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 30, 2000
[ ] 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 August 1, 2000.
Common Stock, $0.001 par value 44,476,945
------------------------------ ----------------
Class Number of Shares
<PAGE>
MEDIX RESOURCES, INC.
INDEX
PART I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 2000 (Unaudited) and
December 31, 1999.................................................2
Unaudited Consolidated Statements of Operations -- For the Six
Months Ended June 30, 2000 and June 27, 1999......................3
Unaudited Consolidated Statements of Cash Flows -- For the Six
Months Ended June 30, 2000 and June 27, 1999......................4
Notes to Unaudited Consolidated Financial Statements...............5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................11
PART II. Other Information
-----------------
SIGNATURES...........................................................20
Index to Exhibits....................................................20
<PAGE>
MEDIX RESOURCES, INC.
Consolidated Balance Sheets
June 30, December 31,
2000 1999
------------- -------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 3,703,000 $ 1,229,000
Accounts receivable, net 187,000 35,000
Notes receivable 500,000 -
Prepaid expenses and other 151,000 176,000
Assets of discontinued
operations 73,000 1,057,000
------------- -------------
Total current assets 4,614,000 2,497,000
Property and equipment, net 322,000 115,000
Intangible assets, net 3,163,000 2,017,000
------------- -------------
Total assets $ 8,099,000 $ 4,629,000
============= =============
Liabilities and Stockholders' Deficit
Current liabilities
Notes payable 27,000 84,000
Line-of-credit - 484,000
Accounts payable 297,000 257,000
Accrued expenses 704,000 504,000
Accrued payroll tax,
interest and penalty 517,000 502,000
Liabilities of discontinued
operations - 22,000
------------- -------------
Total current liabilities 1,545,000 1,853,000
Note Payable - 400,000
------------- -------------
Total liabilities 1,545,000 2,253,000
Stockholders' equity
1996 Preferred stock, 10%
cumulative convertible, $1 par
value, 488 shares authorized,
155 issued, 1.00 share and 1.00
share outstanding. - -
1997 Convertible preferred stock,
$1 par value, 300 shares
authorized, 167.15 shares issued,
zero and 5.00 shares outstanding. - -
1999 Series A convertible
preferred stock, $1 par value,
300 shares authorized, 300 shares
issued, 100 shares and 185
outstanding. - -
1999 Series B convertible preferred
stock, $1 par value, 2,000 shares
authorized, 1,832 shares issued,
50 and 817 shares outstanding. - 1,000
1999 Series C convertible preferred
stock, $1 par value, 2,000 shares
authorized, 1,995 shares issued,
1,000 and 1995 shares outstanding. 1,000 2,000
Common stock, $.001 par value,
100,000,000 authorized, 44,425,945
and 27,642,691 issued and
outstanding. 44,000 27,000
Dividends payable with common stock 5,000 25,000
Additional paid-in capital 26,692,000 20,329,000
Accumulated deficit (20,188,000) (18,008,000)
------------- -------------
Total stockholders' equity 6,554,000 2,376,000
------------- -------------
Total liabilities and
stockholders' equity $ 8,099,000 $ 4,629,000
============= =============
-2-
<PAGE>
MEDIX RESOURCES, INC.
Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
June 30, June 27, June 30, June 27,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 126,000 $ - $ 190,000 $ -
Direct costs of services 20,000 1,000 23,000 3,000
------------- ------------- ------------- -------------
Gross margin 106,000 (1,000) 167,000 (3,000)
Selling, general and
administrative expenses 2,011,000 421,000 3,065,000 803,000
------------- ------------- ------------- -------------
Net loss from operations (1,905,000) (422,000) (2,898,000) (806,000)
Other income (56,000) - (88,000) -
Interest expense - 26,000 20,000 49,000
------------- ------------- ------------- -------------
Net loss from continuing
operations $ (1,849,000) $ (448,000) $ (2,830,000) $ (855,000)
------------- ------------- ------------- -------------
Net gain (loss) from
discontinued operations - (156,000) 650,000 (344,000)
------------- ------------- ------------- -------------
Net loss $ (1,849,000) $ (604,000) $ (2,180,000) $ (1,199,000)
============= ============= ============= =============
Net loss per common
share - continuing
operations $ (.04) $ (.02) $ (.08) $ (.04)
============= ============= ============= =============
Net income (loss) per
common share -
discontinued operations $ - $ (.01) $ .02 $ (.02)
============= ============= ============= =============
Net Loss per common
share - (Note 10) $ (.04) $ (.03) $ (.06) $ (.06)
============= ============= ============== =============
Weighted average shares
outstanding 41,585,464 22,410,332 37,086,910 21,973,581
============= ============= ============= =============
</TABLE>
-3-
<PAGE>
MEDIX RESOURCES, INC.
