 payable with $1,000,000 in cash
and approximately $600,000 in notes at closing. The transaction is scheduled
to close by September 1, 1998. There is no assurance, however, that this
transaction will close on a timely basis or at all. The sales will
result in a loss of approxoimately $573,000. The Company has accordingly
impaired goodwill on the Stat and Ellis divisions by $573,000 as a result of
signing the letter-of-intent.
The two New York operations provided $3,330,000 in revenues for the six months
ended June 28, 1998. The sale of these operations will significantly reduce
revenues.
The Nasdaq Stock Market, Inc. delisted the Company's common stock from trading
on the Nasdaq SmallCap Market, effective at the close of business on July 14,
1998, for failure to satisfy the revised listing maintenance standards adopted
by The Nasdaq Stock Market, Inc. last year. The Company's common stock is
eligible to trade on the OTC Bulletin Board. Information about the OTCBB can
be found on the Internet at www.OTCBB.com. However, quotes for stock traded
on the OTC Bulletin Board are not published in major newspapers, and can only
be found in specialized publications or on the Internet.
In the light of such delisting, the Company determined that it would not be in
the best interests of its shareholders to complete the reverse stock split
that had been approved by its shareholders at its Annual Meeting of
Shareholders held on May 29, 1998, and the Board of Directors exercised its
authority to abandon the reverse stock split.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements and Associated Risks
- ---------------------------------------------------
This filing contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and the Company intends that such forward-looking
statements be subject to the safe harbors created thereby. These
forward-looking statements include the plans and objectives of the management
for future operations, including plans and objectives relating to services
offered by and future economic performance of the Company.
Healthcare Services Operations. The forward-looking statements included
herein are based on current expectations that involve a number of risks and
uncertainties. These forward-looking statements are based on assumptions that
the Company will continue to be able to provide on a cost effective and
competitive basis quality home health care and interim staffing services, that
the regulatory environment governing the Company's industry will not change in
ways that are materially adverse to the Company and its operations, that the
Company will be able to continue to fund operations, that the Company will be
able to raise additional equity or debt capital if required to fund
operations, that the Company will be able to achieve operating efficiencies
resulting in cost reductions, that a sufficient supply of qualified health
care personnel will be available to the Company for deployment in the health
care industry on a competitive and cost effective basis and that there will be
no material adverse change in the demand for the Company's services or in the
Company's operations or business. Additional risks and uncertainties that
the Company faces include the current uncertainty in the health care industry
and government health care reform proposals considered from time to time,
which has already and may in the future adversely affect the regulatory
environment in which the Company operates and the reimbursement rate payable
under government programs, resulting in decreased revenues from home care
services; the Company's dependence on customer relationships, which makes the
Company vulnerable to consolidation in the health care industry, changes in
customer personnel and other factors that may impact customer relationships;
the Company's ability to obtain needed licenses, permits and governmental
approvals; the Company's ability to compete in the highly competitive
supplemental staffing services market; hospital budgetary cycles, increased
competition for qualified medical personnel, patient admission fluctuations
and seasonality; the adoption by hospitals and third party payers of new or
revised reimbursement policies; and uninsured risks associated with providing
home care and supplemental staffing services, which the Company will attempt
to minimize, but which can not be entirely eliminated.
Further, the Company's announced policy of disposing of healthcare service
operations to fund the development and marketing of its Cymedix subsidiary's
software products, has created uncertainty and instability among the staffs
of such operations, which in turn adversely impacts the value of such
operations.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Forward-Looking Statements and Associated Risks (continued)
- ----------------------------------------------------------------
Medical Information Software Operations. The Company, through its subsidiary
Cymedix Lynx Corporation has only recently begun its medical software line of
business through the acquisition of a development stage medial software
business. The uncertainties and risks that accompany forward-looking
statements are enhanced by the Company's lack of experience in this business.
The Company has no experience in marketing of software products, providing
software support services, evaluating demand for products, financing a
software business and dealing with government regulation of software products.
As a developer of information systems, the Company will be required to
anticipate and adapt to evolving industry standards and new technological
developments. The market for the Company's software products is characterized
by continued and rapid technological advances in both hardware and software
development, requiring ongoing expenditures for research and development and
the timely introduction of new products and enhancements to existing products.
