UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to___________
Commission file number 0-5186
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OCG TECHNOLOGY, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-2643655
------------------------------ --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
56 Harrison Street, New Rochelle, New York 10801
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(Address of principal executive offices)
(914) 576-8457
--------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Shares Outstanding at November 6, 2001
- ---------------------------- --------------------------------------
Common Stock ($.01 par value) 35,223,613 Shares
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------------- -----------
Consolidated Condensed Balance Sheets
September 30, 2001 and June 30, 2001 1
Consolidated Condensed Statements of Loss for
the Three Months Ended September 30, 2001 and 2000 2
Consolidated Condensed Statements of Cash Flow for
the Three Months Ended September 30, 2001 and 2000 3
Notes to Consolidated Condensed Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2001 JUNE 30, 2001
ASSETS (UNAUDITED) (AUDITED)
Current Assets:
Cash $ 21,612 $ 7,775
Receivables, trade 2,264 9,474
Inventory 8,856 0
Other current assets 219,920 304,654
------------- -------------
Total current assets 252,652 321,903
Property and equipment, net of accumulated depreciation of
($585,069) ($577,765) 35,136 42,440
Capitalized software costs, net of accumulated amortization
($118,290) ($ 94,743) 386,058 376,193
Other assets 4,972 4,972
------------- -------------
Total assets $ 678,818 $ 745,508
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 57,120 $ 63,841
Notes payable 356,000 255,000
Bank loans payable 8,000 0
------------- -------------
Total current liabilities 421,120 318,841
------------- -------------
Shareholders' equity: (Note 4)
Preferred stock $.10 par value, Series E 10,000 10,000
Common stock $.01 par value 352,236 352,236
Additional paid-in capital 24,682,592 24,676,592
Deficit (24,691,630) (24,516,661)
Subscription receivable ( 33,000) ( 33,000)
------------- -------------
320,198 489,167
Less treasury stock, at cost (62,500) (62,500)
------------- -------------
Total shareholders' equity 257,698 426,667
------------- -------------
Total liabilities and shareholders' equity $ 678,818 $ 745,508
============= =============
See accompanying notes to consolidated condensed financial statements
1
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
2001 2000
----------- -----------
Revenue:
Sales $ 10,774 $ 24,909
----------- -----------
Costs and expenses:
Cost of sales 1,994 0
Marketing, general and administrative 76,669 43,513
Depreciation and Amortization 30,851 25,135
Product development costs 76,229 130,922
Interest - net 0 (476)
----------- -----------
Total Expenses 185,743 199,094
----------- -----------
Net Loss $ (174,969) $ (174,185)
=========== ===========
Weighted average number of Common
Shares outstanding during period 33,951,661 32,320,485
=========== ===========
Loss per Common Share $ ($0.01) $ ($0.01)
=========== ===========
See accompanying notes to consolidated condensed financial statements
2
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2001 2000
Cash flows from operating activities:
Net income (loss) $ (174,969) $ (174,185)
---------- ----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 30,851 25,135
Issuance of stock and warrants for services 6,000 6,000
Changes in assets and liabilities
(Increase) decrease in receivables 7,210 (2,794)
(Increase) decrease in notes receivable (sale of business) 0 39,908
(Increase) decrease in other current assets 84,736 23,522
(Increase) decrease in inventory (8,856) 0
(Decrease) in accounts payable and accrued expenses (6,722) (14,928)
---------- ----------
Total adjustments 113,219 76,843
---------- ----------
Net cash used in operating activities (61,750) (97,342)
---------- ----------
Cash flows from investing activities:
Capitalized software development costs (33,412) 0
(Increase)decrease in property and equipment 0 (355)
Cash flows from financing activities:
Increase (decrease)in notes 101,000 35,000
Increase (decrease)in bank loans 8,000 0
Proceeds from issuance of common stock 0 75,000
---------- ----------
Net cash changes from investing and financing activities 75,588 109,645
---------- ----------
Net increase (decrease) in cash 13,838 12,303
Cash, beginning of period 7,774 37,829
---------- ----------
Cash, end of period $ 21,612 $ 50,132
========== ==========
See accompanying notes to consolidated condensed financial statements
3
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of the Company, (which, together with its subsidiaries,
unless the context otherwise requires, is referred to as "OCGT"), the
accompanying unaudited consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position as of September 30, 2001 and the
results of operations for the three months ended September 30, 2001 and 2000
and the statements of cash flows for the three months ended September 30, 2001
and 2000. The June 30, 2001 balance sheet has been derived from the Company's
audited financial statements.
