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 SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-24768
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MEDIX RESOURCES, INC.
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(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
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(Address of principal executive offices) (Zip Code)
(303) 741-2045
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(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 November 10, 2000.
Common Stock, $0.001 par value 46,199,445
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Class Number of Shares
<PAGE>
MEDIX RESOURCES, INC.
INDEX
PART I. Financial Information Page No.
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Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 2000
(Unaudited) and December 31, 1999.......................2
Unaudited Consolidated Statements of Operations -- For
the Three and Nine months Ended September 30, 2000
and September 26, 1999..................................3
Unaudited Consolidated Statements of Cash Flows -- For
the Nine months Ended September 30, 2000 and
September 26, 1999......................................4
Notes to Unaudited Consolidated Financial Statements.....6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................10
PART II. Other Information
SIGNATURES.......................................................19
Index to Exhibits................................................19
<PAGE>
<TABLE>
<CAPTION>
MEDIX RESOURCES, INC.
Consolidated Balance Sheets
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents ......................... $ 2,273,000 $ 1,229,000
Accounts receivable, net .......................... 86,000 35,000
Notes receivable .................................. 500,000 --
Prepaid expenses and other ........................ 102,000 176,000
Assets of discontinued operations ................. 59,000 1,057,000
------------ ------------
Total current assets ......................... 3,020,000 2,497,000
------------ ------------
Software development costs, net ........................ 295,000 --
------------ ------------
Property and equipment, net ............................ 423,000 115,000
------------ ------------
Intangible assets, net ................................. 3,076,000 2,017,000
------------ ------------
Total assets ........................................... $ 6,814,000 $ 4,629,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Notes payable ..................................... $ 8,000 $ 84,000
Line-of-credit .................................... -- 484,000
Accounts payable .................................. 200,000 257,000
Accrued expenses .................................. 418,000 504,000
Accrued payroll tax, interest and penalty ......... 477,000 502,000
Liabilities of discontinued operations ............ -- 22,000
------------ ------------
Total current liabilities .................... 1,103,000 1,853,000
------------ ------------
Note payable ...................................... -- 400,000
------------ ------------
Total liabilities ............................ 1,103,000 2,253,000
------------ ------------
Stockholders' equity
1996 Preferred stock, 10% cumulative convertible,
$1 par value, 488 shares authorized, 155 issued,
1 and 1 share outstanding ........................ -- --
1997 Convertible preferred stock, $1 par value,
300 shares authorized, 167.15 shares issued,
zero and 5 shares outstanding .................... -- --
1999 Series A convertible preferred stock, $1 par
value, 300 shares authorized, 300 shares issued,
zero and 185 shares 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, 875 and 1,995 shares outstanding ......... 1,000 2,000
Common stock, $.001 par value, 100,000,000
authorized, 46,058,945 and 27,642,691 issued
and outstanding .................................. 46,000 27,000
Dividends payable with common stock ............... 5,000 25,000
Additional paid-in capital ........................ 27,127,000 20,329,000
Accumulated deficit ............................... (21,468,000) (18,008,000)
Total stockholders' equity .................. -- --
------------ ------------
5,711,000 2,376,000
------------ ------------
Total liabilities and stockholders' equity ............. $ 6,814,000 $ 4,629,000
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
MEDIX RESOURCES, INC.
Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 26, September 30, September 26,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ................................... $ 104,000 $ -- $ 294,000 $ --
Direct costs of services ................... 73,000 -- 96,000 3,000
------------ ------------ ------------ ------------
Gross margin ............................... 31,000 -- 198,000 (3,000)
------------ ------------ ------------ ------------
Software research and development costs .... 427,000 -- 427,000 --
Selling, general and administrative expenses 1,028,000 480,000 3,993,000 1,283,000
------------ ------------ ------------ ------------
Net loss from operations ................... (1,424,000) (480,000) (4,222,000) (1,286,000)
Other income ............................... (47,000) -- (135,000) --
Interest expense ........................... 3,000 29,000 23,000 78,000
------------ ------------ ------------ ------------
Net loss from continuing operations ........ (1,380,000) (509,000) (4,110,000) (1,364,000)
Net gain (loss) from discontinued
operations ................................ -- (660,000) 650,000 (1,004,000)
------------ ------------ ------------ ------------
Net loss ................................... $ (1,380,000) $ (1,169,000) $ (3,460,000) $ (2,368,000)
============ ============ ============ ============
Net loss per common share-continuing
operations ................................ $ (0.03) $ (0.02) $ (0.10) $ (0.06)
Net income (loss) per common
share-discontinued Operations ............. -- (0.03) 0.02 (0.04)
------------ ------------ ------------ ------------
Net loss per common share-(Note 11) ........ $ (0.03) $ (0.05) $ (0.08) $ (0.10)
============ ============ ============ ============
Weighted average shares outstanding ........ 44,989,209 23,026,176 39,811,424 22,324,446
============ ============ ============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
MEDIX RESOURCES, INC.