The establishment of standards is largely a function of user acceptance.
Therefore, such standards are subject to change. The Company's future
success, if at all, will depend in part upon its ability to enhance existing
products, to respond effectively to technology changes, and to introduce new
products and technologies to meet the evolving needs of its clients in the
health care information systems market. The Company is currently devoting
significant resources toward the development of products. There can be no
assurance that the Company will successfully complete the development of these
products in a timely fashion or that the Company's current or future products
will satisfy the needs of the health care information systems market.
Further, there can be no assurance that products or technologies developed by
others will not adversely affect the Company's competitive position or render
its products or technologies noncompetitive or obsolete.
Certain of the Company's products provide applications that relate to patient
medical histories and treatment plans. Any failure by the Company's products
to provide accurate, secure and timely information could result in product
liability claims against the Company by its clients or their affiliates or
patients. The Company maintains insurance that it believes is adequate to
protect against claims associated with the use of it products, but there can
be no assurance that its insurance coverage would adequately cover any claim
asserted against the Company. A successful claim brought against the Company
in excess of its insurance coverage could have a material adverse effect on
the Company's results of operations, financial condition or business. Even
unsuccessful claims could result in the expenditure of funds in litigation, as
well as diversion of management time and resources.
The success of the Company is dependent to a significant degree on its key
management, sales and marketing, and technical personnel. The Company
believes that its success will also depend upon its ability to attract,
motivate and retain highly skilled, managerial, sales and marketing, and
technical personnel, including software programmers and systems architects
skilled in the computer languages in which the Company's products operate.
Competition for such personnel in the software and information services
industries is intense. The loss of key personnel, or the inability to hire or
retain qualified personnel, could have a material adverse effect on the
Company's results of operations, financial condition or business.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Forward-Looking Statements and Associated Risks (continued)
- ----------------------------------------------------------------
Medical Information Software Operations (continued). The health care industry
in the United States is subject to changing political, economic and regulatory
influences that may affect the procurement practices and operations of health
care organizations. During the past several years, the health care industry
has been subject to increasing levels of governmental regulation of, among
other things, reimbursement rates and certain capital expenditures. The
Company cannot predict with any certainty what impact, if any, such increased
regulation might have on its results of operations, financial condition or
business. In addition, Medicare has, from time to time, promulgated
regulations concerning anti-fraud and (physician) inducement that heretofore
have not directly affected the marketing of the Company's software and similar
products. However, these regulations, which are usually later adopted by
state-managed Medicaid plans, have created uncertainty in the industry. A
current example is HIPAA (Health Insurance Portability and Accountability Act
of 1996). The Company is waiting for the promulgation of the related
regulations so that it may assess the impact on its business. It is unclear
the effect, if any, these regulations will have on the Company, its products
or its clients.
The U.S. Food and Drug Administration (the "FDA") has promulgated a draft
policy for the regulation of certain computer software products as medical
devices under the 1976 Medical Device Amendments to the Federal Food, Drug and
Cosmetic Act (the "FDC Act") and has recently indicated it may modify such
draft policy or create a new policy. To the extent that computer software is
a medical device under the policy, the manufacturers or such products could be
required, depending on the product, to (i) register and list their products
with FDA, (ii) notify the FDA and demonstrate substantial equivalence to other
products on the market before marketing such products, or (iii) obtain FDA
approval by demonstrating safety and effectiveness before marketing a product.
