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 MARCH 28,1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24768
MEDIX RESOURCES, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1123311
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 May 14, 1999.
Common Stock, $0.001 par value 22,762,064
Class Number of Shares
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MEDIX RESOURCES, INC.AND SUBSIDIARIES
INDEX
PART I. Financial Information Page No.
Item 1.Financial Statements
Consolidated Balance Sheets -- March 28, 1999
(Unaudited) and December 27, 1998...............1
Unaudited Consolidated Statements of
Operations -- For the Three
Months Ended March 28, 1999 and March 29, 1998..2
Unaudited Consolidated Statements of Cash
Flows -- For the Three Months
Ended March 28, 1999 and March 29, 1998.........3
Notes to Unaudited Consolidated Financial
Statements......................................4
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations..............7
PART II. Other Information......................................15
SIGNATURES.............................................17
Index to Exhibits......................................18
<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 28, December 27,
1999 1998
------------ ------------
(Unaudited)
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents ................................ $ 2,000 $ 40,000
Accounts receivable, net ................................. 1,890,000 2,081,000
Notes receivable ......................................... 30,000 563,000
Prepaid expenses and other ............................... 83,000 97,000
------------ ------------
Total current assets ................................. 2,005,000 2,781,000
Property and equipment, net ............................... 200,000 220,000
Other assets
Intangible assets, net ................................... 2,135,000 2,174,000
------------ ------------
Total assets .............................................. $ 4,340,000 $ 5,175,000
============ ============
Liabilities and Stockholders' Deficit
Current liabilities
Checks in excess of cash ................................. $ -- $ 72,000
Notes payable ............................................ 270,000 289,000
Line-of-credit ........................................... 1,228,000 993,000
Accounts payable ......................................... 855,000 838,000
Accrued expenses ......................................... 1,044,000 1,097,000
Accrued payroll tax, interest and penalty ................ 948,000 1,469,000
Preferred stock redemption payable ....................... 585,000 635,000
------------ ------------
Total current liabilities ............................. 4,930,000 5,393,000
Stockholders' deficit
1996 convertible preferred stock, 10%
cumulative, $1 par value, 488 shares
authorized, 8.0 issued and outstanding at
March 28, 1999 and December 27, 1998,
liquidation preference $120,000 ......................... -- --
1997 convertible preferred stock, $1 par
value, 300 shares authorized, 167.15
issued and 19.50 outstanding at March 28,
1999 and December 27, 1998, liquidation
preference $195,000 ..................................... -- --
1999 convertible preferred stock, $1 par
value, 300 shares authorized, 10.0
and 0.0 issued and outstanding at March 28,
1999 and December 27, 1998, respectively ................ -- --
Common stock, $0.001 par value; 25,000,000
shares authorized, 21,643,581 and
21,500,724 issued and outstanding at March 28,
1999 and December 27, 1998, respectively ............... 22,000 22,000
Dividends payable with common stock ..................... 41,000 39,000
Additional paid-in capital .............................. 13,103,000 12,882,000
Accumulated deficit ..................................... (13,756,000) (13,161,000)
------------ ------------
Total stockholders' deficit ........................ (590,000) (218,000)
------------ ------------
Total liabilities and stockholders'
deficit ......................................... $ 4,340,000 $ 5,175,000
============ ============
</TABLE>
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<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
For the three For the three
months ended months ended
March 28, March 29,
1999 1998
-------------- --------------
Revenues $ 3,100,000 $ 5,034,000
Direct costs of services 2,467,000 3,909,000
-------------- --------------
Gross Margin 633,000 1,125,000
Selling, general and administrative 1,110,000 1,555,000
expenses
-------------- --------------
Net loss from operations (477,000) (430,000)
Interest expense, net 118,000 180,000
-------------- --------------
Net loss $ (595,000) $ (610,000)
============== ==============
Net loss per common share (Note 5) $ (0.03) $ (0.03)
============== ==============
Weighted average shares 21,536,831 19,487,068
outstanding
============== ==============
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MEDIX RESOURCES, INC.AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
For the three For the three
months ended months ended
March 28, March 29,
1999 1998
---------- ----------
Cash flows from operating activities
Net loss ..................................... $(595,000) $(610,000)
Adjustment to reconcile net loss to net cash
flows from operating activities
Depreciation and amortization ............... 60,000 169,000
Options and warrants issued for services .... 73,000 --
Net changes in current assets and
current liabilities ...................... (424,000) 675,000
--------- ---------
Net cash flows (used in) provided by
operating activities ............... (886,000) 234,000
--------- ---------
Cash flows from investing activities
Proceeds from sale of property and equipment . 2,000 --
Purchase of property and equipment ........... (3,000) (12,000)
Proceeds from notes receivable ............... 533,000 --
Business acquisition costs, net of cash
acquired .................................... -- (39,000)
--------- ---------
Net cash flows provided by (used in)
investing activities ............... 532,000 (51,000)
--------- ---------
Cash flows from financing activities
Advances, net ................................ 235,000 (192,000)
Payments on capital leases and debt .......... (19,000) (24,000)
Net proceeds from issuance of preferred stock 100,000 --
--------- ---------
Net cash flows provided by (used in)
financing activities ............... 316,000 (216,000)
Net decrease in cash and cash equivalents ..... (38,000) (33,000)
Cash and cash equivalents, at beginning
of period .................................... 40,000 158,000
--------- ---------
Cash and cash equivalents, at end of period ... $ 2,000 $ 125,000
========= =========
- -------------------------------------------------
Non-cash investing and financing activities for the three months ended March 28,
1999:
Issuance of 142,857 shares of common stock for a $50,000 reduction in
preferred redemption payable.