Unaudited Consolidated Statements of Cash Flows
For the Six Months Ended
June 30, 2000 and June 27, 1999
------------------------------------
2000 1999
------------ ------------
Cash flows from operating
activities
Net loss $ (2,080,000) $ (1,199,000)
Adjustment to reconcile
net income (loss) to net
cash flows (used in)
provided by operating
activities
Gain on sale of
staffing business (823,000) -
Depreciation and
amortization 132,000 121,000
Gain on sale of
property and
equipment - (2,000)
Options and warrants
issued for litigation
in settlement and
service respectively 137,000 125,000
Net changes in
current assets and
current liabilities 579,000 (813,000)
------------ ------------
Net cash flows
(used in) provided
by operating
activities (2,055,000) (1,768,000)
------------ ------------
Cash flows from investing
activities
Proceeds from the
disposal of staffing
business 500,000 -
Proceeds from sale of
property and
equipment - 2,000
Purchase of property
and equipment (333,000) (54,000)
Purchase of software
license (350,000) -
Proceeds from notes
receivable - 563,000
Business acquisition
costs, net of cash
acquired (94,000) -
------------ ------------
Net cash flows
(used in) investing
activities (277,000) 511,000
------------ ------------
Cash flows from financing
activities
Advances (payments)
under financing
agreement, net (484,000) 232,000
Payments on capital
leases and debt (57,000) (279,000)
Net proceeds form
exercise of options
and warrants 5,347,000 26,000
Net proceeds from
issuance of
preferred stock - 1,255,000
------------ ------------
Net cash flows
provided by
(used in) financing
activities 4,806,000 1,234,000
------------ ------------
Net decrease in cash
and cash
equivalents 2,474,000 (23,000)
Cash and cash
equivalents, at
beginning of period 1,229,000 40,000
------------ ------------
Cash and cash
equivalents, at end of
period $ 3,703,000 $ 17,000
============ ============
Non-cash and investing and financing activities for the six months ended
June 30, 2000:
Conversion of Preferred Stock into Common Stock (Note 5)
Conversion of $400,000 note payable into 800,000 shares of common stock.
Disposal of staffing business (Note 3).
$400,000 accrued liability for the purchase of a license (Note 7).
Acquisition of the assets and assumption of certain liabilities, of a
business from a related party (Note 4).
Non-cash investing and financing activities for the six months ended
June 27, 1999:
Issuance of 686,371 shares of common stock for a $250,000 reduction in
preferred redemption payable.
Issuance of 375,848 shares of common stock for conversion of 2 units of
1996 preferred stock, 7.5 units of 1997 Preferred stock and accrued
dividends of $5,000.
450,000 options to purchase common stock valued at approximately $100,000
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 $4,000.
-4-
<PAGE>
MEDIX RESOURCES, INC.
Notes to Financial Statements
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 unaudited
consolidated financial statements as of June 30, 2000 have been derived from
audited financial statements. The unaudited consolidated financial statements
contained herein 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 31, 1999. The results of operations for the six months ended June 30,
2000 are not necessarily indicative of the results for the entire fiscal year
ending December 31, 2000.
2. INTANGIBLE ASSETS
--------------------------
Intangible assets consist of the following:
June 30, 2000
-------------
Goodwill acquired through the
Cymedix acquisition. $ 1,938,200
Goodwill acquired through the
Automated Design Concepts, Inc.
acquisition. (Note 4) $ 474,800
License agreement with ZirMed.com.
(Note 7) $ 750,000
=============
Net Intangible Assets $ 3,163,000
3. DISPOSITION OF STAFFING BUSINESS SEGMENT
-----------------------------------------------
In February of 2000, the Company closed on the sale of the assets of
its remaining staffing businesses for $1,000,000. The purchase price was paid
with $500,000 cash at closing and the Company receiving a $500,000 subordinated
note receivable. The note provides for interest at prime plus 1% and is due in
May of 2001. This sale was the final step of a plan approved by the board of
directors in December 1999 for the Company to divest itself of the staffing
businesses and focus its efforts on its Internet communication software products
for the healthcare industry.
The accompanying unaudited financial statements reflect the results of
operations of the staffing businesses as a discontinued business segment. The
discontinued results of operations include those direct revenues and expenses
associated with running the staffing businesses as well as an allocation of
corporate costs.
