SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[Fee Required]
For the Fiscal Year ended June 30, 2005
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[No Fee Required]
For the transition period from ______ to ______
Commission file number 0-5186
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OCG TECHNOLOGY, INC.
(Name of small business issuer in its charter)
DELAWARE 13-2643655
--------------------------------------------------------------- -------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
56 Harrison Street, New Rochelle, New York 10801
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 576-8457
Securities registered pursuant to section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) had been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-K is not contained herein, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the average of the closing sale price for such stock
on September 15, 2005 was $1,452,717. As of September 15, 2005 the
Registrant had 49,901,121 shares of Common Stock outstanding.
The Issuer's revenues for its most recent fiscal year: $315,697.00
Documents Incorporated by Reference: None
Page 1
Part I
Item 1. Description of Business
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General.
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OCG Technology, Inc.(which, together with its subsidiaries, unless
the context otherwise requires, is referred to as the "Company")
and its wholly owned subsidiary, PrimeCare Systems, Inc. ("PSI"):
(i) created, own, maintain, and market the PrimeCareTM Patient
Management System, Version 9 ("PrimeCareTM Version 9") which
includes the CodeComplierTM; (ii) created, own, maintain, and
market Web sites containing secure Internet enhanced, and targeted
components of PrimeCareTM, which Web sites are known as
PrimeCareOnTheWeb.com, YourOwnDoctor.com, and YourOwnHealth.com;
(iii) operate a shopping cart and market videos and DVDs on a
fitness Web site, known as www.DeniseAustin.com; and (iv) created,
and own the Cardiointergraph, a medical device used for the early
detection of coronary artery disease. OCG Technology, Inc. was
incorporated as Data Display Systems, Inc. on July 3, 1969.
The Company's principal executive office is located at 56 Harrison
Street, New Rochelle, New York 10801 and its telephone number is
(914) 576-8457.
Products Overview.
-----------------
Although the Company's primary source of revenues are currently
derived from the operation of the "shopping cart" on the fitness
Web site known as www.DeniseAustin.com, the Company believes that
the PrimeCare Version 9 and its related Web sites will become the
major source of the Company's revenues. This is more fully
discussed below under "Competition" and "Marketing".
PrimeCare(TM) Patient Management System, Version Nine
-----------------------------------------------------
PrimeCare(TM) Patient Management System, Version Nine
("PrimeCareTM Version Nine ) is a complete, ground-up redesign and
re-write of the Company's initial electronic medical record
("EMR") system, the PrimeCareTM Patient Management System
("PCPMS"). The overall system architecture has been changed; the
supporting data base structures have been enhanced; the client
interface has been redesigned to more accurately reflect the
operational needs of the end-users, and user installation has been
greatly simplified and hardware cost reduced.
Page 2
PrimeCareTM Version Nine is a user friendly, patient management
system that is patient, physician and staff, interactive.
PrimeCareTM Version Nine: (i) creates an electronic medical record
documenting the patient physician encounter; (ii) is Health
Insurance Portability Accountability Act ("HIPAA") compliant;
(iii) is designed for use in national and local health care
systems, military organizations, correctional facilities, HMOs,
hospitals with outpatient services, ambulatory clinics, group
practices and solo practitioners; (iv) uses an authoritative and
comprehensive knowledge database of approximately 280 symptom and
problem oriented patient Questionnaires for diagnostic and
follow-up office visits; (v) collectively contains over 100,000
complaint and disease state questions, over 2,000 diagnoses, over
675 physician reference articles, over 300 patient education
articles; (vi) allows the physician's staff to schedule the
appropriate Questionnaire and enter the patient's vital signs;
(vii) interacts directly with the patient by having the patient
select the answers from the Questionnaires that apply to their
problem; (viii) does not require the patient to have computer or
typing skills; (ix) enables the physician to obtain their
patients' detailed History of Present Illness ("HPI") by having
the patient answer the Questionnaires without requiring physician
or staff time; (x) allows the physician to interact directly with
PrimeCareTM Version Nine to select and document the normal and
abnormal physical findings, assessments, tests, prescriptions and
treatment plan for the patient; (xi) provides automatic (real
time) calculation of the Health Care Finance Administration's
("HCFA") Evaluation and Management ("E&M") code, with a full audit
trail, used for determining the reimbursement level by Medicare,
health insurance providers and other third party payors for the
office visit; (xii) permits patients to answer Questionnaires at
their own speed (xiii) creates significant clinical and patient
databases for outcomes research.