In addition, such products would be subject to the FDC Acts general controls,
including those relating to good manufacturing practices and adverse
experience reporting. Although it is not possible to anticipate the final
form of the FDA'' policy with regard to computer software, the Company expects
that, whether or not the draft is finalized or changed, the FDA is likely to
become increasingly active in regulating computer software that is intended
for use in health care settings. The FDA can impose extensive requirements
governing pre- and post-market conditions such as device investigation,
approval, labeling and manufacturing. In addition, the FDA can impose
extensive requirements governing development controls and quality assurance
processes. There can be no assurance that actions taken by the FDA to
regulate computer software products will not have a material adverse effect on
the Company's results of operations, financial condition or business.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Forward-Looking Statements and Associated Risks (continued)
- ----------------------------------------------------------------
Company Specific Factors. Important factors to be considered in connection
with forward-looking statements include, without limitation, (a) the fact that
the Company reported net losses in the last several years and had an
accumulated deficit and a working capital deficit at the end of fiscal 1997;
(b) the Company's auditors have included a "going concern" exception in their
report on the Company's financial statements; (c) the Company's lack of
working capital may require the Company to raise additional equity or debt
financing in order to fund operations and the Company may be unable to raise
such debt or equity financing; (d) Nasdaq informed the Company on July 14,
1998 that it was delisted for non-compliance with a requirement to remain
listed on the Nasdaq SmallCap market. The non-compliance was for failing to
maintain tangible net worth of $2.0 million (while the Company's balance sheet
shows net assets of an excess of this amount, a substantial portion of those
assets are intangible). Being delisted from the Nasdaq SmallCap market
significantly impedes the Company's ability to raise future equity capital;
(e) the Company depends on key-management personnel, especially John P. Yeros
to manage and direct the business and operations of the Company and its
healthcare services and Keith Berman to manage the development and marketing
of the Company's medical information software; and (f) various other factors
may cause actual results to vary materially from the results contemplated in
any forward-looking statements included in this filing. No assurances can be
given that the foregoing factors will not result in a material adverse effect
on the Company and its operations.
As of August 12, 1998, the Company does not have a source of funds for the
funding of the development of its Cymedix software products. If the sale of
the two New York operations closes on a timely basis, the Company should have
funds available to meet a portion of its current obligations. The proceeds
from the sale will not be adequate to meet the future cash needs of the
Company. The Company is currently pursuing other sources of funds, including
the potential sale of other assets.
Any of these important factors discussed above or elsewhere in this filing
could cause the Company's revenues or results of operations, or growth in
revenues or results of operations, to differ materially from prior results.
In addition, growth in absolute amounts of selling, general and
administrative expenses or the occurrence of extraordinary events could
cause actual results to vary materially from the results contemplated by
the forward-looking statements. Budgeting and other management decisions are
subjective in many respects and thus susceptible to interpretations and
periodic revisions based on actual experience and business developments,
the impact of which may cause the Company to alter its marketing, capital
expenditures or other budgets, which may, in turn, affect the Company's
results of operation.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Forward-Looking Statements and Associated Risks (continued)
- ----------------------------------------------------------------
Company Specific Factors (continued). Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive and market conditions, and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes the assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate, and therefore, there can be no assurance
that the results contemplated in the forward-looking statements will be
realized. In addition, the business and operations of the Company, because of
the industries in which it operates and its underfunded operations, are
subject to substantial risks which increase the uncertainty inherent
in such forward-looking statements.
In light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
Results of Operations
- -----------------------
Comparison of three months ended June 28, 1998 and June 29,1997
The Company generated approximately $5,128,000 in revenues from operations for
the quarter ended June 28, 1998, compared to approximately $6,961,000 in
revenues for the second quarter of 1997. The decrease in sales for the
quarter is due primarily to the sale of Paxxon Services, Inc. (Paxxon) and the
Homecare division. Paxxon and the Homecare division generated revenues of
approximately $1,073,000 and $234,000 respectively, in the second quarter of
1997. Texas and Colorado revenues were also down from the second quarter of
1997. In July of 1998, the Company signed a letter of intent to sell its two
remaining New York operations. The two New York operations provided $1,671,000
in revenues for the second quarter of 1998. The sale of these operations will
significantly reduce the Company's revenues.
The Company's gross margin percentage increased from 24% for the second
quarter of 1997 to 25% for the second quarter of 1998. The increase is
primarily due to increased margins in the Texas operations and a reduction in
unemployment tax rate for the New York operations.
Selling, general and administrative expenses increased for the quarter ended
June 28, 1998 by approximately $118,000 as compared to the quarter ended June
29, 1997. This increase includes approximately $363,000 of Selling, general,
administrative expenses incurred by Cymedix.