-5-
<PAGE>
MEDIX RESOURCES, INC.
Notes to Financial Statements
The results of operations of the Company's discontinued staffing
businesses for the six months ended June 30, 2000 and June 27, 1999 are as
follows:
June 30, 2000 June 27, 1999
------------- -------------
Revenue $ 1,128,000 $ 6,104,000
Direct costs of services 927,000 4,810,000
------------- -------------
Gross margin 201,000 1,294,000
------------- -------------
Selling, general and
administrative expenses 219,000 1,474,000
Interest expense 18,000 164,000
Litigation settlement 137,000 -
------------- -------------
Net loss $ (173,000) $ (344,000)
============= =============
Also reflected in the accompanying unaudited balance sheet at June 30,
2000 are the following assets related to the Company's discontinued staffing
business segment which were not acquired by the purchaser.
Current assets
Accounts receivable, net of
$155,000 allowance $ 65,000
Prepaid expenses and other 8,000
-------------
Total current assets $ 73,000
=============
During the first quarter of 2000, the Company reported the following gain on the
disposal of the assets of its staffing business:
Sales price $ 1,000,000
Accounts receivable collection
costs (100,000)
-------------
900,000
Assets acquired
Property and equipment (85,000)
Deposits (14,000)
Liabilities assumed
Accounts payable 3,000
Accrued liabilities 19,000
-------------
Gain on disposal of staffing
businesses 823,000
Loss from operation of staffing
business through disposal date (173,000)
-------------
Net gain on disposal of staffing
businesses $ 650,000
=============
-6-
<PAGE>
MEDIX RESOURCES, INC.
Notes to Financial Statements
4. ACQUISITION OF ASSETS
-------------------------------
In March of 2000 the Company acquired the assets and assumed certain
liabilities of Automated Design Concepts, Inc., an entity owned by a director of
the Company. To finance the acquisition the Company issued 60,400 shares of
common stock valued at $374,000 and paid $100,000. The Company also entered into
a two-year lease for $1,000 per month expiring in February 2002. The acquisition
has been accounted for as a purchase, with the following allocation to the
assets acquired and liabilities assumed:
Cash $ 6,000
Accounts receivable 27,000
Goodwill 487,000
Accounts payable (41,000)
Accrued liabilities (5,000)
--------------
Total purchase price $ 474,000
==============
The results of operations have been reflected from the date of
acquisition forward. The resulting goodwill is being amortized over 15 years.
5. EQUITY TRANSACTIONS
----------------------------
During the second quarter of 2000, 15 shares of the 1999 Series B
preferred stock, and 995 shares of the 1999 Series C preferred stock were
converted into 30,000 and 1,990,000 shares of common stock, respectively.
Additionally, the Company received proceeds of $3,233,000 from the
exercise of stock options and warrants resulting in the issuance of 7,063,634
shares of common stock.
6. STOCK OPTIONS
----------------------
In May 2000, the Company granted options to purchase 10,000 shares at
an exercise price of $2.50 per share to one employee of the Company, under the
Company's 1999 Stock Option Plan.
In May 2000, the Company entered into a consulting agreement, which
obligates the Company to issue a Warrant to the consultant which gives the
consultant rights to purchase up to 60,000 shares of the Company's common stock
at an exercise price of $2.50 per share for a two-year period ending in May
2002. These rights to purchase common stock vest in accordance with the
following schedule: rights to purchase 20,000 shares vested on the date the
agreement was entered into, and rights to purchase 10,000 shares vested or vest
on each of June 1, July 1, August 1, and September 1, 2000, if the agreement has
not been terminated before such date by either party. Either party can terminate
the agreement at any time.
-7-
<PAGE>
MEDIX RESOURCES, INC.
Notes to Financial Statements
In June 2000, the Company granted options to purchase 50,000 shares at
an exercise price of $2.25 per share to one employee of the Company, under the
Company's 1999 Stock Option Plan.
In July 2000, the Company granted options to purchase 15,000 shares at
an exercise price of $2.31 per share to one employee of the Company, under the
Company's 1999 Stock Option Plan.
7. LICENSING AGREEMENT
----------------------------
During June, 2000, the Company signed a perpetual license agreement
with a company for it's source code for Web-based claims submission. As of June
30, 2000, the Company had paid $350,000 of the $750,000 licensing fee, with the
remaining $400,000 to be paid over the next four months of 2000, and will pay
nominal annual royalties for the software license.
