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 December 31, 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.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 13-2643655
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(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
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(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 February 1, 2002
- ---------------------------- --------------------------------------
Common Stock ($.01 par value) 35,423,614 Shares
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PAGE NUMBER
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PART I. - FINANCIAL INFORMATION
- --------------------------------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
December 31, 2001 and June 30, 2001 1
Consolidated Condensed Statements of Loss for
the Three Months and Six Months Ended
December 31, 2001 and 2000 2
Consolidated Condensed Statements of Cash Flows for
the Six Months Ended December 31, 2001 and 2000 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. 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 12
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 2001 JUNE 30, 2001
ASSETS (UNAUDITED) (AUDITED)
Current Assets:
Cash $ 17,813 $ 7,775
Accounts receivable 1,575 9,474
Notes Receivable 25,000 0
Inventory 8,061 0
Other current assets 124,692 304,654
------------- -------------
Total current assets 177,141 321,903
Property and equipment, net of accumulated depreciation of
($591,425) ($577,765) 28,780 42,440
Capitalized software costs, net of accumulated amortization of
($142,507) ($94,743) 403,615 376,193
Other assets 4,972 4,972
------------- -------------
Total assets $ 614,508 $ 745,508
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 36,449 $ 63,841
Notes Payable 49,000 255,000
Bank loans payable 4,110 0
------------- -------------
Total current liabilities 89,559 318,841
Shareholders' equity: (Note 4)
Preferred stock $.10 par value, Series C 6,000 0
Preferred stock $.10 par value, Series E 3,300 10,000
Common stock $.01 par value 354,236 352,236
Additional paid-in capital 25,137,292 24,676,592
Accumulated Deficit (24,880,379) (24,516,661)
Stock subscriptions receivable (33,000) (33,000)
------------- -------------
587,449 489,167
Less treasury stock, at cost (12,500 shares) (62,500) (62,500)
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Total shareholders' equity 524,949 426,667
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Total liabilities and shareholders' equity $ 614,508 $ 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 DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
2001 2000 2001 2000
Revenue:
Sales $ 28,334 $ 24,909 $ 39,108 $ 25,730
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 15,325 0 17,319 0
Marketing, general and
administrative 130,827 79,931 241,579 172,701
Depreciation and
amortization 31,574 25,135 62,425 45,688
Other product costs 39,323 95,504 81,469 187,208
Interest - net 34 (476) 34 (405)
---------- ---------- ---------- ----------
Total costs and expenses 217,083 199,094 402,826 405,192
---------- ---------- ---------- ----------
Net profit(loss)
from operations (188,749) $ (174,185) $ (363,718) $ (379,462)
========== ========== ========== ==========
Weighted average number of
shares outstanding
during the period 35,223,613 32,320,485 35,223,613 33,123,436
========== ========== ========== ==========
Loss per Common Share $(0.01) $(0.01) $(0.01) $(0.01)
========== ========== ========== ==========
See accompanying notes to consolidated condensed financial statements
-2-
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED DECEMBER 31,
2001 2000
Cash flows from operating activities:
Net income (loss) $(376,718) $ (379,462)
---------- -----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 62,425 45,688
Issuance of stock and warrants for services 12,000 12,000
Changes in assets and liabilities
(Increase) decrease in receivables 7,899 7,025
(Increase) decrease in notes receivable (25,000) 39,908
(Increase) decrease in other current assets 179,961 43,086
(Increase) decrease in inventory (8,061) 0
(Decrease) in accounts payable and accrued expenses (27,391) (18,177)
---------- -----------
Total adjustments 201,833 129,175
---------- -----------
Net cash used in operating activities (161,885) (250,288)
---------- -----------
Cash flows from investing activities:
Capitalized software development costs (76,186) 0
(Increase) decrease in property and equipment 0 (355)
Cash flows from financing activities:
Increase (decrease)in notes payable (206,000) 35,000
Increase (decrease)in bank notes 4,110 0
Proceeds from issuance of common stock 0 240,000
Proceeds from issuance of Series C Preferred stock 450,000 0
---------- -----------
Net cash changes from investing and financing activities 171,924 275,000
---------- -----------
Net increase (decrease) in cash 10,039 24,712
Cash, beginning of period 7,774 37,829
---------- -----------
Cash, end of period $ 17,813 $ 62,541
========== ===========
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
December 31, 2001 and the results of operations for the three and six
months ended December 31, 2001 and 2000 and the statements of cash
flows for the six months ended December 31, 2001 and 2000. The June 30,
2001 balance sheet has been derived from OCGT's audited financial
statements.
The results of operations for the six months ended December 31,
2001 are not necessarily indicative of the results to be expected for
the full year.