Page 3
When the patient arrives at, or telephones, the doctor's office, a
staff member selects the appropriate Questionnaire based upon the
patient's chief complaint and/or symptoms, and if the patient is
at the doctor's office, takes and enters the patient's vital
signs. The patient at the doctor's office is then seated at a
computer, or if at home or office then via the Internet, answers
complaint-specific questions contained in the Questionnaire, by
using either the keyboard number keys or mouse to indicate answers
that apply to him or her. No typing or computer skills are
required. When the patient has completed the Questionnaire,
PrimeCareTM Version Nine 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, and the patient's detailed HPI that
includes all of positive and significant negative responses to
the questions contained in the Questionnaire , vital signs and an
alphabetical list of the diagnostic possibilities with the
patient's responses repeated that support, or give rise, to each
diagnostic possibility. By freeing up the time physicians would
normally have to spend asking patient history questions and
recording responses, PrimeCareTM Version Nine permits physicians
to see more patients and/or to spend more quality time with each
patient. PrimeCareTM Version Nine 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, tests, treatment plan, prescribe medications, and
patient education handout materials and to schedule follow-up
visits, thus creating and electronically storing, the patient's
record and virtually eliminates dictation and transcription costs.
The physician or appropriate staff member can also type a comment
that expands upon an answer selected by the patient in the
Questionnaire, a physical finding, an assessment, a treatment
plan, a prescription, or about any subject that may be
appropriate. At the conclusion of the encounter a final summary
report of the visit that includes, the patient's HPI, physical
findings, assessment, tests, prescriptions, treatment plan,
patient educational materials and the scheduled follow-up visit,
are stored electronically in the patient's file, and a copy can be
printed for the patient.
Page 4
PrimeCareTM Version Nine: standardizes the patient record and can
improve consistency in patient care, since all patients with the
same symptoms, or problems, answer the same Questionnaire and
questions, eliminating inconsistencies which occur when questions
are asked orally, and the same questions may not be asked of each
patient; creates a patient database for clinical and outcomes
research; automatically generates a problem list; incorporates
patient care algorithms and clinical practice guidelines; permits,
with appropriate security controls, both local and remote, on-line
electronic retrieval of patient records and hard copy print outs;
enables rapid access to important patient data for clinical care;
contains and provides patient education materials about disease,
disease management, tests and medications; and provides physician
reference materials.
PrimeCareTM Version Nine's overall system architecture has been
redesigned away from a local network based two-tier client-server
application, used in the prior version of the PCPMS, to
incorporate a robust three-tier client-provider-relational
database management system ("RDBMS") application, designed for
geographically separated tiers. The client (end-user) tier of
PrimeCareTM Version Nine is designed to connect with the middle or
provider (server) tier via secure Internet communications. The
provider and data base tiers are designed to support multiple,
distinct clients simultaneously. The client application has been
designed to allow easy internationalization and localization (easy
adaptation to local currency, date and time conventions).
Supporting databases have been redesigned to remove unnecessary
redundancies, including a major redesign of the patient/physician
encounter questionnaire. Also, provisions have been added for
support of an unlimited number of alternative languages.
Currently, language support is offered in English. A version is
being developed for Spanish, which was substantially completed
during September, 2005. The terms of a recently signed license
agreement provides for the licensee to pay for development of a
Portuguese version . French, and Simplified Chinese have been
started, but will not be completed in the near future.
Page 5
PrimeCare(TM) Version Nine continues to be a Windows(TM)
application. The client tier will run on Windows 98SE or any
later Windows desktop operating system, such as Windows 2000,
Windows NT, or Windows XP. It will not run on Unix or Linux. The
server (provider tier) and data base tiers of PrimeCare(TM)
Version Nine should be hosted on redundant Windows 2000 or Windows
XP servers with appropriate backup, and standby support.