8. LEGAL PROCEEDINGS
--------------------------
On November 12, 1999, an action was filed in California Superior Court,
which has since been removed to the U. S. District Court, Central District of
California, against Medix Resources, Inc. and its wholly owned subsidiary,
Cymedix Lynx Corporation under the caption Leslie Wolf v. Medix Resources, Inc.,
Cymedix Lynx Corporation, John Yeros, Bill Lyons (CV 00-703 MMM), alleging,
among other things, gender discrimination, breach of contract and wrongful
termination. Plaintiff is seeking damages of $2,000,000 in commissions, plus
lost wages and other benefits and stock options in an indeterminate amount.
Management does not believe plaintiff's claims have any merit and intends to
vigorously defend this action. Our attorneys filed a motion to dismiss the
action, and on May 22, 2000, the Court ruled in favor of plaintiff on most of
such motion to dismiss, however, our motion was successful against two of
plaintiffs causes of action. We are now in the discovery stage of the proceeding
with trial scheduled for March of 2001. Management does not expect any
resolution of this matter to have a material adverse effect on our financial
condition.
On June 1, 2000, an action was filed in the District Court of the City
and County of Denver, Colorado, against Medix Resources, Inc., and its
wholly-owned subsidiary, Cymedix Lynx Corporation, under the caption Michael J.
Ruxin v. Cymedix Lynx Corporation, and Medix Resources, Inc. (Case No.00CV2997),
alleging that a predecessor company of Cymedix Lynx Corporation had promised to
issue stock options to the plaintiff but had failed to honor that promise.
Plaintiff is claiming the right receive an option to purchase 90,000 shares of
Medix common stock at approximately $0.44 per share. Plaintiff seeks damages in
an amount to be determined at trial, plus prejudgment interest, costs, including
attorney's fees, and such further relief as the Court deems just and proper.
Management does not believe that plaintiff's claims have any merit and intends
to vigorously defend this action. Management does not expect any resolution of
this matter to have a material adverse effect on our financial condition.
-8-
<PAGE>
MEDIX RESOURCES, INC.
Notes to Financial Statements
On July 11, 2000, an action was filed in the United States District
Court, Southern District of New York, against Medix Resources, Inc., under the
caption Guli R. Rajani v. Medix Resources, Inc. (00CIV. 5061), alleging that the
Company granted to plaintiff the right to purchase preferred stock convertible
into the Company's common stock and warrants to purchase the Company's common
stock in connection with the Company's private financings during 1999, and then
failed to permit plaintiff to purchase shares in those financings. Plaintiff
seeks damages of $12,600,000, plus interest thereon, alleging that such damages
resulted from the Company's failure to let him purchase
securities in the private offerings. Management believes plaintiff's claims to
be frivolous and totally without merit and intends to vigorously defend this
action. Management does not expect any resolution of this matter to have a
material adverse effect on our financial condition.
From time to time, the Company is involved in claims and litigation
that arise out of the normal course of business. Currently, other than as
discussed above, there are no pending matters that in Management's judgment
might be considered potentially material to us. Management does not believe that
any of the litigation described above will have a material adverse effect on the
Company.
9. RELATED PARTY TRANSACTION
-----------------------------------
During the six month period ended June 30, 2000, the Company had paid
approximately $179,000 to a related party for services. The president of the
Company has an ownership interest in the related party.
10. LOSS PER SHARE
-----------------------
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. The Company recorded additional
dividends to preferred stockholders of approximately $285,000 and $288,000 for
the three and six months ended June 27, 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.
-9-
<PAGE>
MEDIX RESOURCES, INC.
Notes to Financial Statements
Loss per share applicable to common stockholders is calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ -----------------------------
June 30, June 27, June 30, June 27,
2000 1999 2000 1999
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net loss $ (1,849,000) $ (604,000) $(2,180,000) $(1,199,000)
Preferred stock dividends
- stated rate - (2,000) (4,000)
Preferred stock dividends
- imputed discount - (285,000) - (288,000)
------------ ------------ ----------- -----------
Net loss applicable to
common stockholders $ (1,849,000) $ (891,000) $(2,180,000) $(1,491,000)
============ ============ =========== ===========
Basic loss per common share $ (.04) $ (.04) $ (.06) $ (.07)
============ ============ =========== ===========
Weighted average shares
outstanding 41,585,464 22,410,332 37,086,910 21,973,581
============ ============ =========== ===========
</TABLE>
-10-
<PAGE>
MEDIX RESOURCES, INC.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
--------
We are an information technology company headquartered in Denver,
Colorado, with offices in Thousand Oaks, California, East Brunswick, New Jersey,
Atlanta, Georgia, and New York City. We specialize in the development, marketing
and management of software and connectivity solutions for clinical and business
transactions within the healthcare industry. Through our wholly owned
subsidiary, Cymedix Lynx Corporation, a Colorado corporation, we have developed
Cymedix.com(R), a unique healthcare communication technology product.