The results of operations for the three months ended September 30, 2001
are not necessarily indicative of the results to be expected for the full
year.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's latest annual report on Form 10-
KSB.
The accompanying consolidated financial statements have been prepared on
a going concern basis which contemplates continuity of operations and
realization of assets and liquidation of liabilities in the ordinary course of
business. Because of significant operating losses, the Company's ability to
continue as a going concern is dependent upon its ability to obtain sufficient
additional financing and, ultimately, upon future profitable operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
2. Earnings per share is computed using the weighted average number of
shares outstanding during the periods. The effect of warrants outstanding
would be anti-dilutive.
3. Other assets decreased due primarily to the amortization of the value
previously assigned under a Black Scholes calculation to warrants issued for
marketing and corporate services to be rendered and rent and other services.
This value continues to be amortized over the life of the services rendered .
4. Capital Changes:
During the three months ended September 30, 2001, for services rendered
in accord with the terms of a consulting agreement, warrants were issued to
purchase a total of 15,000 shares of the Company's common stock at exercise
prices ranging between $0.15 to $0.25 per share with exercise dates of said
warrants expiring between July 1 to September 1, 2003. The Company reflected a
total expense of $6,000 for the three month period ending September 30, 2001.
During the three months ended September 30, 2001, for business
development services to be rendered in accord with the terms of a consulting
agreement, OCGT issued warrants to purchase an aggregate of 1,500,000 shares
of the Company's common stock at exercise price $0.10 per share with an
exercise date of said warrants expiring July 31, 2003.
During the three months ended September 30, 2001, for business
development services to be rendered in accord with the terms of a consulting
agreement, OCGT issued warrants to purchase an aggregate of 400,000 shares
of the Company's common stock at exercise price $0.10 per share with an
exercise date of said warrants expiring August 31, 2003.
During the three months ended September 30, 2001, for business
development services to be rendered in accord with the terms of a consulting
agreement, OCGT issued warrants to purchase an aggregate of 200,000 shares
of the Company's common stock at exercise price $0.10 per share with an
exercise date of said warrants expiring August 31, 2003.
During the three months ended September 30, 2001, for business
development services to be rendered in accord with the terms of a consulting
agreement, OCGT issued warrants to purchase an aggregate of 800,000 shares
of the Company's common stock at exercise price $0.10 per share with an
exercise date of said warrants expiring August 31, 2003.
During the three months ended September 30, 2001, for business
development services to be rendered in accord with the terms of a consulting
agreement, OCGT issued warrants to purchase an aggregate of 1,500,000 shares
of the Company's common stock at exercise price $0.10 per share with an
exercise date of said warrants expiring September 30, 2003.
The Company has agreed to replace its current promissory notes with
secured convertible notes which will enable the holders to convert their loans
into a class of convertible preferred stock to be created.
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A SUMMARY OF INCREASES (DECREASES) IN THE ITEMS INCLUDED IN
THE CONSOLIDATED STATEMENTS OF LOSS IS SHOWN BELOW:
General
- -------
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere
herein. The following discussion contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 and OCGT intends that such
forward-looking statements be subject to the safe harbors created thereby.
These forward-looking statements include predictions, estimates and other
statements that involve a number of risks and uncertainties. While this
outlook represents OCGT's current judgment on the future direction of the
business, such risks and uncertainties could cause actual results to differ
materially from any future performance suggested herein.
OCGT has experienced recurring losses from operations and has relied on the
sale of equity interests in OCGT to fund its operations. If necessary, OCGT
intends to provide additional working capital through the sale of equity
interests in OCGT. Although, in the past, OCGT has been able to provide
working capital through the sale of equity interests in OCGT, there can be no
assurances that OCGT will succeed in its efforts, which creates a doubt about
its ability to continue as a going concern. The results of operations for
prior periods is based on OCGT's continuing operations.