Unaudited Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Nine Months ended
September 30, 2000
And September 26, 1999
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2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss .............................................. $(3,460,000) $(2,368,000)
Adjustments 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 ....................... 274,000 182,000
Gain on sale of property and equipment ............... -- (2,000)
Options and warrants issued for settlement of
litigation services, respectively ................... 137,000 417,000
Net changes in current assets and
current liabilities ................................. 535,000 (140,000)
----------- -----------
Net cash flows (used in)
provided by operating ...................... (3,337,000) (1,911,000)
----------- -----------
Cash flows from investing activities
Proceeds from the disposal of staffing business ..... 500,000 --
Proceeds from sale of property and equipment .......... -- 2,000
Software development costs incurred .................. (347,000) --
Purchase of property and equipment .................... (382,000) (63,000)
Purchase of software license .......................... (620,000) --
Proceeds from notes receivable ........................ -- 563,000
Business acquisition costs, net of cash acquired ..... (94,000) --
----------- -----------
Net cash flows (used in) investing activities (943,000) 502,000
----------- -----------
Cash flows from financing activities
Advances (payments) under financing agreement, net ..... (484,000) 94,000
Payments on capital leases and debt .................... (76,000) (289,000)
Net proceeds from exercise of options and warrants ..... 5,884,000 51,000
Net proceeds from issuance of preferred stock .......... -- 1,523,000
----------- -----------
Net cash flows provided by (used in) financing 5,324,000 1,379,000
----------- -----------
Net increase (decrease) in cash and cash equivalents .... 1,044,000 (30,000)
Cash and cash equivalents at beginning of period ........ 1,229,000 40,000
----------- -----------
Cash and cash equivalents at end of period .............. $ 2,273,000 $ 10,000
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
MEDIX RESOURCES, INC.
Unaudited Consolidated Statements of Cash Flows
Non-cash and investing and financing activities for the nine months ended
September 30, 2000: Conversion of preferred stock into common stock (Note
6). Conversion of $400,000 note payable into 800,000 shares of common
stock. Disposal of staffing business (Note 4).
$370,000 accrued liability for the purchase of a license
Acquisition of the assets and assumption of certain liabilities of a
business from a related party (Note 5).
Non-cash and investing and financing activities for the nine months ended
September 26, 1999: Issuance of 1,295,241 shares of common stock for a
$430,000 reduction in preferred redemption payable.
Payable.
Issuance of 813,766 shares of common stock for conversion of 4.5 units of
1996 preferred stock, 14.5 units of 1997 preferred stock and accrued
dividends of $12,000.
1,575,000 options to purchase common stock valued at approximately $392,000
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 $5,000.
See notes to unaudited consolidated financial statements.
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<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 September 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 nine
months ended September 30, 2000 are not necessarily indicative of the results
for the entire fiscal year ending December 31, 2000.
2. SOFTWARE DEVELOPMENT COSTS
The company accounts for costs incurred in the development of
computer software as software research and development costs until technological
feasibility has been established for the product. Costs incurred after
technological feasibility has been established prior to general release to
customers are capitalized and amortized over a three year period .
3. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
Intangible assets consist of the following: September 30, 2000
------------------
<S> <C>
Goodwill acquired through the Cymedix acquisition. $ 1,900,000
Goodwill acquired through the Automated Design
Concepts, Inc. acquisition. (Note 5) 468,000
License agreement with ZirMed.com. (Note 8) 708,000
-----------
$ 3,076,000
===========
</TABLE>
4. 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.
The results of operations of the Company's discontinued staffing
businesses for the nine months ended September 30, 2000 and September 26, 1999
are as follows:
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<PAGE>
MEDIX RESOURCES, INC.
Notes to Financial Statements
September 30, 2000 September 26, 1999
------------------ ------------------
Revenue ................ $ 1,128,000 $ 8,692,000
Direct costs of services 927,000 6,848,000
----------- -----------
Gross margin ........... 201,000 1,844,000
----------- -----------
Selling, general and
administrative expenses 219,000 2,634,000
Interest expense ....... 18,000 214,000
Litigation settlement .. 137,000 --
----------- -----------
Net loss ............... $ (173,000) $(1,004,000)
=========== ===========
Also reflected in the accompanying unaudited balance sheet at
September 30, 2000 are the following assets related to the Company's
discontinued staffing business which were not acquired by the purchaser
Current assets
Accounts receivable, net of $155,000 allowance $ 51,000
Prepaid expenses and other 8,000
------------
Total current assets $ 59,000
============
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 business 823,000
Loss from operation of staffing business through
disposal date (173,000)
------------
Net gain on disposal of staffing business $ 650,000
============
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MEDIX RESOURCES, INC.