Cymedix.com(R) provides instantaneous access to patient clinical, financial and
administrative information. Its software also supplies healthcare institutions,
such as health plans, insurers and hospitals, as well as practicing physicians
with a set of non-invasive technology tools that can be attached to their
existing software applications and provide Internet-enabled transaction
capability between all parties.
Implementation of the Cymedix.com(R) software suite promises to speed
and improve the efficacy of daily interactions between health caregivers and
their staffs, other ancillary providers (such as labs or pharmacy benefit
managers), insurance companies, hospitals, Integrated Delivery Networks (IDNs)
and Health Management Organizations (HMOs). We believe that the market for
robust and practical healthcare solutions is growing rapidly, and that segment
growth will continue to accelerate as the joined emphases of consumer choice,
quality, administrative service and cost containment ratchets up demand for ever
more efficient and user-friendly methods of delivering quality healthcare.
Forward-Looking Statements and Associated Risks
This Report contains forward-looking statements, which mean that such
statements relate to events or transactions that have not yet occurred, our
expectations or estimates for our future operations and economic performance,
our growth strategies or business plans or other events that have not yet
occurred. Such statements can be identified by the use of forward-looking
terminology such as "might," "may," "will," "could," "expect," "anticipate,"
"estimate," "likely," "believe," or "continue" or the negative thereof or other
variations thereon or comparable terminology. The following paragraphs contain
discussions of important factors that should be considered by prospective
investors for their potential impact on forward-looking statements included in
this Report. These important factors, among others, may cause actual results to
differ materially and adversely from the results expressed or implied by the
forward-looking statements.
-11-
<PAGE>
MEDIX RESOURCES, INC.
We have reported net losses of ($4,847,000), ($5,422,000) and ($515,000)
for the years ended December 31, 1999, December 27, 1998 and December 28, 1997.
At June 30, 2000, we had an accumulated deficit of ($20,188,000). We expect to
continue to experience loses, in the near term, as we attempt to develop and
market our Cymedix.com(R) software products. The current operation of our
business and our ability to continue to develop and market our Cymedix.com(R)
software products will depend upon our ability to obtain additional financing.
At present, we are not receiving any significant revenues from the sale of our
Cymedix.com(R) software products. We are attempting to meet our current cash
flow needs by raising capital in the private debt and equity markets and through
the exercise of currently outstanding warrants. The development and marketing of
the Cymedix.com(R) software products require substantial capital investments.
There can be no assurance that additional investments or financings will be
available to us as needed to support the development of Cymedix.com(R) products.
Failure to obtain such capital on a timely basis could result in lost business
opportunities, the sale of the Cymedix.com(R) business at a distressed price or
the financial failure of our company.
Our 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 in 1998. Our company has little
experience in marketing software products, providing software support services,
evaluating demand for products, financing a software business and dealing with
government regulation of software products. While we have recently put together
a team of experienced executives, they have come from different backgrounds and
may require some time to develop an efficient operating structure and corporate
culture for our company. We believe our structure of multiple offices serves our
customers well, but it does present an additional challenge in building our
corporate culture and operating structure.
Our products are still in the development stage and have not yet proven
their effectiveness or their marketability. As a developer of software products,
we will be required to anticipate and adapt to evolving industry standards and
new technological developments. The market for our software products is
characterized by continued and rapid technological advances in both hardware and
software development, requiring ongoing expenditures for research and
development, and 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. Our future success,
if any, will depend in part upon our 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 healthcare
information systems market. We are currently devoting significant resources
toward the development of products. There can be no assurance that we will
successfully complete the development of these products in a timely fashion or
that our current or future products will satisfy the needs of the healthcare
information systems market. Further, there can be no assurance that products or
technologies developed by others will not adversely affect our competitive
position or render our products or technologies noncompetitive or obsolete.
Certain of our products provide applications that relate to patient
medical histories and treatment plans. Any failure by our products to provide
accurate, secure and timely information could result in product liability claims
against us by our clients or their affiliates or patients. We maintain insurance
that we believe is adequate to protect against claims associated with the use of
our products, but there can be no assurance that our insurance coverage would
adequately cover any claim asserted against us. A successful claim brought
against us in excess of our insurance coverage could have a material adverse
effect on our 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.
