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 March 31, 2002
[ ] 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 May 14, 2002
- ---------------------------- --------------------------------------
Common Stock ($.01 par value) 37,873,613 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
March 31, 2002 and June 30, 2001 1
Consolidated Condensed Statements of Loss for
the Three Months and Nine Months Ended
March 31, 2002 and 2001 2
Consolidated Condensed Statements of Cash Flows for
the Nine Months Ended March 31, 2002 and 2001 3
Notes to Consolidated Condensed Financial Statements 5
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
MARCH 31, 2002 JUNE 30, 2001
ASSETS (UNAUDITED) (AUDITED)
Current Assets:
Cash $ 14,748 $ 7,775
Accounts receivable 1,750 9,474
Inventory 12,339 0
Notes Receivable 325,000 0
Other current assets 68,393 304,654
------------- -------------
Total current assets 422,230 321,903
Property and equipment, net of accumulated depreciation of
($597,032) ($577,765) 23,173 42,440
Capitalized software costs, net of accumulated amortization of
($170,863) ($94,743) 410,657 376,193
Other assets 4,972 4,972
------------- -------------
Total assets $ 861,032 $ 745,508
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 33,804 $ 63,841
Notes payable 194,183 255,000
Bank loans payable 4,110 0
------------- -------------
Total current liabilities 232,097 318,841
Shareholders' equity: (Note 4)
Preferred stock $.10 par value, Series C 6,000 0
Preferred stock $.10 par value, Series E 3,333 10,000
Common stock $.01 par value 378,736 352,236
Additional paid-in capital 25,363,759 24,676,592
Accumulated deficit (25,027,393) (24,516,661)
Stock subscriptions receivable (33,000) (33,000)
------------- -------------
691,435 489,167
Less treasury stock, at cost (12,500 shares) (62,500) (62,500)
------------- -------------
Total shareholders' equity 628,935 426,667
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Total liabilities and shareholders' equity $ 861,032 $ 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 MARCH 31, NINE MONTHS ENDED MARCH 31,
2002 2001 2002 2001
Revenue:
Sales $ 68,915 $ 24,909 $ 97,249 $ 25,730
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 34,504 0 49,829 0
Marketing, general and
administrative 210,328 79,931 341,155 172,701
Depreciation and
amortization 63,814 25,135 95,388 45,688
Other product costs 82,252 94,504 121,575 187,208
Interest - net 0 (476) 34 (405)
---------- ---------- ---------- ----------
Total costs and expenses 390,898 199,094 607,981 405,192
---------- ---------- ---------- ----------
Net profit(loss)
from operations (321,983) $ (174,185) $ (510,732) $ (379,462)
========== ========== ========== ==========
Weighted average number of
shares outstanding
during the period 35,767,873 32,320,485 35,767,873 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)
NINE MONTHS ENDED MARCH 31,
2002 2001
Cash flows from operating activities:
Net income (loss) $(510,732) $ (174,185)
---------- -----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 95,388 25,135
Issuance of stock and warrants for services 33,000 6,000
Changes in assets and liabilities
(Increase) decrease in receivables 7,724 (2,794)
(Increase) decrease in notes receivable (325,000) 39,908
(Increase) decrease in other current assets 236,262 23,522
(Increase) decrease in inventory (12,339) 0
(Decrease) in accounts payable and accrued expenses (30,036) (14,928)
---------- -----------
Total adjustments 4,999 76,843
---------- -----------
Net cash used in operating activities (505,733) (97,342)
---------- -----------
Cash flows from investing activities:
Capitalized software development costs (110,586) 0
(Increase) decrease in property and equipment 0 (355)
Cash flows from financing activities:
Increase (decrease)in bank notes 4,110 0
Proceeds from issuance of Series C Preferred stock 450,000 0
Increase (decrease)in notes payable (60,817) 35,000
Proceeds from issuance of common stock 230,000 75,000
---------- -----------
Net cash changes from investing and financing activities 512,707 109,645
---------- -----------
Net increase (decrease) in cash 6,974 12,303
Cash, beginning of period 7,774 37,829
---------- -----------
Cash, end of period $ 14,748 $ 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 March 31, 2002 and the results of
operations for the three and nine months ended March 31, 2002 and 2001 and the
statements of cash flows for the nine months ended March 31, 2002 and 2001.
The June 30, 2001 balance sheet has been derived from OCGT's audited financial
statements.
The results of operations for the nine months ended March 31, 2002 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 nine months ended March 31, 2002, for services rendered in
accord with the terms of a consulting agreement, warrants were issued to
purchase a total of 45,000 shares of the Company's common stock at exercise
prices ranging between $0.15 to $0.35 per share with exercise dates of said
warrants expiring between July 1 to March 1, 2004. The Company reflected a
total expense of $18,000 for the nine month period ending March 31, 2002.
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.
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.
During January 2002, 150,000 shares of Common Stock were issued as
payment for consulting fees. The shares were valued at $15,000.
During the three months ended March 31, 2002, warrants were
exercised to purchase an aggregate of 2,300,000 shares of the
Company's common stock at an exercise price $0.10 per share.
-4-
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 $44,006 and $61,519 for the three and nine months
ended March 31, 2002, as compared to the same period for 2001, primarily as a
result of an increase in Web site sales. The sales of OCGT and PSI were $0 and
$61,519 respectively, for the nine months ended March 31, 2002.
Marketing, general and administrative expenses increased $130,397 and $168,454
for the three and nine months ended March 31, 2002, as compared to the same
period for 2001, primarily as a result of the amortization of certain
capitalized costs.
Liquidity and Capital Resources
- -------------------------------
At March 31, 2002, OCGT had a current ratio of 3.71 to 1 compared to .522 to 1
as of March 31, 2001. The net loss from operations for the nine months ended
March 31, 2002, was $510,732, of which $216,963 or 42% 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 and accounts receivable were $28,390 at March 31, 2002. OCGT
also has $271,000 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 nine months ended March 31,
2002, 2,618,056 shares of OCGT's common stock were sold for $240,000 ($0.092
per share). 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 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 PSI on May 16, 1994. PSI owns all right, title and interest in
the PrimeCareTM 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 PrimeCareTM System, (ii) owns
and markets secure, Internet enhanced versions of parts of the PrimeCare(TM)
System and the CodeComplierTM, on separate (but linked) Web sites known
respectively as YourOwnDoctor.com, PrimeCareOnTheWeb.comTM and
YourOwnHealth.comTM ; (iii) separately markets the CodeComplierTM and; (iv)
created, maintains and markets a Web site known as DeniseAustin.com. See
"DESCRIPTION OF BUSINESS - Products Overview" and "RISK FACTORS".
PrimeCareTM Patient Management System ("the PrimeCareTM System")
- --------------------------------------------------------------- is an in-
office client server based, user friendly, patient management system. It also
is patient, 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;
(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 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 ComplierTM:
--------------- 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. 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, 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,
o 51% of physicians access the Internet from their personal office areas
o 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 the current fiscal year, significant interest and current
opportunities have arisen for marketing the PrimeCareTM 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 PrimeCareTM 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 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
(a) Exhibits
None
(b) Reports on Form 8-K
No Report on Form 8-K, was filed during the quarter ended March 31, 2002.
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: May 15, 2002