350,000 options to purchase common stock valued at approximately
$48,000 were granted for services.
125,000 warrants to purchase common stock valued at approximately
$25,000 were granted for services. Dividends declared payable in
common stock were $2,000.
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MEDIX RESOURCES, INC.AND SUBSIDIARIES
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 27, 1998 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 27, 1998. The results of operations for the
three months ended March 28, 1999 are not necessarily indicative of the results
for the entire fiscal year ending December 26, 1999.
2. EQUITY TRANSACTIONS
In April 1998, the Company repurchased 76 of its outstanding units of
convertible preferred stock and warrants from the 1997 private placement for
$760,000 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 $760,000 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 the repurchase agreement. In March 1999,
the Company converted $50,000 of the balance due under the repurchase agreement
into 142,857 shares of common stock. The balance due under the repurchase
agreement at March 28, 1999 is $585,000 which may be converted to approximately
1,671,000 shares at a purchase price of $0.35. In April 1999, the Company
converted an additional $150,000 of the balance due under the repurchase
agreement into 428,571 shares of common stock.
In January 1999, the Company issued 125,000 warrants to purchase common stock at
$0.21 per share to a consulting firm in conjunction with a financial advisor
services agreement. The Company recorded consulting expense of $25,000 related
to the issuance of these warrants.
In April 1999, the Company completed a private placement of units consisting of
one share of 1999 Series A convertible preferred stock (1999 A Preferred Stock)
and one thousand warrants. Each unit was sold for $1,000. The A Preferred Stock
is convertible into common stock at a price of $0.25 per share from October 1,
1999 through March 1, 2003. There are no dividends unless the Shares of Common
Stock underlying the preferred is not registered with the Securities and
Exchange Commission by September 30, 1999. If the aforementioned registration is
not completed, then the holder receives dividends of 10% per annum. Each warrant
entitles the holder to purchase one share of common stock at $1.00 from October
1, 1999 to October 1, 2000. The Company received $100,000 in March 1999 and
$200,000 in April 1999 under its private placement.
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<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
In April 1999, the Company initiated a private placement of units consisting of
one share of 1999 Series B convertible preferred stock (1999 B Preferred Stock)
and two thousand warrants. Each unit was sold for $1,000. The B Preferred Stock
is convertible into common stock at a price of $0.50 per share from October 1,
1999 through October 1, 2003. There are no dividends unless the Shares of Common
Stock underlying the preferred is not registered with the Securities and
Exchange Commission by September 30, 1999. If the aforementioned registration is
not completed, then the holder receives dividends of 10% per annum. Each warrant
entitles the holder to purchase one share of common stock at $1.00 from October
1, 1999 to October 1, 2002. The Company has received $840,000 through May 14,
1999 under its private placement.
3. STOCK OPTIONS
On January 15, 1999 the Company granted 350,000 options to purchase common
stock, at $0.25 per share, all of which were granted to outside consultants. The
Company recorded consulting expense of $48,000 related to the grant of these
options.
On March 19, 1999 the Company granted 225,000 options to purchase common stock
at $0.25 per share under the Company's 1996 Stock Incentive Plan, all of which
were granted to officers and employees.
In March 1999, the Company canceled 21,500 and granted 181,500 options to
purchase common stock, at $0.25 per share, all of which were granted to
employees and outside consultants.
4. LITIGATION
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 resolution of this
matter to have a material effect on the Company's financial condition.
In the normal course of business, the Company is party to litigation related to
its staffing employees. The Company maintains insurance to cover these claims
and believes that it will not incur any material losses in excess of accrued
amounts.
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MEDIX RESOURCES, INC.AND SUBSIDIARIES
5. 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 1999 Series A
Preferred Stock issuances are not convertible until October 1, 1999, the Company
has amortized in the first quarter 17% of the imputed discount as a component of
dividends on preferred stock. The Company recorded additional dividends to
preferred stockholders of approximately $3,000 for the quarter ended March 28,
1999, 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:
For the three For the three
months ended months ended
March 28, 1999 March 29, 1998
------------- ------------
Net loss .............................. $ (595,000) $ (610,000)
Preferred stock dividends - stated rate (2,000) (5,000)
Preferred stock dividends - imputed
discount ............................. (3,000) --
------------ ------------
Net loss applicable to common
stockholders ......................... $ (600,000) $ (615,000)
============ ============
Basic loss per common share ........... $ (0.03) $ (0.03)
============ ============
Weighted average shares outstanding ... 21,536,831 19,487,068
============ ============
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<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company's revenues are provided primarily from its supplemental staffing of
therapy and nursing professionals. The Company intends to dispose of its
supplemental staffing business if an adequate price is offered. Until such a
sale occurs, and if the Company's projections for the supplemental staffing
portion of its business is met, such business should provide adequate cash flow
to fund the operation of such portion of the Company's business for the next
twelve months.