-12-
<PAGE>
MEDIX RESOURCES, INC.
We have been granted certain patent rights, a trademark and copyrights.
However, patent and intellectual property legal issues for software programs,
such as the Cymedix.com(R) products, are complex and currently evolving. Since
patent applications are secret until patents are issued, in the United States,
or published, in other countries, we cannot be sure that we are first to file
any patent application. In addition, there can be no assurance that competitors,
many of which have far greater resources than we do, will not apply for and
obtain patents that will interfere with our ability to develop or market product
ideas that we have originated. Further, the laws of certain foreign countries do
not provide the protection to intellectual property that is provided in the
United States, and may limit our ability to market our products overseas. We
cannot give any assurance that the scope of the rights we have are broad enough
to fully protect our Cymedix.com(R) software from infringement.
Litigation or regulatory proceedings may be necessary to protect our
intellectual property rights, such as the scope of our patents. In fact, the
computer software industry in general is characterized by substantial
litigation. Such litigation and regulatory proceedings are very expensive and
could be a significant drain on our resources and divert resources from product
development. There is no assurance that we will have the financial resources to
defend our patent rights or other intellectual property from infringement or
claims of invalidity.
We also rely upon unpatented proprietary technology and no assurance
can be given that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to or disclose
our proprietary technology or that we can meaningfully protect our rights in
such unpatented proprietary technology. We will use our best efforts to protect
such information and techniques, however, no assurance can be given that such
efforts will be successful. The failure to protect our intellectual property
could cause us to loose substantial revenues and to fail to reach our financial
potential over the long term.
The healthcare and medical services industry in the United States is in
a period of rapid change and uncertainty. Governmental programs have been
proposed, and some adopted, from time to time, to reform various aspects of the
U.S. healthcare delivery system. Some of these programs contain proposals to
increase government involvement in healthcare, lower reimbursement rates and
otherwise change the operating environment for our customers. We cannot predict
with any certainty what impact, if any, proposals for healthcare reforms might
have on our software business.
As with any business, growth in absolute amounts of selling, general and
administrative expenses or the occurrence of extraordinary events could cause
actual results to vary materially and adversely from the results contemplated by
the forward-looking statements. Budgeting and other management decisions are
subjective in many respects and thus susceptible to incorrect decisions and
periodic revisions based on actual experience and business developments, the
impact of which may cause us to alter our marketing, capital expenditures or
other budgets, which may, in turn, affect our results of operation. 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 our control. Although we believe 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.
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MEDIX RESOURCES, INC.
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 us or any other person that our
objectives or plans for the Company will be achieved.
Results of Operation
Comparison of These Three Months Ended June 30, 2000 and June 27, 1999.
Total revenues for the three months ended June 30, 2000, were $126,000
compared with $0 for the three months ended June 27, 1999. Cymedix.com(R)
currently provides most of our revenues. Cymedix.com(R) first recorded revenue
in November 1999 for pilot program fees.
Selling, general, and administrative expenses increased approximately
$1,590,000 or 270% from $421,000 for the three months ended June 27, 1999, to
$2,011,000 for the three months ended June 30, 2000.
Interest expense decreased approximately 100% from $26,000 for the three
months ended June 27, 1999 to $0 for the three months ended June 30, 2000.
Net loss from continuing operations increased approximately $1,401,000
from $448,000 for the three months ended June 27, 1999, to $1,849,000 for the
three months ended June 30, 2000, due to all of the reasons discussed above.
Results from discontinued operations changed from a loss of $156,000 for
the three months ended June 27, 1999, to $0 for the three months ended June 30,
2000. This change reflects the disposal of the staffing business during
February, 2000.
Net loss increased approximately $1,245,000 from $604,000 for the three
months ended June 27, 1999, to $1,849,000 for the three months ended June 30,
2000, due to the reasons discussed above.
Comparison of six months ended June 30, 2000 and June 27, 1999
The Company generated approximately $190,000 in revenues from
operations for the six months ended June 30, 2000, compared to approximately $0
in revenues for the six months ended June 27, 1999. Cymedix.com(R) currently
provides most of our revenues. Cymedix.com(R) first recorded revenue in
November, 1999 for pilot program fees.
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MEDIX RESOURCES, INC.
Selling, general and administrative expenses increased approximately
$2,261,000 from $803,000 in the first six months of 1999 to $3,065,000 in the
first six months of 2000, due primarily to an increase in Cymedix.com(R) and
Corporate selling, general and administrative expenses.