The three-tier architecture of PrimeCareTM Version Nine provides
many advantages, including easy client installation; reduced
on-site support requirements; enhanced data security; and maximum
flexibility. PrimeCareTM Version Nine's reduced installation and
maintenance costs and its flexibility enables it to be adapted to
a wide variety of health care organizational uses, including
national and local health care systems, military organizations,
correctional facilities, HMOs, hospitals with outpatient services,
clinics, group practices and solo practitioners.
As a three-tier application, PrimeCareTM Version Nine requires
only the client tier application to be installed at the end-user
location. This system architecture greatly simplifies both user
installation and system maintenance. Although the client
(end-user) tier uses the Internet to communicate with the provider
and data base tiers, it is not a browser-based application,
thereby eliminating the many compatibility and security issues
involved in supporting multiple browser configurations. The
PrimeCareTM Version Nine client is a specially written front-end
application, designed to be downloaded by the client via a web
connection, and then installed at the client's location using
normal Windows installation procedures.
The system is designed to support multiple reimbursement models,
including free demo, no-charge use, sponsored use, flat fee,
periodic (monthly / annual) fee, activity based fees, and
option-based fees.
PrimeCareTM Patient Management System ("PCPMS")
-----------------------------------------------
The PCPMS was the Company's initial EMR offering. The Company has
discontinued marketing and supporting the PCPMS
Page 6
CodeComplierTM:
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The Company has also developed CodeComplierTM, an application
software program used in conjunction with the Company's
PrimeCareTM Version Nine and PrimeCareOnTheWebTM. As each item of
information is entered into and collected by PrimeCareTM 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 payers for
the History, Physical Findings and Decision Making sections of the
office visit. It totally eliminates the time and effort that would
otherwise be required by the physician or office personnel to
complete this task. CodeComplierTM takes the guesswork out of E&M
and third party payer compliance. CodeComplierTM is an integral
part of PrimeCareTM Version Nine.
PrimeCareOnTheWeb.com (the "PCW Site"):
---------------------------------------
The PCW Site is a unique physician and patient interactive Site
that: (I) uses PrimeCareTM Version Nine's unique Questionnaires
for diagnostic and follow-up office visits, physician reference
articles, patient education material, CodeComplierTM for real time
calculation of E&M code and the scheduler portion of PrimeCareTM
Version Nine; (ii) enables physicians to obtain their patient's
detailed HPI by having the patient answer 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 repeated 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) enables
creating a significant database for outcomes research; and (ix)
automatically provides registered physicians individual Web sites
on YourOwnDoctorTM.
Page 7
YourOwnDoctor.com (the "YOD Site"):
-----------------------------------
The YOD Site is a web community created, owned, operated and
maintained by the Company that: (I) provides free individual Web
sites for physicians, physician groups, and other health care
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 specialties, 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 Questionnaire and complete; (v) provides direct
link to YourOwnHealthTM for use by patients.
YourOwnHealth.com (the "YOH Site"):
-----------------------------------
The YOH Site is a unique, free online health and wellness site
designed to empower health care 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 approximately 104 of the 280
Questionnaires contained in PrimeCareTM Version Nine; (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 their completed HPI
Questionnaire reports and to add personal notes and reminders to
the record. (3) "YourOwnHealthTM Reference" provides extensive
health care consumer education material relating to diseases,
disease management, medical procedures and prescription and common
over the counter medications, including drug interaction.
Page 8
Marketing: The principal markets for the PrimeCareTM
Version Nine are national and local health care systems, military
organizations, correctional facilities, HMOs, hospitals with
outpatient services, ambulatory/outpatient medical facilities,
group practices and individual practitioners (collectively,
"Healthcare Providers"). PrimeCareTM Version Nine is designed to
support multiple reimbursement models, including free demo, no
charge use, sponsored use, flat fee, periodic (monthly quarterly,
semi-annual and annual) fee, activity based fees and option based
fees. The Company intends to license PrimeCareTM Version Nine to
Healthcare Providers and organizations that will sub-license the
software to Healthcare Providers, for a minimum flat fee of $4.00
per patient per year.