Results of Operations
- --------------------- Total revenues decreased $14,235 for the three months
ended September 30, 2001 as compared to the same period for 2000 primarily as
a result of no sales of OCGT's CIG and the end of an Internet license. The
sales of OCG Technology, Inc. ("OCGT"), and Prime Care Systems, Inc ("PSI"), a
subsidiary of OCGT, were $0 and $14,235 respectively, for the three months
ended September 30, 2001.
Marketing, general and administrative expenses increased $35150 for the three
months ended September 30, 2001 as compared to the same period for 2000
primarily as a result of the increase of expenditures for business
development.
Liquidity and Capital Resources
- ------------------------------- At September 30, 2001, OCGT had a current
ratio of .57 to 1 compared to .7 to 1 as of September 30,2000. The net loss
from operations for the three months ended September 30, 2001, was $174,969 of
which loss from non-cash charges of $115,227 accounted for 66% of the total
loss from operations. OCGT has experienced recurring losses from operations
and has been unable to provide sufficient working capital from operations and
has relied on the sale of equity interests in OCGT, and the exercise of
warrants and loans from shareholders to fund its operations. OCGT's auditors
have included an explanatory paragraph regarding the ability of OCGT to
continue as a "going concern".
Cash on hand and accounts receivable were $23,876 at September 30, 2001. OCGT
also has $33,000 of demand notes due related to their exercise of warrants. In
the past, OCGT's principal means of overcoming its cash shortfalls from
operations was from the sale of OCGT's common stock. During the three months
ended September 30, 2000, OCGT received $101,000 in loans from shareholders.
Although, in the past, OCGT has been able to provide working capital through
the sale of equity interests in OCGT, loans from shareholders and through the
exercise of warrants, there can be no assurances that OCGT will succeed in its
efforts.
Disposition of Assets.
- ---------------------- On August 2, 1999, pursuant to the terms of an Asset
Purchase Agreement, Mooney-Edwards Enterprises, Inc.("MIS"), a wholly owned
subsidiary of OCGT, sold substantially all of its assets, as of July 28, 1999,
to Medical Manager Southeast, Inc.("MM") and MM assumed substantially all of
the liabilities related to operations as of July 28, 1999 for a purchase price
equal to four-hundred-two thousand eight-hundred-six dollars ($402,806).
Products and Competition.
- -------------------------
OCGT acquired PrimeCare Systems, Inc.(" PSI"), a Delaware corporation, on May
16, 1994. PSI owns all right, title and interest in the PrimeCareTM Patient
Management System ("the PrimeCareTM System"), which is protected by
copyrights. (Hereafter "OCGT" shall mean OCGT and/or PSI as the context
requires).
OCGT has unique products that are of significant benefit to healthcare
providers, their patients, consumers, pharmaceutical companies and other
companies in the healthcare industry and fitness field. Physicians agree that
the most important and time consuming part of any medical encounter is the
collection of the patient's detailed history of present illness ("HPI").
Today, as a result of increased patient loads and stringent documentation
demands, many physicians do not have the time necessary to obtain a patient's
detailed HPI, even though most agree that in as many as 8 of every 10 patients
the diagnosis can be obtained from a detailed HPI.