The Company's medical information software business (Cymedix) will require
adequate funding in order to continue its efforts to bring its products to
market. Such funding is not currently secured. If the Company sells its
supplemental healthcare staffing business, the proceeds of such sale will not be
sufficient to fund the shortfall in the currently budgeted Cymedix operations
for the next twelve months. The Company will attempt to fund Cymedix's
development through raising capital in the private debt or equity markets. The
Company may not be successful in raising such capital. In which case, the
continued operation of the Company as a going concern would be doubtful.
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.
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<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
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.
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 medical 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.
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<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Forward-Looking Statements and Associated Risks (continued)
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.
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.
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<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Forward-Looking Statements and Associated Risks (continued)
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.
Company Specific Factors. Important factors to be considered in connection with
forward-looking statements include, without limitation, (a) the fact that the
Company has reported net losses in the last several years and has an accumulated
deficit, a negative net worth, and a working capital deficit at the end of its
most recent fiscal quarter; (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 and inability to generate positive cash
flow from operations 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. Being delisted from the Nasdaq SmallCap
market significantly impedes the Company's ability to raise future equity
capital; (e) at May 6, 1999 the Company had substantial delinquent liabilities,
which, if the creditors instituted collection proceedings, could cause financial
failure of the Company if payment could not be made or extension arrangements
could not be negotiated; 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.
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MEDIX RESOURCES, INC.AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Forward-Looking Statements and Associated Risks (continued)
As of May 14, 1999, the Company does not have a source of funds for the funding
of the development of its Cymedix software products. The Company is currently
pursuing sources of funds, but no assurance can be given that the Company will
be successful.
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. Failure to
obtain financing on a timely basis could result in loss of business
opportunities, the sale of the Cymedix business at a distressed price or the
financial failure of the Company. 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.
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.
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<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Results of Operations
Comparison of three months ended March 28, 1999 and March 29, 1998
The Company generated approximately $3,100,000 in revenues from operations for
the first quarter of 1999, compared to approximately $5,034,000 in revenues for
the first quarter of 1998. The decrease in sales for the quarter is due
primarily to the sale of two New York divisions, STAT and Ellis, in September
1998. The two New York divisions generated revenues of approximately $1,665,000
in the first quarter of 1998. The sale of these operations has and will continue
to significantly reduce the Company's future revenues. Therapist staffing
revenues in California and Colorado were also down significantly from the first
quarter of 1998. These decreases were partially offset by increased nurse
staffing revenues in the Texas, Colorado and Travel divisions. The Company
intends to sell all of its staffing operations. These operations currently
represent all of the Company's revenues. If completed, Cymedix would be the
Company's only business operation. Cymedix does not currently generate any
revenue. The sale of the staffing operations would significantly reduce the
Company's revenues.
The Company's gross margin percentage decreased from 22% for the first quarter
of 1998 to 20% for the third quarter of 1999. The decrease is primarily due to
the sale of the higher margin New York divisions.
Selling, general and administrative expenses decreased approximately $445,000
from $1,555,000 in the first quarter 1998 to $1,110,000 in the first quarter
1999. This decrease was primary due to the sale of the New York divisions,
related corporate downsizing, and a reduction in amortization related to the
fourth quarter 1998 impairment of intangible assets. The decrease was partially
offset by an increase in Selling, general, administrative expenses incurred by
Cymedix of approximately $186,000. Cymedix's Selling, general, administrative
expenses were $487,000 in the first quarter 1999 and $301,000 in the first
quarter of 1998.
Loss from operations increased $47,000 from $430,000 in the first quarter 1998
to $477,000 in the first quarter 1999. The increase primarily due to the
increase in Cymedix's Selling, general and administrative expenses.
Interest expense decreased approximately 34% from $180,000 in the first quarter
1998 to $118,000 in the first quarter of 1999. The decrease is primarily due to
the sale of the New York divisions.
The Company's net loss decreased $15,000 from $610,000 for the first quarter
1998 to $595,000 for the first quarter 1999. The decrease is primarily due to
the reduction in interest expense.
Liquidity and Capital Resources
At March 28, 1999, the Company's current liabilities were approximately
$4,930,000 and current assets were approximately $2,005,000 and it had a
negative net worth. The Company is currently delinquent in the payment of
certain of its current liabilities.
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<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Liquidity and Capital Resources (continued)
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 April 1999, the Company completed a private placement for $300,000.
The Company received $100,000 in March 1999 and $200,000 in April 1999 from the
private placement. In April 1999, the Company initiated another private
placement. The Company has received $840,000 through May 14, 1999 under this
private placement. The Company intends to sell its staffing operations to raise
additional capital. However, there are no current agreements in place to engage
in such a transaction.
Proceeds from the private placements 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 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.
Year 2000 Disclosure
The Company currently utilizes an external vendor for hardware and packaged
software support. The external vendor has tested all hardware, operating
systems, and software for year 2000 compliance. The external vendor identified
13 PC's that are not compliant and would require replacement or upgrades. The
Company uses current versions of widely used, publicly available software for
its accounting and other data processing requirements. The Company has obtained
year 2000 certification from these software vendors. The certification for the
Company's accounting software involves an upgrade to the version currently in
use. Cymedix Lynx was designed to be year 2000 compliant. The Cymedix software
products have been tested internally and have been found to be compliant. The
Company does not anticipate the need to have the Cymedix software products
independently certified due to it's recent development and Y2K compliant
operating system. The Company's relations with banks, lending institutions,
current and future customers and vendors may be impacted by their ability to
become year 2000 compliant.