According to the American Medical Association, there are over
650,000 physicians in the U.S. creating a very large potential
market for the System. The Company estimates that as many as
250,000 of these physicians could use PrimeCareTM Version Nine
routinely.
Currently, the Company's revenues from PrimeCareTM Version Nine
are minimal and no assurances can be given that the marketing plan
will succeed. Currently, the principal sources of income from the
Web sites are branding/advertising fees and commissions from
product sales. This income is directly related to the number of
visitors to each site. However, since the close of the year
ending June 30, 2005, the Company has entered into a ten year
license agreement with a company based in Argentina. The Medical
Director of the Licensee, a prominent, highly regarded physician
in Argentina, has been using PrimeCare Version Nine since
November, 2004. As part of the consideration for becoming the
exclusive licensee in the free trade association, known as
Mercosur, whose members are Argentina, Brazil, Chile, Paraguay and
Uruguay, the Licensee has agreed to fund the translation and
internationalization of PrimeCare Version Nine in both Spanish and
Portuguese. The Spanish version was substantially completed
during September 2005. The Licensee will sub-license PrimeCare
Version Nine to health care providers in the Mercosur. In the
event that the gross revenues derived by Licensee from sub
licensing PrimeCare V9, are less than two million five hundred
thousand U.S. dollars (US$2,500,000) for the third year of the
Term of the agreement, or any year thereafter, the Agreement will
become non-exclusive for the balance of the term. The License
provides that the fee to be charged to a sub-licensee shall be not
less than four US dollars (US$4) per annum, per patient of each
sub-licensee, without regard to the number of patient uses of the
software during that year, unless the Company agrees, in writing,
to a lower fee. The Licensee intends to begin installation of
PrimeCare Version Nine in a few months.
Page9
Competition: According to the Fact Sheet, of the Health
Information Requests for Proposals, requested by the Office of the
National Coordinator for Health Information Technology of the
Department of Health & Human Services, dated June 6, 2005,
http://www.os.dhhs.gov/healthit/documents/RFPfactsheet.pdf, there
are more than 200 EHR (electronic health records) on the market
today To date, market penetration by both the Company and its
competitors has been very small. We refer you to an article
appearing in the May 23, 2005 edition of the Wall Street Journal
entitled "Software for Symptoms", which discusses the use of
computers in medicine. It also points out that use of software
can be cost prohibitive, time-consuming and cumbersome, and that
there are concerns regarding computerized mistakes and the fact
that the consensus is that no more than 2% of U.S. doctors use
diagnostic software for these reasons. Therefore, we do not
believe that any competitor has a significant share of the market.
The article raises the question as to why diagnostic software has
not found more of a market. It then states in response "Some
doctors say it takes too much time to enter extensive patient data
into some systems." it then continues with "If your HMO allows you
10 and a half minutes to see a patient how are you going to do
this?" quoting David Goldmann, a physician who serves as vice
president and editor in chief of the Physicians' Information and
Education Resource, a guide to clinical care published by the
American College of Physicians in Philadelphia." Unlike
competitive electronic medical records ("EMR") or computerized
patient records ("CPR") the PrimeCare System reduces the time the
physician spends with the patient. This is accomplished by the
PrimeCare System because it contains and uses an authoritative and
comprehensive knowledge database of approximately 280 symptom and
problem oriented patient Questionnaires for diagnostic and
follow-up office visits, which Questionnaires are answered by the
patient, without requiring physician time or presence, and when
completed generates a report which contains all "yes" answers,
pertinent "no" answers, and list the diagnostic possibilities in
alphabetical order, together with the responses which gave rise to
said diagnostic consideration. The System does not make any
decisions. It gathers and prepares information for the physician
to review and then make the decision or diagnosis. This is more
fully discussed below. The Company believes that when this
becomes more widely known the PrimeCare System will be able to
make a significant penetration of the potential market.
Page 10
The Company has not identified any competitive patient management
system, which embodies all the features of PrimeCareTM Version
Nine, in particular the complaint specific, interactive
Questionnaires that are completed by the patient, and the report
generated by the patient's responses.