Net loss for the quarter increased from $101,000 for the quarter ended June
29, 1997 to $806,000 for the quarter ended June 28, 1998. The loss for the
quarter is attributable to reduced revenues, Cymedix expenses, impairment of
$573,000 which were partially offset by a $350,000 gain on forfeitures of
deposits (see Note 8 in the accompanying financial statements).
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Results of Operations (continued)
- ------------------------------------
Comparison of three months ended June 28, 1998 and June 29,1997 (continued)
During the first and second quarters, the Company initiated several programs
and service lines which are intended to increase revenues for the remainder of
1998. In particular, nurse staffing was started in the California locations
which previously staffed only therapists. Therapist staffing operations were
expanded in the Texas operations which previously focused primarily on
nursing. Other sales incentive programs have been developed to increase the
existing sales base in Texas, Colorado and New York. The Company has
addressed the dip in margin in its travel division and believes margins will
improve for the remainder of the year.
Comparison of six months ended June 28, 1998 and June 29,1997
The Company generated approximately $10,162,000 in revenues from operations
for the six months ended June 28, 1998, compared to approximately $13,624,000
in revenues for the first six months of 1997. The decrease in sales for the
six months is due primarily to the sale of Paxxon Services, Inc. (Paxxon) and
the Homecare division. Paxxon and the Homecare division generated revenues of
approximately $2,117,000 and $452,000 respectively, in the first six months of
1997. Texas and Colorado revenues were also down from the first six months of
1997. In July of 1998, the Company signed a letter of intent to sell its two
remaining New York operations. The two New York operations provided $3,330,000
in revenues for the six months ended June 28, 1998. The sale of these
operations will significantly reduce the Company's revenues.
The Company's gross margin percentage increased from 23% for the six months
ended June 29, 1997 to 24% for the six months ended June 28, 1998. The
increase is primarily due to increased margins in the Texas operations and a
reduction in unemployment tax rate for the New York operations.
Selling, general and administrative expenses increased for the six months
ended June 28, 1998 by approximately $267,000 as compared to the six months
ended June 29, 1997. This increase includes approximately $664,000 of
Selling, general, administrative expenses incurred by Cymedix.
Net loss for the six months increased from $141,000 for the six months ended
June 29, 1997 to $1,416,000 for the six months ended June 28, 1998. The loss
for the six months is attributable to the same factors discussed in the quarter
ended June 28, 1998 (see Note 8 in the accompanying
consolidated financial statements).
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Results of Operations (continued)
- ------------------------------------
Comparison of six months ended June 28, 1998 and June 29,1997 (continued)
During the first and second quarters, the Company initiated several programs
and service lines which are intended to increase revenues for the remainder of
1998. In particular, nurse staffing was started in the California locations
which previously staffed only therapists. Therapist staffing operations were
expanded in the Texas operations which previously focused primarily on
nursing. Other sales incentive programs have been developed to increase the
existing sales base in Texas, Colorado and New York. The Company has
addressed the dip in margin in its travel division and believes margins will
improve for the remainder of the year.
Liquidity and Capital Resources
- ----------------------------------
The Company's current liabilities at June 28, 1998 aggregated approximately
$6,912,000 and current assets at June 28, 1998 aggregated approximately
$4,328,000. The Company is currently delinquent in the payment of certain of
its current liabilities.
In order for the Company to meet its current obligations, management
anticipates the need to raise additional debt or equity capital or sell assets
(see Forward-Looking Statements and Associated Risks, including Company
Specific Factors).
In July 1998 the Company terminated agreements to sell all of its staffing
operations for $7,080,000 in cash and $2,000,000 in convertible preferred
stock. The Company intended to use the proceeds from these sales to meet
current obligations and fund the development and marketing of the Cymedix
software products. The termination of these agreements has had a material
adverse effect on the Company's financial conditions and has forced the
Company to search for alternative sources of funds to meet current obligations
and adequately fund Cymedix.