Hardware upgrades or replacements are scheduled to be completed by August 31,
1999. The upgraded and replaced systems are scheduled to be tested by September
30, 1999. The Company intends to obtain documentation of year 2000 compliance
from its banks, lending institutions, and significant customers and vendors by
June 30, 1999.
- 13 -
<PAGE>
MEDIX RESOURCES, INC.AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Year 2000 Disclosure (continued)
The Company does not feel costs relating to year 2000 will have a material
effect on the Company's financial statements. Hardware replacements or upgrades
related to year 2000 should be less than $20,000 and software upgrades should be
less than $10,000. If required, an independent certification of the Cymedix
software products would cost approximately $20,000.
- 14 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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 resolution of this
matter to have a material effect on the Company's financial condition.
In the normal course of business, the Company is party to litigation related to
its staffing employees. The Company maintains insurance to cover these claims
and believes that it will not incur any material losses in excess of accrued
amounts.
Item 2. Changes in Securities and Use of Proceeds
Unregistered sales of securities by the Company for the quarter reported on. See
Note 2 to the unaudited consolidated financial statements elsewhere herein.
<TABLE>
<CAPTION>
No. of Exemption
Security Issued Date Shares Consideration Purchasers Claimed
- --------------- --------- -------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Common Stock 3/5/99 142,857 Conversion of Private Section 3(a)(9)
Debt Investors
Units of Series A 3/24/99 100 $100,000 Private Section 4(2)
Preferred Stock Investors
</TABLE>
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
- 15 -
<PAGE>
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
March 1, 1999 Item 5, reporting press release on retaining the
services of two outside advisors, The Fountainhead
Group, LLC and Creative Management Strategies.
- 16 -
<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: May 14, 1999
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)
- 17 -
<PAGE>
INDEX TO EXHIBITS
3.1.12 Articles of Amendment of Articles of Incorporation of the Company as
filed on April 21, 1999 with the Secretary of State of the State of Colorado.
4.7 Form of 1999 Unit Warrant.
27 Financial Data Schedule
- 18 -
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
MEDIX RESOURCES, INC.
MEDIX RESOURCES, INC., a corporation organized under the laws of the State of
Colorado, by its President and Chief Executive Officer does hereby certify:
1. The name of the Corporation is MEDIX RESOURCES, INC.
2. The Board of Directors of the Corporation, at a meeting on April 13, 1999,
has approved and adopted the amendment to the Corporation's Articles of
Incorporation contained herein, which amendment sets forth the text of a
determination by the board of directors of the designations, preferences,
limitations and relative rights of a series of Preferred Stock and which
amendment is effective without shareholder action as provided in Section
7-106-102 of the Colorado Business Corporation Act.
3. Article IV of the Articles of Incorporation of the Corporation is hereby
amended by the addition of a new Section 8 thereto, to read in its entirety
as follows:
"Section 8. 1999 Series A Convertible Preferred Stock.
I. Designation and Amount.
Three hundred (300) shares of the authorized shares of Preferred Stock of the
Company are hereby designated "1999 Series A Convertible Preferred Stock" (the
"1999 Preferred Stock"). All shares of 1999 Preferred Stock shall rank prior, as
to both payment of dividends and as to distribution of assets upon the voluntary
or involuntary liquidation, dissolution or winding up of the Company, to all of
the Company's now or hereafter issued common stock (the "Common Stock"), and any
other series of capital stock of the Company, other than the 1996 Convertible
Preferred Stock and the 1997 Convertible Preferred Stock, that is not, by its
terms, senior to or pari passu with the 1999 Preferred Stock, and shall rank
junior in all respects to the 1996 Convertible Preferred Stock and the 1997
Convertible Preferred Stock of the Company.
II. Dividends.
(1) Except as specifically described herein, the registered owners of the
1999 Preferred Stock, shall not be entitled to receive any dividends.
If a registration statement under the Securities Act of 1933, as
amended, (the "Act") registering the shares of Common Stock of the
Company into which the 1999 Preferred Stock is convertible is not
declared effective by September 30, 1999, or if any such registration
statement ceases to be effective at any time prior to the second
anniversary of the date on which such registration statement first
becomes effective, the registered owners of each share of 1999
Preferred Stock shall be entitled to receive out of assets of the
Company legally available therefor, dividends for any period after
September 30, 1999, during which such registration statement is not
effective at the rate of ten percent (10%) per annum, for each day
during which the registration statement is not effective. Dividends
shall be calculated on the amount of the Liquidation Value of each
share. Dividends, if any as provided hereunder, shall accrue without
interest and be cumulative and shall be payable to the registered
owners of 1999 Preferred Stock out of assets of the Company legally
available therefore, quarterly in arrears on the last day of each
fiscal quarter of the Company. Dividends shall be payable to
shareholders of record on the fifteenth day immediately preceding such
dividend payment date, or if such day is not a business day, on the
immediately preceding business day.