Competitive systems require the physician to acquire the clinical
information needed to make the diagnosis. This information is
acquired mainly by verbally by asking the patient questions. A
physician may not ask every patient the same questions for the
same problem, nor may different physicians always ask the same
questions for the same problem.
Competitive systems require the physician to enter the data they
acquired during a verbal interview with the patient, some by
entering the data into a computer program, and others by selecting
the physician's diagnosis from a computer program, which brings up
on the computer a list of symptoms relating to that diagnosis and
the physician checks off the patient's symptoms, which enters them
into that patients record. Whereas, PrimeCareTM Version Nine
contains symptom, and problem oriented, patient Questionnaires for
diagnostic, and follow-up office visits, which Questionnaires are
answered by the patient, without requiring physician time or
presence, and when completed generates a report (the "Report")
which contains all "yes" answers, pertinent "no" answers, and a
list of the diagnostic possibilities, in alphabetical order, with
the responses, which gave rise to said diagnostic consideration.
The physician reviews this report, examines the patient using
PrimeCareTM Version Nine which contains both abnormal and normal
findings, selects the diagnosis, selects and prescribes
medications, recording them all in the patient's record by a click
of the "mouse" or using the keyboard, all of which is done in real
time. Since the Report list the diagnostic possibilities, the
physician is less apt to overlook of forget about a diagnostic
possibility. PrimeCareTM Version Nine makes a more complete
record since it contains every question asked, every answer and a
list of diagnostic possibilities. Competitive systems increase
the physicians work, while PrimeCareTM Version Nine reduces the
work. The patient can answer the PrimeCareTM Version Nine
Questionnaires on the Internet or in the physicians office.
Page 11
Fitness Web Site:
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The Company has marketing arrangements with www.DeniseAustin.com
("DeniseAustin.com"), currently the Company's primary source of
revenues. The Company has entered into two agreements with the
manager of the Web site. Under one agreement, the Company
provides and operates the "shopping cart" on the site and the
second agreement retains the Company as the exclusive seller of
Denise Austin videos and DVDs on the site. The Manager markets
and promotes the site. The fitness and wellness Web site known as
DeniseAustin.com features Denise Austin, a nationally known
fitness expert, who has had a daily fitness show on television for
over 15 years. The Company's shopping cart sells 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, private label apparel and food
supplements.
Competition: There are a number of sellers of fitness
videotapes including those of Denise Austin, such as retail stores
and other Web sites. However, the Company is the exclusive seller
of fitness videos and DVDs on Denise Austin's Web site which is
promoted by Denise Austin, the host of Lifetime Television's
"Denise Austin's Fit & Lite" and "Denise Austin's Daily Workout".
She is also a columnist for Prevention magazine and has written
many books, including "Fit and Fabulous After 40," "Lose Those
Last 10 Pounds" and "Shrink Your Female Fat Zones." As a result
of ads and other forms of promotion, people come to the Web site,
and pay to join, and become members of, and participate in, Denise
Austin's Fit Forever, all of which generates visitors to the Web
site and our shopping cart.
Government Regulation
---------------------
The Company is operating in the medical field, which is
subject to extensive federal, state and local regulations. Neither
the PrimeCareTM Version Nine, nor the CodeComplierTM require FDA
filings or approval. However, PrimeCareTM Version Nine must be,
and it is, compliant with the Health Insurance Portability
Accountability Act ("HIPAA") to enable physicians to use it.
HIPAA was enacted, in part, to establish national standards for
electronic health care transactions and it addresses the security
and privacy of health data during electronic data interchange.
However, there can be no assurance that new laws will not be
passed, or current regulations changed, the enactment of which
could negatively effect, or prohibit, the marketability of
PrimeCareTM Version Nine.
Page 12
Employees
---------
The Company has seven employees including officers. Two
full time employees are non-salaried officers, four are full time
salaried employees, and one is a paid part time employee.