Notes to Financial Statements
5. 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.
6. EQUITY TRANSACTIONS
During the third quarter of 2000, 100 shares of the 1999 Series A
preferred stock and 125 shares of the 1999 Series C preferred stock were
converted into 400,000 and 250,000 shares of common stock, respectively.
Additionally, the Company received proceeds of $436,000 from the
exercise of stock options and warrants resulting in the issuance of 983,000
shares of common stock.
7. STOCK OPTIONS
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.
8. LICENSING AGREEMENT
During June, 2000, the Company signed a perpetual license agreement
with a company for its source code for Web-based claims submission. As of
September 30, 2000, the Company had paid $620,000 of the $720,000 licensing fee,
with the remaining $100,000 to be paid during the last quarter of 2000, and will
pay nominal annual royalties for the software license thereafter.
9. LEGAL PROCEEDINGS
See Part II-Other Information, Item 1 Legal Proceedings in this Form
10-QSB.
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<PAGE>
MEDIX RESOURCES, INC.
Notes to Financial Statements
10. RELATED PARTY TRANSACTION
During the nine month period ended September 30, 2000, the Company had
paid approximately $254,000 to a related party for services. The president of
the Company has an ownership interest in the related party.
11. 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 $314,000 and $602,000 for
the three and nine months ended September 26, 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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 26, September 30, September 26,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss ................................. $ (1,380,000) $ (1,169,000) $ (3,460,000) $ (2,368,000)
Preferred stock dividends-stated rate .... -- (1,000) -- (5,000)
Preferred stock dividends-imputed discount -- (314,000) -- (602,000)
------------ ------------ ------------ ------------
Net loss applicable to common stockholders $ (1,380,000) $ (1,484,000) $ (3,460,000) $ (2,975,000)
============ ============ ============ ============
Basic loss per common share .............. $ (0.03) $ (0.06) $ (0.09) $ (0.13)
============ ============ ============ ============
Weighted average shares outstanding ...... 44,989,209 23,026,176 39,811,424 22,324,446
============ ============ ============ ============
</TABLE>
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<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.
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 September 30, 2000, we had an accumulated deficit of ($21,468,000). 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
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<PAGE>
MEDIX RESOURCES, INC.
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.
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<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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<PAGE>
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 September30, 2000 and September 26, 1999
Total revenues for the three months ended September 30, 2000, were
$104,000 compared with $0 for the three months ended September 26, 1999.
Cymedix.com(R) currently provides most of our revenues. Cymedix.com(R) first
recorded revenue in November 1999 for pilot program fees.
Research and development costs increased approximately $427,000 or 100%
from $0 for the three months ended September 26, 1999, to $427,000 for the three
months ended September 30, 2000.
Selling, general, and administrative expenses increased approximately
$548,000 or 114% from $480,000 for the three months ended September 26,1999, to
$1,028,000 for the three months ended September 30, 2000, due primarily to the
expansion nationwide of the Company's strategic sales force, and expansion of
it's New York operations.
Interest expense decreased approximately 90% from $29,000 for the three
months ended September 26, 1999 to $3,000 for the three months ended September
30, 2000.
Net loss from continuing operations increased approximately $944,000
from $480,000 for the three months ended September 26, 1999, to $1,424,000 for
the three months ended September 30, 2000, due to all of the reasons discussed
above.
Results from discontinued operations changed from a loss of $660,000 for
the three months ended September 26, 1999, to $0 for the three months ended
September 30, 2000. This change reflects the disposal of the staffing business
during February, 2000.
Net loss increased approximately $211,000 from $1,169,000 for the three
months ended September 26, 1999, to $1,380,000 for the three months ended
September 30, 2000, due to the reasons discussed above.
Comparison of nine months ended September 30, 2000 and September 26, 1999
The Company generated approximately $294,000 in revenues from
operations for the nine months ended September 30, 2000, compared to
approximately $0 in revenues for the nine months ended September 26, 1999.
Cymedix.com(R) currently provides most of our revenues. Cymedix.com(R) first
recorded revenue in November, 1999 for pilot program fees.
Research and development costs increased approximately $427,000 or 100%
from $0 for the nine months ended September 26, 1999, to $427,000 for the nine
months ended September 30, 2000.
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<PAGE>
MEDIX RESOURCES, INC.
Selling, general and administrative expenses increased approximately
$2,710,000 from $1,283,000 in the first nine months of 1999 to $3,993,000 in the
first nine months of 2000, due primarily to expansion nationwide of the
company's strategic sales force, and expansion of it's New York operations.