(2) So long as any share of 1999 Preferred Stock is outstanding, the
Company shall not (a) declare or pay any dividend or make any other
distribution (other than dividends payable solely in Common Stock or
other capital stock ranking junior as to dividend rights to the 1999
Preferred Stock) on the Common Stock or any other class or series of
capital stock of the Company ranking, as to dividends, junior to the
1999 Preferred Stock, or set funds aside therefor, or (b) purchase,
redeem or otherwise acquire, any of the Common Stock, or any other
class of capital stock of the Company ranking junior as to dividends
to the 1999 Preferred Stock (other than in exchange for Common Stock
or other class of capital stock ranking junior as to dividends to the
1999 Preferred Stock) or set funds aside therefor.
(3) If at any time any dividend on any capital stock of the Company
ranking senior as to dividends to the 1999 Preferred Stock ("Senior
Dividend Stock") shall be in default, in whole or in part, then no
dividend shall be paid or declared and set apart for payment on the
1999 Preferred Stock unless and until all accrued and unpaid dividends
with respect to the Senior Dividend Stock shall have been paid or
declared and set apart for payment. No dividends shall be paid or
declared and set apart for payment on the 1999 Preferred Stock or on
any capital stock ranking pari passu with the 1999 Preferred Stock in
the payment of dividends (the "Parity Dividend Stock") for any period
unless a pro rata dividend has been, or contemporaneously is, paid or
declared and set apart for payment on the Parity Divided Stock or the
1999 Preferred Stock, as the case may be, so that the amount of
dividends paid or declared and set aside for payment per share on the
1999 Preferred Stock and the Parity Dividend Stock shall in all cases
bear to each other the same ratio that accrued and unpaid dividend per
share on the shares of 1999 Preferred Stock and the Parity Dividend
Stock bear to each other. Notwithstanding the foregoing, the Company
agrees, to the extent that there are funds legally available
therefore, to declare all outstanding Senior Dividend Stock and Party
Dividend Stock as may be necessary to permit the payment of the full
dividends payable with respect to the 1999 Preferred Stock.
(4) Subject to the foregoing provisions, the holders of Common Stock, the
Parity Dividend Stock and each other class of capital stock of the
Company which is junior as to dividends to the 1999 Preferred Stock
shall be entitled to receive, as and when declared by the Board of
Directors out of the remaining assets of the Company legally available
therefor, such dividends (payable in cash, capital shares or
otherwise) as the Board of Directors may from time to time determine.
(5) Any reference to "distribution" contained in this Section II shall not
be deemed to include any distribution made in connection with any
liquidation, dissolution, or winding up of the Company.
III. Liquidation
(1) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, then out of the assets of
the Company before any distribution or payment to the holders of the
Common Stock or any other class of capital stock of the Company
ranking junior as to liquidation preferences to the 1999 Preferred
Stock, but after distribution to and subject to the rights of holders
of capital stock of the Company ranking senior as to liquidation
rights to the 1999 Preferred Stock, the holders of the shares of 1999
Preferred Stock the outstanding shall be paid the Liquidation Value of
the shares of 1999 Preferred Stock then outstanding and such holders
shall be entitled to no other or further distribution.
(2) The Liquidation Value of each share of the 1999 Preferred Stock shall
be $1,000 per share plus the amount of any dividends which have
accrued thereon to the close of business on the date of such
liquidation, dissolution or winding up and remain unpaid, whether or
not such dividends have been earned or declared.
(3) After payment in full to the holders of (a) any capital stock ranking
senior as to liquidation rights to the 1999 Preferred Stock, (b) the
1999 Preferred Stock and (c) any class of stock hereafter issued that
ranks on a parity as to liquidation rights with the 1999 Preferred
Stock, of the sums which such holders are entitled to receive in such
case, the remaining assets of the Company shall be distributed among
and paid to the holders of the Common Stock and any other class of
capital stock of the Company ranking junior to the 1999 Preferred
Stock.
(4) If the assets of the Company available for distribution to its
shareholders shall be insufficient to permit payment in full to the
holders of the 1999 Preferred Stock and all other series of preferred
shares ranking equally as to liquidation preferences with the 1999
Preferred Stock of sums which such holders are entitled to receive,
then all of the assets available for distribution to such holders
shall be distributed among and paid to such holders ratably in
proportion to the respective amounts that would be payable per share
if such assets were sufficient to permit payment in full.
(5) The consolidation or merger of the Company with any other corporation
or corporations or a sale of all or substantially all of the assets of
the Company shall not be deemed a liquidation, dissolution or winding
up of the Company within the meaning of this Section III.
IV. Redemption.
(1) If on September 30, 1999 a registration statement under the Act
registering the Common Stock of the Company into which the 1999
Preferred Stock is convertible is not effective, the Company shall, at
the written election of the registered owner of any outstanding shares
of 1999 Preferred Stock received on or before October 31, 1999, redeem
such shares of 1999 Preferred Stock at the redemption price per share
of $1,000 plus any accrued and unpaid dividends thereon, whether or
not declared, to the date of redemption.
(2) The redemption price for any shares of 1999 Preferred Stock to be
redeemed hereunder shall be payable in cash, out of funds legally
available therefore, as soon as practicable after October 31, 1999. If
the Company has insufficient funds legally available to pay the
redemption price of all of the shares of 1999 Preferred Stock tendered
for redemption, the Company shall redeem as many shares as it has
legally available therefore pro rata among the shareholders tendering
1999 Preferred Stock for redemption and shall continue to be obligated
to redeem the remaining shares tendered for redemption when and as
funds become legally available therefore, subject to the right of any
tendering shareholder to withdraw its election to have such shares
redeemed. Any election to have any shares of 1999 Preferred Stock
redeemed pursuant hereto shall be accompanied with the certificates
representing the shares being tendered for redemption.