Products:
- --------
PrimeCareTM Patient Management System ("the PrimeCareTM System") is an
in-office client server based, user friendly, patient management system, and,
also, is uniquely patient interactive, as well as physician and staff
interactive. The PrimeCareTM System: (i) creates an electronic medical record
documenting the patient/physician encounter; (ii) is compatible with practice
management and billing systems, EMR and CPR systems; (iii) is Health Insurance
Portability Accountability Act ("HIPAA") compliant; (iv) is designed for use
in ambulatory clinics, group and individual practices; (v) uses an
authoritative and comprehensive knowledge database of approximately 280
symptom and problem oriented patient History of Present Illness ("HPI")
Questionnaires for diagnostic and follow-up office visits; (vi) collectively
contains over 100,000 complaint and disease state questions, over 1,600
diagnoses, 1,250 physician reference articles, 1,700 patient education
articles; (vii) allows the staff to schedule the appropriate HPI Questionnaire
and enter the vital signs; (viii) interacts directly with the patient by
having the patient select the answers that apply to their problem from the HPI
Questionnaire; (ix) does not require the patient to have computer or typing
skills; (x) enables the physician to obtain their patients' detailed HPI by
having the patient answer the HPI Questionnaire without requiring physician or
staff time; (xi) allows the physician to interact directly with the
PrimeCareTM System to select and document the normal and abnormal physical
findings, assessments, tests, prescriptions and treatment plan for the
patient; (xii) automatic (real time) calculation of HCFA's Evaluation and
Management code, with full audit trail, used for determining the reimbursement
level by Medicare and other third party payors for the office visit; (xiii)
helps prevents E&M code down grading by HCFA due to "insufficient
documentation"; (xiv) encrypts all medical data for storage; (xv) eliminates
dictation and transcription costs; (xvi) reduces risk of malpractice liability
due to errors of omission and "failure to consider"; (xvii) permits patients
to answer HPI questionnaires at their own speed and at the patient's option in
English or Spanish; (xviii) creates significant clinical and patient databases
for outcomes research; and (xix) allows staff to schedule HPI Questionnaire
for patient interview via the Internet and allows patient to answer HPI
Questionnaires via PrimeCareOnTheWebTM (see next section, PrimeCareOnTheWebTM).
When the patient arrives at the doctors office, the designated staff member
selects the appropriate Questionnaire based upon the patient's chief complaint
and/or symptom and enters the patient's vital signs. The patient is then
seated at a computer or web browser and answers complaint-specific questions
by using either the number keys or mouse to indicate answers that apply to
them. No typing or computer skills are required. The software also has
bilingual capabilities, allowing Spanish-speaking patients to interact in
their preferred language. When the patient has completed the Questionnaire,
the PrimeCareTM System creates a Preliminary Report (the "Report") for the
physician to review before examining the patient. The Report contains the
patient's current problems, medications and allergies, all positive and
significant negative subjective responses, vital signs and an alphabetical
list of the diagnostic possibilities with the patient's responses that
triggered each diagnostic possibility. By freeing up the time physicians would
normally have to spend asking patient history questions and recording
responses, the PrimeCareTM System permits physicians to see more patients and
to spend more quality time with them. The PrimeCareTM System is also easy for
physicians to understand and use . The same simple key stroke or mouse click
process allows the physician or appropriate staff member to select and
document the: physical findings (normal and abnormal), assessment, select
tests, treatment plan, prescribed medications, drug interaction checks, and
patient education materials distributed and schedule follow-up visits. The
physician or appropriate staff member can also type a comment that further
expands upon an answer given in the patients HPI, physical finding,
assessment, treatment plan, prescriptions, or about any subject that may be
appropriate. At the conclusion of the encounter a final summary report of the
visit, patient educational materials, and prescriptions are printed for the
patient.
The PrimeCareTM System: standardizes the patient record; assures consistency
in patient care; creates a patient database for clinical and outcomes
research; offers, both local and remote, means for utilization review and
quality assurance audits; improves the quality of care; increases efficiency
and productivity of the physician's practice; automatically generates a
problem list; incorporates patient care algorithms and clinical practice
guidelines; permits, both local and remote, on-line electronic retrieval of
patient record and hard copy print out with appropriate security controls;
enables rapid access to important patient data for clinical care; contains and
provides patient education, complaint oriented and medication specific;
provides physician reference materials.
The PrimeCare System is fully functional in current Windows operating
environments including Windows 95, 98, ME, and Windows NT, 2000. PSI's
interfaces enable the PrimeCare(TM) System to communicate with other practice
management systems used in medical facilities. This provides a method for
these systems to transfer information to the PrimeCare(TM) System, such as
patient demographics and appointment scheduling, and the PrimeCare(TM) System
to transfer information (such as billing information including E&M codes, ICD9
codes and CPT codes) to these other systems.