Interest expense decreased approximately 71% from $78,000 in the first
nine months of 1999 to $23,000 in the first nine 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 $2,746,000 from $1,364,000 in
the nine months ended September 26, 1999 to $4,110,000 in the nine months ended
September 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 $1,092,000 from $2,368,000 for the
nine months ended September 26, 1999 to $3,460,000 for the nine months ended
September 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 $2,273,000 in cash as of September 30, 2000 with net working
capital of $1,917,000 as of September 30, 2000. During the nine months ended
September 30, 2000, net cash used in operating activities was $3,337,000. During
the nine months ended September 30, 2000, we raised $5,884,000 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 September 30, 2000 and through November 1, 2000, we
received approximately $140,000 from the exercise of options and warrants. As of
November 1, 2000, we had outstanding 5,136,000 warrants with a total exercise
price of $2,568,000, 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. $2,568,000 could be available from the
exercise of these callable warrants. However, there can be no assurance that any
of these warrants will be exercised.
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<PAGE>
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 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. If current efforts to raise
additional capital are not successful, we could suffer lost business
opportunities, be forced to sell the Cymedix.com(R) business at a distressed
price, or face the financial failure of our company.
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<PAGE>
MEDIX RESOURCES, INC.
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. As of November 3, 2000, a tentative settlement agreement was reached
between the Company and the plaintiff. This tentative agreement is subject to
the execution of various related documents and the issuance of an order
dismissing the case by the Court.
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 to 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. We are now in the discovery stage of
the proceeding with trial scheduled for September 10, 2001. Management does not
expect any resolution of this matter to have a material adverse effect on our
financial condition.
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. The Company's motion to dismiss
was heard by the Court on November 1, 2000. The court ruled in favor of
plaintiff on one count, and in favor of the Company on the other. However, the
ruling in favor of the Company gave the plaintiff the opportunity to replead the
second count. Management does not expect any resolution of this matter to have a
material adverse effect on our financial condition.
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<PAGE>
MEDIX RESOURCES, INC.
On September 27, 2000, an action was filed in the United States
District Court, Eastern District of New York, against Medix Resources, Inc.,
under the caption, Yecheskel Munk and The Nais Corporation, v. Medix Resources,
Inc. f/k/a International Nursing Services, Inc. (CV 00 5816), alleging that the
Company had failed to properly and fully convert the Company's convertible
preferred stock held by one of the Plaintiffs, and had failed to maintain the
registration for public sale with the Securities and Exchange Commission of
shares underlying warrants held by both Plaintiffs. Plaintiffs seek damages of
approximately $2,700,000, plus interest thereon. Management intends to
vigorously defend this action and does not expect any resolution of this matter
to have a material adverse effect on the Company's 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>
Security Number of Exemption
Issued Date Shares Consideration Purchasers Claimed
------------------- ---------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Common Stock July 50,000 Conversion of Private Section 3(a)(9)
Preferred Investors
Common Stock August 100,000 Conversion of Private Section 3(a)(9)
Preferred Investors
Common Stock September 500,000 Conversion of Private Section 3(a)(9)
Preferred Investors
Common Stock September 450,000 $275,000 Private Section 4(2) &
For Exercised Investors Regulation D
Warrants
</TABLE>
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<PAGE>
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) Form 8-K, filed with the Commission on July 7, 2000, reporting in
Item 5 a press release announcing the signing of a licensing agreement
for source code with Zirmed.com.
2) Form 8-K, filed with the Commission on August 10, 2000, reporting in
Item 5 a press release announcing the signing of a joint
development agreement with Parkstone Medical Information
Systems, Inc.
3) Form 8-K, filed with the Commission on August 14, 2000, reporting in
Item 5 a press release announcing the Company's second quarter
financial results.
4) Form 8-K, filed with the Commission on August 14, 2000, reporting in
Item 5 a press release announcing the retention of KCSA Public
Relations Worldwide for investor relations support.
5) Form 8-K, filed with the Commission on August 31, 2000, reporting in
Item 5 a press release announcing the First Annual Healthcare Internet
Conference on Connectivity to be co-sponsored by the Company and
others.
6) Form 8-K, filed with the Commission on September 12, 2000, reporting in
Item 5 a press release announcing that the Company was to make a
presentation at the First Security Van Kasper's annual
growth stock conference.
7) Form 8-K, filed with the Commission on October 5, 2000, reporting in
Item 5 a press release announcing the successful completion of the
first Annual Tahoe Summit on Healthcare Internet Connectivity, which
was co-sponsored by the Company and Wellpoint Pharmacy Management.
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<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: November 13, 2000
MEDIX RESOURCES, INC.
(Registrant)
/s/ Patricia A. Minicucci
Patricia A. Minicucci
Executive Vice President
(Principal Financial and Accounting Officer)
INDEX TO EXHIBITS
27 Financial Data Schedule
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