Interest expense decreased approximately 59% from $49,000 in the first
six months of 1999 to $20,000 in the first six months of 2000. The decrease is
primarily due to a reduction in accrued interest on delinquent payroll taxes and
a reduction in the outstanding line-of-credit balance related to the sale of the
remaining staffing business.
Loss from continuing operations increased $1,975,000 from $855,000 in
the six months ended June 27, 1999 to $2,830,000 in the six months ended June
30, 2000, due primarily to an increase in selling, general and administrative
expenses, at both the Cymedix.com(R) and Corporate levels.
The Company's net loss increased $981,000 from $1,199,000 for the six
months ended June 27, 1999 to $2,180,000 for the six months ended June 30, 2000.
The increase is primarily due to the other factors discussed above, reduced by
the gain in the sale of the remaining staffing business.
Liquidity and Capital Resources
We have $3,703,000 in cash as of June 30, 2000 with net working capital
of $3,069,000 as of June 30, 2000. During the six months ended June 30, 2000,
net cash used in operating activities was $2,059,000. During the six months
ended June 30, 2000, we raised $5,347,000 from the exercise of options and
warrants.
In February of 2000, we sold the assets of our remaining staffing
businesses for $1,000,000. The purchase price was paid with $500,000 cash at
closing and a $500,000 subordinated note which is payable in May 2001.
Subsequent to June 30, 2000 and through August 1, 2000, we received
approximately $500 from the exercise of options and warrants. As of August 1,
2000, we had outstanding 5,726,000 warrants with a total exercise price of
$2,983,000, which are callable for $.01 per warrant upon thirty days written
notice. Currently, we have not provided any written notice to holders that we
will call these warrants. We expect to receive $2,983,000 from the exercise of
these callable warrants over the next several months. However, there can be no
assurance that any of these warrants will be exercised.
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MEDIX RESOURCES, INC.
We expect to continue to experience losses and negative cash flows from
operations, in the near term, as we attempt to develop our Cymedix.com(R)
software products. The current operation of our business and our ability to
continue to develop our Cymedix.com(R) software products will depend upon our
ability to obtain additional financing. At present, we are not receiving any
significant revenues from the sale of our Cymedix.com(R) software products. We
are attempting to meet our current cash flow needs by raising capital in the
private debt and equity markets and through the exercise of currently
outstanding warrants. The development and marketing of the Cymedix.com(R)
software products require substantial capital investments. We believe that we
have adequate cash on hand and available from likely exercise of currently
outstanding options and warrants to fund operations for the year ended December
31, 2000. However, there can be no assurance that additional funding will be
available on terms acceptable to us, or at all.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On November 12, 1999, an action was filed in California Superior Court,
which has since been removed to the U. S. District Court, Central District of
California, against Medix Resources, Inc. and its wholly owned subsidiary,
Cymedix Lynx Corporation under the caption Leslie Wolf v. Medix Resources, Inc.,
Cymedix Lynx Corporation, John Yeros, Bill Lyons (CV 00-703 MMM), alleging,
among other things, gender discrimination, breach of contract and wrongful
termination. Plaintiff is seeking damages of $2,000,000 in commissions, plus
lost wages and other benefits and stock options in an indeterminate amount.
Management does not believe plaintiff's claims have any merit and intends to
vigorously defend this action. Our attorneys filed a motion to dismiss the
action, and on May 22, 2000, the Court ruled in favor of plaintiff on most of
such motion to dismiss, however, our motion was successful against two of
plaintiffs causes of action. We are now in the discovery stage of the proceeding
with trial scheduled for March of 2001. Management does not expect any
resolution of this matter to have a material adverse effect on our financial
condition.
On June 1, 2000, an action was filed in the District Court of the City
and County of Denver, Colorado, against Medix Resources, Inc., and its
wholly-owned subsidiary, Cymedix Lynx Corporation, under the caption Michael J.
Ruxin v. Cymedix Lynx Corporation, and Medix Resources, Inc. (Case No.00CV2997),
alleging that a predecessor company of Cymedix Lynx Corporation had promised to
issue stock options to the plaintiff but had failed to honor that promise.
Plaintiff is claiming the right receive an option to purchase 90,000 shares of
Medix common stock at approximately $0.44 per share. Plaintiff seeks damages in
an amount to be determined at trial, plus prejudgment interest, costs, including
attorney's fees, and such further relief as the Court deems just and proper.
Management does not believe that plaintiff's claims have any merit and intends
to vigorously defend this action. Management does not expect any resolution of
this matter to have a material adverse effect on our financial condition.