In July 1998 the Company signed a letter of intent to sell two New York
operations for approximately $1,600,000 payable with $1,000,000 in cash and
approximately $600,000 in notes subject to certain closing conditions. If the
transaction closes on a timely basis, funds should be available to meet a
portion of the Company's current obligations. There is no assurance, however,
that this transactions will close on a timely basis or at all. Such payments
will not provide adequate funds to support the projected development and
marketing costs of the Cymedix software products. Sales of Cymedix software
products have not met, and on-site testing of installed products has taken
longer than, the Company's initial expectations. See "Forward-Looking
Statements and Associated Risks - Medical Information Software Operations" and
"Company Specific Factors" above. The two New York operations to be sold,
provided $7,090,000 in revenues for the 1997 fiscal year and $3,330,000 in
revenues for the first six months of 1998. The sale of these operations will
significantly reduce the Company's revenues. The Company will need to obtain
additional financing or sell additional assets in order to generate sufficient
cash to support its operations for the next twelve months.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (continued)
- -----------------------------------------------
The Company has historically released certain of its checks in anticipation of
receiving cash proceeds from its line of credit agreement. The Company does
not have an arrangement with its banks to cover checks presented in excess of
its collected cash balance; however, this situation has not occurred as the
Company releases its checks as close as possible to its funding date.
The Nasdaq Stock Market, Inc. delisted the Company's common stock from trading
on the Nasdaq SmallCap Market, effective at the close of business on July 14,
1998, for failure to satisfy the revised listing maintenance standards adopted
by The Nasdaq Stock Market, Inc. last year. The Company's common stock is
eligible to trade on the OTC Bulletin Board. Information about the OTCBB can
be found on the Internet at www.OTCBB.com. However, quotes for stock traded
on the OTC Bulletin Board are not published in major newspapers, and can only
be found in specialized publications or on the Internet. Being delisted from
the Nasdaq SmallCap Market significantly impedes the Company's ability to
raise equity capital.
In the light of such delisting, the Company determined that it would not be in
the best interests of its shareholders to complete the reverse stock split
that had been approved by its shareholders at its Annual Meeting of
Shareholders held on May 29, 1998, and the Board of Directors exercised its
authority to abandon the reverse stock split.
Year 2000 Disclosure
- ----------------------
The Company uses current versions of widely used, publicly available software
for its accounting and other data processing requirements. The providers of
the software utilized by the Company have stated that there will be no
failures in the programs used by the Company resulting from the year 2000.
Cymedix Lynx was designed to be year 2000 compliant. The Company does not
feel it will incur any significant costs in excess of normal operating
expenses relating to the year 2000.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. In January 1997, the Company was named as a party in a lawsuit filed by
a former patient in San Antonio, Texas. The complaint alleges that a
respiratory therapist employed by a subsidiary of the Company was negligent in
his duties resulting in bodily injuries and mental anguish suffered by the
patient. In a separate but related matter, the client/hospital at which the
alleged incident occurred has paid $100,000 to the plaintiff in exchange for
being released as a party to the lawsuit and has demanded that the Company
indemnify the hospital as the hospital alleges is stipulated in the contract
between the Company and the hospital. The Company does not believe it has an
obligation to indemnify its client hospital under its contract as the Company
was not a party to the settlement. On July 22, 1998, all parties to the
litigation, including the Company and its subsidiary settled the litigation
and the Company and its subsidiary agreed to make certain payments to the
plaintiffs. all such payments are being made on behalf of the Company and its
subsidiary by the Company's liability insurance carrier. Plaintiffs executed
a release agreement that released the defendants and related parties in this
matter. The Court entered a final judgment consistent with the settlement.
2. In April 1997, Ellis Home Care Services, Inc. ("EHCSI") filed a
complaint in the United States District Court, Southern District of New York,
against the Company. The complaint alleges that the Company has breached
certain obligations it undertook in connection with the acquisition of the
Ellis assets by the Company. EHCSI sought a judgment of $421,705, which
represents the difference between the asset purchase price of $1,060,063 and
the total of (i) the aggregate sales proceeds EHCSI received from the sale of
all of its shares of the Company's stock and (ii) a cash payment of $60,000
made by the Company to EHCSI. In addition to the amount of $421,705, the
complaint seeks interest on such amount at nine percent (9%) per annum and
attorney's fees. On August 1, 1997 the Company agreed to a settlement of this
matter and agreed to pay EHCSI $435,397 plus interest at the rate of nine
percent (9%) per annum in an initial payment of $60,000 and monthly payments
of $19,722 with the last payment due April 1, 1999. On September 23, 1997 a
judgment was entered against the Company in this matter as a result of the
Company's failure to make the initial payment of $60,000, although all monthly
payments had been made. The judgment was entered in the amount of $391,731
plus interest at the rate of nine percent (9%) until paid. The Company is
continuing to negotiate this matter with EHCSI and to pay its agreed monthly
payments. It has paid the delinquent $60,000 and EHCSI has made no effort to
date to execute the judgment against the Company. The balance payable at June
28, 1998 is approximately $190,000.