The PrimeCare(TM) System has other enhancements and features which include:
(1) voice command recognition capability (for physicians only) and touch
screen which may be used by both, patient and physician. All keystrokes,
mouse clicks are duplicated by the touch screen and/or voice command hardware
and software. (2) The PrimeCareTM System uses either Microsoft's SQL Server
or Interbase, as a database. This expands the flexibility of the PrimeCareTM
System since it enables medical facilities that are using MS SQL Server
database for practice management systems and other software to add
PrimeCareTM without purchasing an additional database. Both databases support
distributed processing in local and wide area networks.
Code Complier(TM):
---------------- OCGT has also developed Code ComplierTM an application
software program that was designed to be used in conjunction with OCGT's
PrimeCareTM System and PrimeCareOnTheWeb.comTM (described below). As each item
of information is entered into and collected by the PrimeCareTM System during
the patient encounter, the CodeComplierTM organizes the data in the proper
classification and using the 1997 HCFA guidelines, automatically calculates
HCFA's Evaluation and Management code level, with full audit trail, used for
determining the reimbursement level by Medicare and other third party payors
for the History, Physical Findings and Decision Making sections the office
visit. It totally eliminates the time and effort which would otherwise be
required by physician office personnel to complete this task. CodeComplierTM
takes the guess work out of E&M compliance. However, no assurances can be
given that OCGT's marketing plan will succeed.
PrimeCareOnTheWeb.com (the "PCW Site"):
-------------------------------------- The PCW Site is a unique
physician and patient interactive Site that: (i) uses the HPI questionnaires
for diagnostic and follow-up office visits, physician reference articles,
patient education material, CodeComplierTM for real time calculation of E&M
code and scheduler portion of the PrimeCareTM System; (ii) enables physicians
to obtain their patient's detailed HPI by having the patient answer HPI
Questionnaires via the Internet without requiring physician time; (iii) saves
the physician and staff the time required to obtain the HPI, thus allowing
them to give more attention to each patient and/or see more patients; (iv)
produces an extremely comprehensive HPI that includes all of the "yes"
answers, pertinent negatives and a list of the diagnostic possibilities with
the answers that support each diagnostic consideration; (v) is HIPAA
compliant; (vi) protects all Internet communication and the confidentiality
rights of every user through a unique user ID and password per questionnaire
to be answered and secure digital certificates from VeriSignTM, (vii)
encrypts all data for storage; (viii) creates a significant data base for
outcomes research; and (ix) automatically provides registered physicians
individual Web sites on YourOwnDoctorTM.com.
YourOwnDoctor.com (the "YOD Site"):
---------------------------------- The YOD Site is a web community
created, owned, operated and maintained by PSI that: (i) provides free
individual Web sites for physicians, physician groups, and other healthcare
providers that register for PrimeCareOnTheWebTM; (ii) enables physicians to
promote their services through displaying credentials, including photos of
each physician and staff in the office, listing specialities, office hours,
directions, maps, phone numbers, e-mail addresses, and accepted insurance
plans; (iii) provides useful links to other medical sites; (iv) provides a
direct link from physician site to PCW that enables patient to access
appropriate HPI Questionnaire and complete; (v) provides direct link to
YourOwnHealth.comTM for use by patients.
YourOwnHealth.com (the "YOH Site"):
--------------------------------- The YOH Site is a unique, free
online health and wellness site and empowers healthcare consumers to be better
prepared for their next visit to the doctor. The YOH Site offers: (1) the
"Medical Interview" that: (i) enables visitors to securely and anonymously
select and complete from 110 of the 280 diagnostic problem specific HPI
Questionnaires contained in the PrimeCareTM System; (ii) generates and makes
available to the visitor a detailed HPI report based upon their responses;
(iii) permits the visitor to answer the Questionnaires in either English or
Spanish; (iv) encrypts all medical data and uses digital certificates from
VeriSignTM for Internet communication; (v) provides banner links to the YOD
Site and www.DeniseAustin.com. (2) "YourOwnHealthTM Notebook": (i) is a
secure depository for storage of personal and family medical data for
Registered Members; (ii) can be accessed only through the use of registered
IDs and Passwords; (iii) encrypts all medical data and uses digital
certificates from VeriSignTM for Internet communication; (iv) provides a
convenient way to keep track of personal health issues such as allergies,
immunizations, medications and others that can be kept and edited on
designated lists; (v) allows the Member to save the completed Questionnaire
HPI report and to add personal notes and reminders to the record. (3)
"YourOwnHealthTM Reference" provides extensive healthcare consumer education
material relating to diseases, disease management, medical procedures and
prescription and common over the counter medications, including drug
interaction.