(3) At the option of the Company, at any time after March 1, 2003, the
shares of the 1999 Preferred Stock may be redeemed by the Company, in
whole or in part, at any time, at a redemption price of $1,000 per
share, plus any accrued and unpaid dividends thereon, whether or not
declared, to the date of redemption, if the holders of the shares to
be redeemed are given at least thirty (30) days notice of such
redemption in writing.
V. Voting Rights.
The holders of the 1999 Preferred Stock shall have no voting rights except
as required by law.
VI. Conversion: Anti-dilution Provisions.
(1) Subject to the provisions of this Section VI, each share of 1999
Preferred Stock may be converted, at the option of the holder thereof
at any time on or after October 1, 1999 and prior to March 1, 2003,
into fully paid and non-assessable shares of Common Stock of the
Company, in the manner and upon the terms and conditions hereinafter
set forth in paragraphs (2) and (3) of this Section VI.
(2) The holder of each share of 1999 Preferred Stock may convert such
share of 1999 Preferred Stock into the number of shares of Common
Stock determined by dividing $1,000, by $ 0.25 (the "Conversion
Price").
(3) In order to convert the 1999 Preferred Stock into Common Stock, the
holder thereof shall surrender at the principal office of the Company
(or at such other place as the Board of Directors of the Corporation
shall have reasonably designated for the purpose) the certificate or
certificates for such 1999 Preferred Stock properly endorsed in blank
for transfer or accompanied by a proper instrument of assignment or
transfer in blank, together with a written request for conversion
stating the name or names in which such holder wishes the certificate
or certificates for such Common Stock to be issued and, if the
certificate or certificates are to be issued in a name or names other
than such holder, payment by such holder of all applicable transfer
taxes. The Company shall, as soon as practicable thereafter, issue and
deliver to such holder, or to the nominee or nominees of such holder,
a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. The 1999
Preferred Stock shall be deemed to be converted, and the person or
persons in whose name or names any certificate or certificates for
Common Stock shall be issuable upon such conversion shall be deemed to
have become for all purposes a holder or holders of record of such
Common Stock, at the close of business on the date upon which the
Company receives the written request for conversion covering such
shares (which may be delivered by facsimile transmission). The Company
will pay all issue taxes, if any, incurred upon the issue of Common
Stock upon conversion of the 1999 Preferred Stock, provided that the
Company will not pay any transfer or other taxes incurred by reason of
the issue of such Common Stock in a name or names other than that in
which such 1999 Preferred Stock so converted were registered. No
fractional shares shall be issued upon conversion, and the Company
shall pay cash in lieu of issuing fractional shares based upon the
closing bid price or other fair market value as determined by the
Board of Directors of one share of Common Stock on the business day
immediately preceding the date of conversion. If more than one
certificate representing shares of 1999 Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number
of full shares issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of 1999 Preferred Stock
represented by such certificates, or the specified portions thereof to
be converted, so surrendered. All 1999 Preferred Stock which shall
have been converted as provided in this Section VI shall no longer be
deemed to be outstanding and all rights with respect to such 1999
Preferred Stock shall forthwith cease and terminate except for the
right of the holders thereof to receive Common Stock. Any 1999
Preferred Stock surrendered for conversion shall be cancelled, retired
and thereafter not reissued.
(4) (A) If at any time or from time to time after the date of issuance of
1999 Preferred Stock, the Company determines to distribute to the
holders of the Common Stock (i) securities other than Common Stock, or
(ii) property other than cash, without payment therefor, then, in each
such case, the Company shall provide written notice to each holder of
the 1999 Preferred Stock at least 30 days prior to the effective date
of any such distribution. During such 30 day period, the holder of the
1999 Preferred Stock may, at its election, convert the 1999 Preferred
Stock into Common Stock of the Company and, if so converted, the
holders shall be entitled to receive such securities or property,
other than cash, which are distributable upon the Common Stock of the
Company at the effective date.
(B) In case the Company shall, after the date of issuance of any 1999
Preferred Stock, (i) pay a dividend or make a distribution on its
capital shares in Common Stock in capital stock or securities
convertible into capital stock, (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares (a stock split), (iii)
combine its outstanding shares of Common Stock into a smaller number
of shares (a reverse stock split), or (iv) issue by reclassification
of its Common Stock any shares of capital stock of the Company, the
number of shares of Common Stock into which the 1999 Preferred Stock
may be converted in effect immediately prior thereto shall be adjusted
so that the holder of any 1999 Preferred Stock surrendered for
conversion immediately thereafter would be entitled to receive the
number of shares of Common Stock or other capital shares of the
Company which he would have owned immediately following such action
had such 1999 Preferred Stock been converted immediately prior
thereto. An adjustment made pursuant to this subsection shall become
effective immediately after the record date of such action. If, as a
result of an adjustment made pursuant to this subsection, the holder
of any 1999 Preferred Stock thereafter surrendered for conversion
shall become entitled to receive two or more classes of capital shares
of the Company, the Board of Directors shall determine the allocation
of the adjustment between or among such classes of capital shares.