While OCGT 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 OCGT'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, OCGT'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 OCGT 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. Capital Changes:
During the six months ended December 31, 2001, for services
rendered in accord with the terms of a consulting agreement, warrants
were issued to purchase a total of 30,000 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
December 1, 2003. The Company reflected a total expense of $12,000 for
the six month period ending December 31, 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 months of October 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. Of
these Warrants, 500,000 were issued without there being shares of
Common Stock reserved for their issue if exercised. The exercise of
such Warrants is conditioned upon the Company having increased its
authorized number of shares of Common Stock to one hundred million
shares. Said Warrants are then exercisable
During the month of December 2001, 67,000 shares of the Company's
Series E Preferred Stock was converted into 200,000 shares of the
Company's Common Stock.
4. Material Subsequent Event:
During January 2002, Secured Convertible Notes in the amount of
$450,000 were converted by their holders
into 60,000 Series C Preferred Stock.
During the month of January 2002, 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. Of these
Warrants, 1,000,000 were issued without there being shares of Common
Stock reserved for their issue if exercised. The exercise of such
Warrants is conditioned upon the Company having increased its
authorized number of shares of Common Stock to one hundred million
shares. Said Warrants are then exercisable.
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 increased $3,425 and $13,378 for the three and six months
ended December 31, 2001, as compared to the same period for 2000. The
sales of OCGT and PSI were $0 and $39,108 respectively, for the six
months ended December 31, 2001.
Cost of sales for the six months ended December 31, 2001, as compared to
the same period for 2000, increased from $0 to $17,319 as a result of
changing the mode of operation on Internet sales of particular items
from receiving commissions on sales to selling from inventory.
Marketing, general and administrative expenses increased $50,896 and
$68,878 for the three and six months ended December 31, 2001, as
compared to the same period for 2000, primarily as a result of the
increase in business development and legal costs..
Other product costs decreased $55,181 and $105,739 for the three and six
months ended December 31, 2001, as compared to the same period for 2000,
as a result of a reduction in the staff.
Liquidity and Capital Resources
- -------------------------------
At December 31, 2001, OCGT had a current ratio of 4.37 to 1 compared to
.57 to 1 as of December 31,2000. The net loss from operations for the
six months ended December 31, 2001, was $363,718, of which $242,027 or
66% were non-cash charges. OCGT has experienced recurring losses from
operations and has been unable to provide sufficient working capital
from operations and has relied significantly 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, inventory, accounts receivable, and notes receivable were
$52,449 at December 31, 2001. OCGT also has $33,000 of collateralized
demand notes receivable related to the purchase of OCGT's common stock
through the 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 month of January, 2002, notes in the
amount of $450,000 were converted into 60,000 shares of OCGT's Series C
Preferred Stock. Although, in the past, OCGT has been able to provide
working capital through the sale of equity interests in OCGT 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 at July 28,
1999, to Medical Manager Southeast, Inc.("MM"); and MM assumed
substantially all of MIS' liabilities related to operations as of July
28, 1999. The gross purchase price equaled ($402,806).
Products and Competition.
- ------------------------
OCGT acquired PSI on May 16, 1994. PSI owns all right, title and
interest in the PrimeCare(TM) System, which is protected by copyrights.
OCGT has 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"). 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 as many as 8 of every 10
patients the diagnosis can be obtained from a detailed HPI.
Products:
- --------- The Company (i) owns and markets the PrimeCare(TM) System, (ii)
owns and markets secure, Internet enhanced versions of parts of the
PrimeCare(TM) System and the CodeComplier(TM), on separate (but linked)
Web sites known respectively as YourOwnDoctor.com,
PrimeCareOnTheWeb.com(TM) and YourOwnHealth.com(TM) ; (iii) separately
markets the CodeComplier(TM) and; (iv) created, maintains and markets a
Web site known as DeniseAustin.com. See "DESCRIPTION OF BUSINESS -
Products Overview" and "RISK FACTORS".
PrimeCare(TM) Patient Management System ("the PrimeCare(TM) System")
- ------------------------------------------------------------------- is an
in-office client server based, user friendly, patient management system.
It also is patient, physician and staff, interactive. The PrimeCare(TM)
System: (i) creates an electronic medical record documenting the patient
physician encounter; (ii) is compatible with practice management and
billing 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
PrimeCare(TM) 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 PrimeCareOnTheWeb(TM) (see next section,
PrimeCareOnTheWeb(TM)).
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 PrimeCare(TM) 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 PrimeCare(TM) System permits physicians to see
more patients and to spend more quality time with them. The PrimeCare(TM)
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 PrimeCare(TM) 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 uses either Microsoft's SQL Server or Interbase,
as a database. This expands the flexibility of the PrimeCare(TM) System
since it enables medical facilities that are using MS SQL Server
database for practice management systems and other software to add
PrimeCare(TM) without purchasing an additional database. Both databases
support distributed processing in local and wide area networks.