Competition:
- -----------
OCGT has not identified any competitive patient management system which
embodies all the features of the PrimeCare(TM) System, in particular the
complaint specific, interactive Questionnaires completed by the patient and
the report generated by the patient's responses. OCGT believes that it has
the only in-office patient management system and Web sites that enable
physicians to obtain the patient's detailed HPI by having the patient answer
problem-specific HPI Questionnaires on a PC in the office or via the Internet.
This HPI is obtained without requiring physician time. However, other
companies market systems which may have some of the features of the
PrimeCare(TM) System and some companies market medical office products which
perform different functions than those performed by the PrimeCare(TM) System.
To date, market penetration by both PSI and its competitors has been very
small.
The Market:
- ----------
OCGT's markets for: (a) the PrimeCare System, the PCW Site and the YOD Site
are ambulatory/outpatient medical facilities, such as, primary care
physicians, medical clinics, group practices, and health maintenance
organizations, in general, healthcare providers other than those providing
care to patients confined to hospital beds; and (b) the YOH Site is for use of
the general public.
According to the American Medical Association, there are in excess of 675,000
physicians in the U.S. OCGT estimates that of this group, at least 300,000
physicians would benefit from the use of OCGT's healthcare products.
According to a Harris Interactive nationwide survey of practicing physicians
released March 28, 2000,
.. 51% of physicians access the Internet from their personal office areas
.. 34% of physicians access the Internet in their clinical work areas
Since 51% of physicians access the Internet from their personal office and 34%
access it from clinical areas, it is reasonable to assume that at the present
time 150,000 physicians can use OCGT's Web sites from their office and 100,000
can use it from various areas of their office. It should be noted that the
Harris survey is a year old. The Pew tracking report shows the continuing
growth in Internet access, with an 18% increase in the last six months of the
year 2000. It is therefore reasonable to assume that the potential market is
currently actually larger and is continuing to grow.
The Pew Internet & American Life Project: Internet tracking report, released
on February 18, 2001, stated, "Comparing figures gathered in our tracking
survey in May and June with figures gathered between Thanksgiving and
Christmas, we find that the number of American adults with Internet access
grew from about 88 million to more than 104 million in the second half of
2000." This is an 18% increase in six months.
The Pew Internet & American Life Project: Online life report, released
November 26, 2000, stated that "Fifty-two million American adults, or 55% of
those with Internet access, have used the Web to get health or medical
information. We call them 'health seekers' and a majority of them go online at
least once a month for health information. A great many health seekers say the
resources they find on the Web have a direct effect on the decisions they make
about their health care and on their interactions with doctors." This creates
a very large, continually growing potential market for the YOH Site.
Revenue Sources and Marketing Strategy:
- -------------------------------------- During the fiscal year ending June
30, 2001, OCGT's marketing efforts had been concentrated on its Web products.
However, during this past quarter significant interest and opportunities have
arisen for marketing the PrimeCareTM Patient Management System (the
"PrimeCare System") as part of a major multi-year international healthcare
information management program.. Successful completion of these contracts
would produce very significant revenues for OCGT.
OCGT believes that a significant revenues will be derived from the sale of
advertising, outcomes research and licensing fees for use of the PrimeCare
System. OCGT believes that its initial and potentially largest source of
revenues will be derived from the sale of advertising. Its second source of
revenues will be from outcomes research and an additional source of income
will be derived from fees for use of the PrimeCare System.
Advertising Revenues.
- -------------------- An article appearing in CNET News.com from
Knowledge@Wharton.com, August 7, 2000 stated, ".... Pharmaceutical companies
currently spend $2 billion in direct-to-consumer advertising. Johnson &
Johnson has said it will move 40 percent of its ad budget to the Internet. If
everyone moves 40 percent to the Internet, that's almost $1 billion...."