(C) Whenever the number of shares of Common Stock into which the 1999
Preferred Stock may be converted is adjusted as provided in this
Section VI and upon any modification of the rights of a holder of 1999
Preferred Stock in accordance with this Section VI, the Company shall
promptly mail to the holders of the 1999 Preferred Stock a certificate
of the Secretary of the Company setting forth the number of shares of
Common Stock into which the 1999 Preferred Stock is convertible after
such adjustment or the effect of such modification, a brief statement
of the facts requiring such adjustment or modification and the manner
of computing such adjustment or modification.
(D) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to
another entity of the property of the Company as an entirety or
substantially as an entirety, or in the case of any statutory exchange
of securities with another corporation (including any exchange
effected in connection with a merger of a third corporation into the
Company), the holders of 1999 Preferred Stock shall have the right
thereafter to convert such 1999 Preferred Stock into the kind and
amount of securities, cash or other property which such holders would
have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale or conveyance had such
1999 Preferred Stock been converted immediately prior to the effective
date of such consolidation, merger, statutory exchange, sale or
conveyance, and effective provision shall be made in the Articles of
Incorporation of the resulting or surviving corporation or otherwise
so that the provisions set forth in this paragraph (D) of Section VI
for the protection of the conversion rights of the 1999 Preferred
Stock shall thereafter be applicable, as nearly as reasonably may be,
to any such shares and other securities and property deliverable upon
conversion of the 1999 Preferred Stock remaining outstanding or other
convertible securities received by the holders in place thereof, and
any such resulting or surviving corporation shall expressly assume the
obligation to deliver, upon the exercise of the conversion privilege,
such shares, securities or property as the holders of the 1999
Preferred Stock, or other convertible securities receive in place
thereof, shall be entitled to receive pursuant to the provisions
hereof, and to make provisions for the protection of the conversion
right as above provided. The provisions of this subsection (D) shall
similarly apply to successive consolidation, merger, statutory
exchanges, sales or conveyances. Notice of any such consolidations,
mergers, statutory exchanges, sales or conveyances and of said
provisions so proposed to be made, shall be mailed to the holders of
1999 Preferred Stock not less than 30 days prior to such event. A sale
of all or substantially all of the assets of the Company for
consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(5) The Company shall at all times after October 1, 1999 reserve and keep
available out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of 1999 Convertible Preferred Stork,
the number of shares of Common Stock from time to time issuable upon the
conversion of 1999 Preferred Stock then outstanding and shall take all such
action and obtain all such permits or orders as may be necessary to enable
the Company lawfully to issue Common Stock upon the conversion of 1999
Preferred Stock. In addition, the Company shall also reserve and keep
available such other securities and property as may from time to time be
deliverable upon conversion of the 1999 Preferred Stock and shall take all
such action and obtain all such permits or orders as may be necessary to
enable the Company lawfully to deliver such other securities and property
upon the conversion of such 1999 Preferred Stock. So long as any 1999
Preferred Stock shall be outstanding, the Company will use its best efforts
to take all corporate action necessary in order that the Company may
validly and lawfully issue fully paid and non-assessable Common Stock upon
conversion of the 1999 Preferred Stock, including, without limitation, the
calling of a special shareholders meeting for the purpose of increasing the
number of authorized but unissued shares of Common Stock of the Company as
may be necessary."
4. The amendment contained in these Articles of Amendment to Articles of
Incorporation was duly adopted by the board of directors of the Corporation
pursuant to Section 7-106-102 of the Colorado Business Corporation Act.
IN WITNESS WHEREOF, MEDIX RESOURCES, INC. has caused these Articles of
Amendment to Articles of Incorporation to be signed by its President and Chief
Executive Officer, effective as of the date of filing with the Secretary of
State of the State of Colorado.
MEDIX RESOURCES, INC.
By: /s/ John P. Yeros
John P. Yeros
President and Chief Executive Officer
[FILED WITH COLORADO SECRETARY OF STATE ON APRIL 21,1999]
Neither these Warrants nor the shares of Common Stock issuable on exercise of
these Warrants have been registered under the Securities Act of 1933, as amended
(the "Act") or applicable state securities laws. None of such securities may be
sold, assigned, pledged, transferred or otherwise disposed of in the absence of
registration under the Act and registration or qualification under applicable
state securities laws, or an opinion of counsel acceptable to the Company to the
effect that such registrations or qualifications are not required.
MEDIX RESOURCES, INC.
1999 UNIT WARRANT CERTIFICATE
DATE ISSUED: ________, 1999
Number of Warrants (and Shares): ________
Holder: ___________
Address: ____________
Telephone number: _____________
THIS CERTIFIES THAT the holder of this Certificate named above ("Holder") is
entitled to purchase from MEDIX RESOURCES, INC., a Colorado corporation
(hereinafter called the "Company"), on or after October 1, 1999 and prior to
October 1, 2000, at $1.00 per share, the number of shares of the Company's
common stock set forth above ("Common Stock"). The Warrants and all rights
thereunder shall expire on October 1, 2000. However, if the closing or last
price of the Common Stock as reported on the OTC Bulletin Board or other
recognized quotation system is $3.00 or above for five consecutive trading days
after October 1, 1999, the Company, at its option, may upon thirty (30) days
prior notice to the Holder, re-purchase the Warrants from the Holder, at a
re-purchase price of $.01 per Warrant, if they are not exercised within such
30-day period or prior to the end of the three-year exercise period of the
Warrants, whichever is shorter. The further terms and conditions of the Warrants
are as follows:
1. These Warrants and the Common Stock issuable on exercise of these Warrants
(the "Underlying Shares") may be transferred, sold, assigned or
hypothecated, only if registered by the Company under the Securities Act of
1933 (the "Act") and registered or qualified under any applicable state
securities laws, or if the Company has received from counsel to the Holder
who is reasonably satisfactory to the Company a written opinion which is
reasonably satisfactory to the Company to the effect that registration of
the Warrants or the Underlying Shares is not necessary in connection with
such transfer, sale, assignment or hypothecation. Certificates evidencing
the Warrants and the Underlying Shares shall be appropriately legended to
reflect this restriction and stop transfer instructions shall apply.