Code Complier(TM):
----------------- OCGT has also developed Code Complier(TM) an
application software program that was designed to be used in conjunction
with OCGT's PrimeCare(TM) System and PrimeCareOnTheWeb.com(TM). As each
item of information is entered into and collected by the PrimeCare(TM)
System during the patient encounter, the CodeComplier(TM) 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. CodeComplier(TM) 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, CodeComplier(TM) for real
time calculation of E&M code and scheduler portion of the PrimeCare(TM)
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 VeriSign(TM), (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 YourOwnDoctor(TM).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 PrimeCareOnTheWeb(TM); (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.com(TM) 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
PrimeCare(TM) 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 VeriSign(TM)
for Internet communication; (v) provides banner links to the YOD Site
and www.DeniseAustin.com. (2) "YourOwnHealth(TM) 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 VeriSign(TM) 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) "YourOwnHealth(TM) 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, as regards 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 which 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 the use of 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, health maintenance
organizations, and in general, healthcare providers other than those
providing care to patients confined to hospital beds; and (b) the YOH
Site is for the 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, 2001,
* 51% of physicians access the Internet from their personal office
areas
* 34% of physicians access the Internet in their clinical work areas
It is reasonable, therefore, to assume that, at the present time,
150,000 physicians have the capability to 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 approximately two years
old.
The Pew tracking report shows the continuing growth in Internet access,
with an 18% increase in the last six months of the year 2001. 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: An 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 2001." This is an 18% increase in six months.
The Pew Internet & American Life Project: An online life report,
released November 26, 2001, stated that "Fifty-two million American
adults, or 55% of those with Internet access, have used the Web to get
health or medical information." It further stated that, "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 report signifies a very large,
continually growing potential market for OCGT's 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 its next quarter, significant interest and
current opportunities have arisen for marketing the PrimeCare(TM) 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. There can be no assurance,
however, that this project will move forward or in the event that it
does, that the PrimeCare(TM) System will be selected.
Advertising Revenues.
- -------------------- An article appearing in CNET News.com from
Knowledge@Wharton.com, August 7, 2001 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....". This should create the availability of
significant advertising dollars for the Company's Web products which are
viewed by consumers.
Physicians see, on average, 500 patients per month. OCGT believes 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.
In an effort to maximize the healthcare provider's desire to use OCGT's
Web Sites, OCGT devised a marketing strategy which gives each healthcare
provider a share of the revenues generated through that providers use of
OCGT's Web products. In addition, OCGT gives physicians free access to,
and use of, its Web products. Its "revenue sharing" concept is supported
by an October 2001 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, 2001, 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." OCGT's products should meet those
criteria.
The fact that the physicians share in the advertising revenues is a
strong motivation for physicians to use OCGT's healthcare Web sites.
Their use would relieve 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 may be substantial. Patient interactive HPI
Questionnaires average 25 screen pages per Questionnaire. Each page has
room for two sponsorships by advertisers 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 cost-per-thousand
rate), potential revenue per Questionnaire is $3.75. Physicians average
500 patient visits per month. Therefore, assuming that a physician
spends an aggregate of two months on vacations, holidays, seminars,
conferences, etc. the potential annual ad revenue per physician using
OCGT's PCW is $18,750.Therefore, 1,000 physicians could generate
$18,750,000 per year.
Outcomes Research.
- ----------------- Potentially, OCGT could receive 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, which includes, but is not limited to, labor
unions, medical insurance companies, HMOs, military forces and
correctional facilities, can be a source of revenues.
Targeting The Market:
- -------------------- OCGT's primary focus is on targeting healthcare
provider organizations whose physicians can drive the most traffic to
OCGT's Web sites. OCGT is attempting to establish business relationships
with organizations that currently deal with healthcare providers. These
organizations consist of healthcare providers, marketers of software
and hardware, such as, office management system vendors, any other
healthcare Web sites. OCGT would enter 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 basis. 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 medical services organization
("MSO"), North Jersey Medical Management Services, L.L.C. This 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 HUMCMD site has both a "Physician Portal" and "Patient Portal". The
site currently contains the OCGT's PCW Site and YOH Site. The Company
is dependent upon HUMC's marketing efforts to its Staff Physicians.
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. AHN maintains an Intranet for its members use. The AHN
Intranet features links to the Company's Web sites. AHN has 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. The Company is dependent upon AHN's for this
market.
OCGT continues to market the PrimeCare 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 Web 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 on the
DA Web site 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 intends to take advantage of the opportunity to position
its interactive tools directly from www.DeniseAustin.com to facilitate a
greater increase of traffic.
Competition:
----------- Denise Austin's Daily Workout is reputed to be the
number one fitness show on television with over one million viewers each
weekday morning. Her videos have sold over 4 million copies.
OCGT believes that it could obtain sufficient working capital from
operations through marketing its Internet products, the PrimeCare(TM)
System and CodeComplier(TM).
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 December 31, 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: February 15, 2002