Since physicians see, on average, 500 patients per month, OCGT recognized that
this segment of the healthcare market is capable of generating the greatest
activity at its Web sites and thus, the largest amount of advertising
revenues.
OCGT's products provide significant benefits to healthcare providers. However,
to maximize the healthcare provider's desire to use its Web Sites, OCGT
devised a marketing strategy which gives each healthcare provider a share of
the revenues generated through that providers use of the Web products. In
addition, OCGT gives physicians free access to and use of its Web products.
Our "revenue sharing" concept is supported by an October 2000 survey,
conducted by Medem, the secure patient-physician e-health network, founded by
the nation's leading medical specialty societies and the American Medical
Association (AMA), released on November 6, 2000, which stated "that
physicians overwhelmingly believe in the value of a robust Web site for their
practice. In addition, half of physicians surveyed said they would be more
interested in using e-mail to communicate with patients if they were
reimbursed for it." The survey also stated, "These results show that
physicians embrace the concept of online communications with their patients if
a clear office function is addressed or an increased office efficiency can be
demonstrated." Our products more than meet these criteria.
The fact that the physicians share in the advertising revenues is a strong
motivation for physicians to use OCGT's healthcare Web sites. This relieves
OCGT of the enormous costs normally associated with driving traffic to Web
sites.
The advertising revenue potential from patients viewing impressions on the HPI
Questionnaires is substantial. Patient interactive HPI Questionnaires average
25 screen pages per Questionnaire. Each page has room for two sponsorships and
up to 7 ad impressions for a total of 9 impressions per page. Assuming only 5
of the 9 impressions per page are sold at $.03 per impression (a $30 cpm
rate), potential revenue per Questionnaire is $3.75. Physicians average 500
patient visits per month. Therefore, assuming that a physician spends two
months on vacations, holidays, seminars, conferences, etc. the potential
annual ad revenue per physician using PCW is $18,750.Therefore, 1,000
physicians could generate $18,750,000 per year.
Outcomes Research.
- ----------------- OCGT anticipates receiving significant fees for conducting
outcomes research for pharmaceutical companies and teaching hospitals. OCGT
anonymizes, encrypts and stores both the completed diagnostic and follow-up
Questionnaires. This ever-growing medical database can be analyzed in various
ways to determine the effectiveness of treatment plans, medications, etc.
Licensing Fees:
- -------------- OCGT believes that annual licensing fees from large fixed
population groups such as labor unions, HMOs, military forces and correctional
facilities can be a significant source of revenues. Additionally, after
using the PCW Site for several months, healthcare providers will recognize the
benefits of using the full system including the CodeComplier, not just the HPI
section, and will be willing to pay a monthly based upon the number of patient
visits for this service.
Targeting The Market:
- -------------------- The primary focus is on targeting healthcare provider
organizations whose physicians can drive the most traffic to the Web sites.
OCGT is establishing business relationships with organizations that currently
deal with healthcare providers. These organizations consist of MSOs, IPAs,
GPOs, etc., marketers of software and hardware, such as, office management
system vendors, other healthcare Web sites, etc. OCGT enters into revenue
sharing agreements with these organizations. OCGT currently recruits and
trains these organizations through: (a) its sales and marketing staff ;and (b)
through independent consultants. The independent consultants are compensated
solely on a commission bases. OCGT intends to expand both its in house staff
and its consultant network.
To date, the Company has entered into an agreement with Hackensack University
Medical Center ("HUMC"). The agreement provides for the use of the Company's
Web sites by HUMC's MSO, North Jersey Medical Management Services, L.L.C.
The MSO has over 1,000 physicians. HUMC and its Physicians Hospital
Organization have created www.HUMCMD.net , the only complete Physician/Patient
Internet Service Provider ("ISP") providing top quality Internet connectivity
to members of its physician network, plus access to key internal HUMC
applications.