2. Any permitted assignment of any Warrants shall be effected by the Holder by
(i) executing a form of assignment in the form furnished by the Company,
(ii) surrendering the Warrant Certificate for cancellation at the principal
executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder),
accompanied by the opinion of counsel referred to above, and (iii) unless
in connection with an effective registration statement which covers the
sale of the Warrants and or the Underlying Shares, delivery to the Company
of a statement by the transferee (in a form acceptable to the Company and
its counsel) that such Warrants are being acquired by the transferee for
investment and not with a view to its distribution or resale, whereupon the
Company shall issue, in the name or names specified by the Holder
(including the Holder) new Warrant Certificates representing in the
aggregate rights to purchase the same number of Shares as are purchasable
under the Warrant Certificate surrendered. Such Warrants shall be
exercisable immediately upon any such assignment of the number of Warrants
assigned. The transferor will pay all relevant transfer taxes. Replacement
Warrant Certificates shall bear the same legend as is borne by this
Certificate
3. The term "Holder" should be deemed to include any permitted record
transferee of this Warrant.
4. The Company covenants and agrees that all shares of Common Stock which may
be issued upon exercise hereof will, upon issuance, be duly and validly
issued, fully paid and non-assessable and no personal liability will attach
to the holder thereof. The Company farther covenants and agrees that, other
than as disclosed to the Holder at the time of its purchase of the
Warrants, during the periods within which this Warrant may be exercised,
the Company will at all times have authorized and reserved a sufficient
number of shares of Common Stock for issuance upon exercise of the
Warrants.
5. The Warrants shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.
6. In the event that as a result of reorganization, merger, consolidation,
liquidation, recapitalization, stock split, combination of shares or stock
dividends payable with respect to such Common Stock, the outstanding shares
of Common Stock of the Company are at any time increased or decreased or
changed into or exchanged for a different number or kind of share or other
security of the Company or of another corporation, then appropriate
adjustments in the number and kind of such securities then subject to the
Warrants and/or the exercise price of the Warrants shall be made effective
as of the date of such occurrence so that both the position of the Holder
upon exercise and the total exercise price payable on such exercise will be
the same as they would have been had Holder owned immediately prior to the
occurrence of such events the Common Stock subject to the Warrants. Such
adjustment shall be made successively whenever any event listed above shall
occur and the Company will notify the Holder of the Warrants of each such
adjustment. Any fraction of a share resulting from any adjustment shall be
eliminated and the price per share of the remaining shares subject to the
Warrants adjusted accordingly.
7. The rights represented by this Warrant Certificate may be exercised at any
time within the period above specified by (i) surrender of this Warrant
Certificate at the principal executive office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to
the Holder), (ii) payment to the Company of the exercise price for the
number of Shares the represented by the Warrants then held by the Holder,
together with any applicable stock transfer taxes, and (iii) unless in
connection with an effective registration statement which covers the sale
of Underlying Shares, the delivery to the Company of a statement by the
Holder (in a form acceptable to Company and its counsel) that such
Underlying Shares are being acquired by the Holder for investment and not
with a view to their distribution or resale.
The certificates for the Common Stock so purchased shall be delivered to the
Holder within a reasonable time, not exceeding three business days after all
requisite documentation has been provided, after the rights represented by this
Warrant Certificate shall have been so exercised, and shall bear a restrictive
legend with respect to any applicable securities laws.
8. This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Colorado. The Colorado courts shall have
exclusive jurisdiction over this instrument and the enforcement thereof.
Service of process shall be effective if by certified mail, return receipt
requested. All notices shall be in writing and shall be deemed given upon
receipt by the party to whom addressed. This instrument shall be
enforceable by decrees of specific performances well as other remedies.
IN WITNESS WHEREOF, MEDIX REOSURCES, INC. has caused this Warrant
Certificate to be signed by a duly authorized officer, and to
completed and dated as of the date first written above.
MEDIX RESOURCES, INC.
By: ___________________
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-END> MAR-28-1999
<CASH> 2,000
<SECURITIES> 0
<RECEIVABLES> 2,399,000
<ALLOWANCES> 509,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,005,000
<PP&E> 584,000
<DEPRECIATION> 384,000
<TOTAL-ASSETS> 4,340,000
<CURRENT-LIABILITIES> 4,930,000
<BONDS> 0
0
0
<COMMON> 22,000
<OTHER-SE> (612,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,340,000
<SALES> 3,100,000
<TOTAL-REVENUES> 3,100,000
<CGS> 2,487,000
<TOTAL-COSTS> 2,487,000
<OTHER-EXPENSES> 1,110,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118,000
<INCOME-PRETAX> (595,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (595,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (595,000)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