3. During 1997, a subsidiary of the Company was named as defendant in two
suits in Harris County, Texas, entitled Verdell Cooper v. National Care
Resources-Texas, Inc., Harris District Court, 97-21951, and Vanessa Felix v.
National Care Resources-Texas, Inc., Harris District Court, 97-50337. Both
matters involve claims of racial discrimination arising out of the termination
of employment of the plaintiff by the subsidiary. In June of 1998, the
Company settled the two suits by paying an aggregate of $20,000. The Company
denied the claims and obtained releases from any further action, and the Court
dismissed each suit.
<PAGE>
4. On or about November 7, 1997, an action was filed against the Company
in the Eastern District of New York under the caption New York Healthcare,
Inc. v. International Nursing Services, Inc., et al., alleging, among other
things, breach of contract against the Company and seeking damages in excess
of $175,000 plus court costs and attorney fees. The Company filed answers and
counterclaims in this action. The Company intends to vigorously defend this
action and to press its counterclaim. The Company does not expect any
possible resolution of this matter to have a material effect on the Company's
financial condition.
5. On March 19, 1998, the Company announced that its wholly-owned
subsidiary Cymedix Lynx Corporation had submitted a formal demand to Andrx
Corporation for treble damages in the amount of $396.6 million, suffered by
Cymedix as a direct and proximate result of the alleged activities of Andrx,
its affiliate Cybear, Inc. and certain individuals. The demand alleges theft
and unlawful appropriation of Cymedix' computer medical software for remote
on-line healthcare providers and Cymedix' Internet medical communications
technology, commonly referred to as Lynx, for which a preliminary U.S. patent
was filed on October 15, 1996 and a final U.S. patent application was filed on
October 14, 1997. Andrx reportedly responded by denying the allegations and
stating that it intends to vigorously defend any litigation that Cymedix might
file in this matter. On April 2, 1998, Andrx and Cybear filed suit in the
Circuit Court of Broward County, Florida, Case No. 98-04613 CACE03, against
the Company and its wholly-owned subsidiary Cymedix Lynx Corporation, alleging
libel and slander, that the Company's claims are false and defamatory, and
that damages of such actions were in excess of $15,000. Plaintiffs stated
that they intend to seek recovery of punitive damages "at the appropriate
time". The Company intends to vigorously defend itself and proceed with its
claims against Andrx. On May 4, 1998, in response to the suit filed by Andrx,
the Company filed a motion to dismiss amended complaint. On June 22, 1998 the
libel and slander suit against Medix and Cymedix was dismissed. On July 1,
1998, Adrx refiled its second amended complaint for which the Company's motion
to dismiss was denied.
On June 2, 1998 the Company, and its subsidiary Cymedix Lynx Corporation,
filed suit in the Circuit Court of Hillsborough County, Florida, Case No.: CI
94-4621, against Andrx Corporation, its subsidiary Cybear, Inc., Elliot Hahn,
Richard Lucibella, and Jerry Cazzell.
The Company cannot foresee how this matter will proceed, how long it will take
to resolve, or what the ultimate impact of these matters will be on the
financial condition of the Company. Litigation in this matter could require
substantial resources from the Company and take up substantial amount of
management time for a period of several years. No assurance can be given that
the Company would receive an award adequate to compensate it for the use of
such resources and time, or that the ultimate outcome might not be that the
Company is required to pay damages as a result of a counterclaim.