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MEDIX RESOURCES, INC.
On July 11, 2000, an action was filed in the United States District
Court, Southern District of New York, against Medix Resources, Inc., under the
caption Guli R. Rajani v. Medix Resources, Inc. (00CIV. 5061), alleging that the
Company granted to plaintiff the right to purchase preferred stock convertible
into the Company's common stock and warrants to purchase the Company's common
stock in connection with the Company's private financings during 1999, and then
failed to permit plaintiff to purchase shares in those financings. Plaintiff
seeks damages of $12,600,000, plus interest thereon, alleging that such damages
resulted from the Company's failure to let him purchase securities in the
private offerings. Management believes plaintiff's claims to be frivolous and
totally without merit and intends to vigorously defend this action. Management
does not expect any resolution of this matter to have a material adverse effect
on our financial condition.
From time to time, the Company is involved in claims and litigation
that arise out of the normal course of business. Currently, other than as
discussed above, there are no pending matters that in Management's judgment
might be considered potentially material to us. Management does not believe that
any of the litigation described above will have a material adverse effect on the
Company.
Item 2. Changes in Securities and Use of Proceeds
Set forth below are the unregistered sales of securities by the Company
for the quarter reported on. See Note 4 to the unaudited consolidated financial
statements elsewhere herein for a description of the terms of the Units of
Preferred Stock and warrants.
<TABLE>
<CAPTION>
No. of Exemption
Security Issued Date Shares Consideration Purchasers Claimed
--------------- -------- --------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Common Stock April 1,880,000 Conversion of Private Investors Section 3(a)(9)
Preferred
Common Stock May 60,000 Conversion of Private Investors Section 3(a)(9)
Preferred
Common Stock June 200,000 Conversion of Private Investors Section 3(a)(9)
Preferred
Common Stock April 3,005,000 $1,601,450 for Private Investors Section 4(2) &
Exercised Regulation D
Warrants
Common Stock May 810,000 $495,000 for Private Investors Section 4(2) &
Exercised Regulation D
Warrants
Common Stock June 469,000 $410,040 for Private Investors Section 4(2) &
Exercised Regulation D
Warrants
</TABLE>
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MEDIX RESOURCES, INC.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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:
1) On April 6, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing certain changes in the
management of the Company and its wholly-owned subsidiary,
Cymedix Lynx Corporation.
2) On April 6, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing the appointment of Michael
Knepper as Senior Vice President of the Company.
3) On April 6, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing the resignation of Dr. Brian
McLean as a Director of the Company.
4) On April 6, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing the extension of a previous
agreement with Loyola University Medical Center.
5) On April 6, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing the appointment of Patricia
Minicucci as Executive Vice President of Operations, and Brian
Ellacott as Senior Vice President and National Director of
Marketing and Sales.
6) On April 6, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing the merger of Cymedix Lynx
Corporation with Automated Design Concepts.
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MEDIX RESOURCES, INC.
7) On April 6, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing shareholder approval for an
increase in the number of authorized common shares.
8) On April 6, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing the signing of an agreement
with Warburg Dillon Read LLC.
9) On April 7, 2000, the Company filed a Form 8-K reporting under
Item 5 two press releases announcing that the Company's
application for listing by the American Stock Exchange (AMEX) had
been approved, and the appointment of a Chairman of the Board of
Directors
10) On April 7, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing fourth quarter and year end
results
11) On April 27, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing the appointment of Joan E.
Herman as a new member of the Company's Board of Directors, and
the resignation of Thomas J. Oberle from the Company's Board of
Directors.
12) On May 4, 2000, the Company filed a From 8-K/A reporting under
Item 2 the required pro forma information in connection with the
disposition of its remaining staffing businesses as described in
Item 2 previously reported on Form 8-K dated February 19, 2000.
13) On June 1, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing increased popularity of the
Company's medical code information web site.
14) On June 1, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing the signing of an option
agreement to acquire ZirMed.com, Inc.
15) On June 1, 2000, the Company filed a Form 8-K reporting under
Item 5 a press release announcing 2000 first quarter results.
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MEDIX RESOURCES, INC.
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 8, 2000
MEDIX RESOURCES, INC.
(Registrant)
/s/ Patricia A. Minicucci
-------------------------
Patricia A. Minicucci
Executive Vice President
(Principal Financial and Accounting Officer)
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MEDIX RESOURCES, INC.
INDEX TO EXHIBITS
27 Financial Data Schedule
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