The site has both a Physician Portal and Patient Portal. The site currently
contains the Company's PCW Site and YOH Site. On the Physician Portal, the
banner on top alternates between the YOH Site and HUMC's message. The column
on the left hand side of the Physician Portal contains a section entitled
"Primecare". Under the title is "Official Website" which gives access to the
PCW Site and beneath that is "Registration" which provides an entry for
physicians to register for the PCW Site.
The Patient Portal contains a banner on top alternates between the YOH Site
and HUMC's message. The column on the left hand side of the Patient Portal
contains a link to the YOH Site. Both Portals contain a message on their home
page which state, "From the convenience of their home, patients can schedule
an appointment with their physician as well as fill out pre-appointment
questionnaires". HUMC is currently distributing CD ROMs containing its ISP
software to Staff Physicians. We recently attended a Medical Staff Meeting
and demonstrated the Web sites followed by a question and answer session. We
have been invited to demonstrate the Web sites at future Medical Staff
Meetings. HUMC Administration is in the process of obtaining permission for
a Company sales person to have access to the Physicians' Lounge, on a
regularly scheduled basis, to demonstrate the Web sites and register
physicians to use the Web sites. HUMC is distributing literature to its
Staff Physicians explaining the Web sites and the benefits physicians will
gain from using the Web sites.
The Company has also contracted with Advantage Healthcare Net ("AHN") for use
of the Company's Web sites by AHN's 260+ Members organizations and their
2,500+ physicians. AHN is a regional group purchasing organization covering
North Dakota, South Dakota, Minnesota and eastern Montana. It is a Strategic
Marketing Affiliate of Salt Lake City-based Intermountain Health Care
(www.IHC.com/Amerinet), which is one of three shareholders of Amerinet,
(www.Amerinet-GPO.com). Amerinet is the nation's largest membership-based
healthcare group purchasing organization. AmeriNet is located in all 50
states and has a combined membership of 14,790 facilities. AHN's affiliation
with IHC and AmeriNet could lead to additional marketing relationships for the
PSI sites. AHN maintains an Intranet for its members use, which has recently
been redesigned. The new AHN Intranet features links to the Company's Web
sites. AHN is starting a marketing campaign to its members about its Intranet
and includes information about the benefits its physician members will derive
from using the Company's Web sites.
In addition, OCGT continues to market the PrimeCare Patient Management System
and the CodeComplier as turnkey systems within a physician's office.
Fitness Web Site:
- ---------------- OCGT designed, created, operates, maintains and markets a
fitness and wellness Site known as www.DeniseAustin.com. Through a revenue
sharing agreement with Denise Austin, a nationally known fitness expert who
has had a daily fitness show on television for over 14 years, OCGT promotes
and markets a variety of Denise Austin products on the web site. Visitors and
fans are able to shop online for their favorite Denise Austin signature
exercise videos, books, equipment, gear, and private label apparel line and
nutraceuticals (when available), as well as sign up for her monthly news
letter, enjoy fitness tips, exercises, motivation messages, and some of her
favorite healthy recipes.
Marketing:
--------- OCGT has expanded the comprehensive shopping area which
offers a broad range of noncompeting products within the fitness industry.
OCGT will share income from two sources - advertising revenues and e-commerce.
YourOwnHealth is currently positioned at the Denise Austin Web Site with
banners and sponsorship of the monthly newsletter which directs traffic to
YourOwnHealth . YourOwnHealth will take full advantage of the opportunity to
position its interactive tools directly from www.DeniseAustin.com to
facilitate a greater increase of traffic over the existing flow.
Competition:
----------- Denise Austin's Daily Workout is the number one fitness
show on television with over one million viewers each weekday morning. Her
top-selling videos have sold over 4 million copies, capturing 28% of the
fitness video market. She has six videos in the top ten and has authored three
best selling books on fitness.
OCGT believes that it could provide sufficient working capital from operations
through marketing its Internet products, the Window 95/98/NT, ME versions of
the PrimeCareTM System and CodeComplierTM.
Currently, OCGT has no lines of credit and has no material commitments for
capital expenditures outstanding.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No Report on Form 8-K, was filed during the quarter ended
September 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
OCG TECHNOLOGY, INC.
BY /s/Edward C. Levine
-------------------
EDWARD C. LEVINE,
PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
DATED: November 18, 2001