6. On May 22, 1998, an action was filed against the Company in the Supreme
Court of the State of New York in Westchester County, Index No.: 98-08078
under the caption The Nais Corporation against Medix Resources, Inc. and
Lippert Heilshorn and Associates, Inc., alleging, among other things,
non-payment of a brokerage fee on asset sales. The Company filed answers and
counterclaims in this action. The Company intends to vigorously defend this
action and to press its counterclaim. The Company does not expect any
possible resolution of this matter to have a material effect on the Company's
financial condition
<PAGE>
ITEM 2. CHANGES IN SECURITIES
Unregistered sales of securities by the Company for the quarter reported on.
See Note 3 to the unaudited consolidated financial statements elsewhere
herein.
<TABLE>
<CAPTION>
Security No. of Exemption
Issued Date Shares Consideration Purchasers Claimed
- -------- -------- -------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Common Conversion of Private Section 3(a)(9)
Stock Apr 175,900 Warrants Investors
Common Conversion of Private Section 3(a)(9)
Stock Jun 73,563 Preferred Investors
</TABLE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on May 29, 1998 in Denver,
Colorado for the purpose of electing a board of directors, authorizing a
reverse stock split, and approving the appointment of independent auditors.
Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and there was no solicitation in opposition to
management's solicitations.
Voting results were as follows:
<TABLE>
<CAPTION>
Shares
Shares Shares Shares Shares Subject to
Voted Voted Voted Voted Broker
For Against Withhold Abstain Non-votes
--------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
1 Election of
directors
John Yeros 12,049,126 - 294,793 - -
Tom Oberle 12,054,448 - 289,471 - -
Charlie
Powell 12,054,848 - 289,071 - -
2 Approval of
reverse
split 10,575,248 1,545,048 - 203,372 20,251
3. Approval of
independent
auditors 11,902,531 206,281 - 235,107 -
</TABLE>
Shareholders of record for purposes of this annual meeting were determined as
of April 24, 1998 and total shares able to be voted were 20,921,098.
Therefore, all proposals were approved by the shareholders. However, the
Board of Directors of the Company determined that it was in the best interest
of the Company to abandon Proposal No. 2, regarding a reverse stock split,
prior to its effectiveness.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Included as exhibits are the items listed on the Exhibit Index. The
Registrant will furnish a copy of any of the exhibits listed below upon
payment of $5.00 per exhibit to cover the costs to the Registrant of
furnishing such exhibit.
b. Reports on Form 8-K during the quarter reported on.
Filing Date Items
------------ -----
April 6, 1998 Item 7 of Form 8-K/A, containing financial
statements and related pro forma's
amending Form 8-K filed on January 7, 1998.
April 14, 1998 Item 5, reporting press release on agreement
to repurchase convertible preferred stock.
May 1, 1998 Item 5, reporting press releases on signing
of definitive agreement for sale of the
Company's remaining staffing business and on
the grant of four 75 year copyrights for
the Company's Cymedix Lynx product.
May 8, 1998 Item 5, letter to shareholders regarding
among other things, the NASDAQ notification
of stock delisting.
May 21, 1998 Item 5, reporting press release announcing
the Medix Board of Directors is
considering the adoption of a shareholder
rights plan.
June 3, 1998 Item 5, reporting press release announcing
the signing of a sales, marketing and
consulting agreement with a leading managed
care marketing firm.
June 9, 1998 Item 5, reporting press release announcing
lawsuit against Andrx.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 17, 1998
MEDIX RESOURCES, INC.
(Registrant)
/s/ John P. Yeros
--------------------
John P. Yeros
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ David Kinsella
--------------------
David Kinsella
Controller
(Principal Financial and Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-END> JUN-28-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,133,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,328,000
<PP&E> 297,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,618,000
<CURRENT-LIABILITIES> 6,912,000
<BONDS> 0
0
0
<COMMON> 21,000
<OTHER-SE> 3,685,000
<TOTAL-LIABILITY-AND-EQUITY> 10,618,000
<SALES> 0
<TOTAL-REVENUES> 10,162,000
<CGS> 0
<TOTAL-COSTS> 7,763,000
<OTHER-EXPENSES> 3,187,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 405,000
<INCOME-PRETAX> (1,416,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,416,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,416,000)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