PROPERTIES
The Company leases approximately 1,000 square feet of office space
at 56 Harrison Street, New Rochelle, New York where it maintains
its executive office. The lease bears an annual rental of
$22,117.08 and expires on June 30, 2006. The Company also leases
approximately 3,634 square feet of office space in Newport News,
VA. The lease bears an annual rental $44,798 until it expires on
May 31, 2006.
Item 3. Legal Proceedings
-----------------
NONE
Page 13
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
The Company's Common Stock is quoted on the OTC Bulletin Board
under the symbol OCG. Prior to February 19, 1998 The Company's
Common Stock was quoted on NASDAQ (now NASDAQ Small Cap) under
NASDAQ symbol OCG. The following table sets forth the range of
high and low closing prices for the Company's Common Stock for the
periods indicated, on the market it was trading on at that time.
Prices represent quotations between dealers without adjustments
for retail markups, markdowns or commissions and may not represent
actual transactions.
Fiscal Year Ended June 30, 2004 High Low
------------------------------- ---- ----
1st Quarter .0500 .0300
2nd Quarter .0500 .0300
3rd Quarter .1000 .0300
4th Quarter .0800 .0400
Fiscal Year Ended June 30, 2005 High Low
------------------------------- ---- ----
1st Quarter .0600 .0100
2nd Quarter .0500 .0200
3rd Quarter .0600 .0200
4th Quarter .0600 .0300
As of June 30, 2005 there were approximately 1,290 record holders
of the Common Stock, which does not include stockholders whose
shares are registered in "nominee" or "street" name. The closing
bid price per share for the Common Stock on September 15, 2005 was
$.03.
The Company has never paid cash dividends on its Common Stock.
Payment of dividends are within the discretion of the Company's
Board of Directors and will depend, among other factors, on
earnings, capital requirements and the operating and financial
condition of the Company. At the present time, the Company's
anticipated requirements are such that it intends to follow a
policy of retaining earnings, if any, in order to finance the
development of its business.
On July 12, 1984, a majority of the shareholders of the Company
authorized the amendment of the Certificate of Incorporation of
the Company creating a class of 1,000,000 shares of preferred
stock, the relative rights, preferences and designations of which
could be determined by the Board of Directors.
Page 14
On March 21, 2005 pursuant to the authority vested in the Board of
Directors of the Company, a series of Preferred Stock of the Company
was created out of the authorized but unissued shares of the capital
stock of the Company, and was designated Series F Preferred Stock, to
consist of a maximum of 400,000 shares, par value $.10 per share, of
which the preferences and other rights, and the qualifications,
limitations or restrictions thereof, shall be as follows (1) the
shares are convertible into ten thousand (10,000) shares of Common
Stock for each share of Series F Preferred Stock converted, provided
that there is an increase in the number of the Company's authorized
shares of Common Stock to enable conversion; (2) the holders shall
have ten thousand (10,000) votes per share held and shall have the
right to vote for any purpose that the holders of the Company's
Common Stock may vote; (3) dividends shall not be cumulative and
shall be distributable out of the aggregate of all cash dividends
declared by the Company in any year, such cash dividends, if any,
shall be calculated in an amount per share of Series F equal to ten
thousand (10,000) times of the amount per share of dividends
distributable to the holders of one share of the Common Stock; and
(4) in the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Company, the
holders of the Series F Preferred Stock shall be entitled to receive
out of the assets and funds of the Company to be distributed, an
amount per share equal to ten thousand (10,000) times of the amount
per share to be distributed to the holders of one share of the Common
Stock. No shares of Series F Preferred Stock have been issued.
Page 15
On June 25, 2003, the Board amended its Certificate of Designation
creating Series C Preferred Stock created on November 12, 2001.
The amendment increased the number of shares designated as Series
C Preferred Stock from 100,000 to 200,000. The preferences and
other rights, and the qualifications, limitations or restrictions
of the Series C Preferred Stock include the following: (1) the
shares are convertible into one hundred shares of Common Stock for
each share of Series C Preferred Stock converted, provided: (I)
that in the event that there is no increase in the number of the
Company's authorized shares of Common Stock, then conversion can
occur only if authorized by the Company's Board; or in the
alternative, (ii) in the event that the Company's Stockholders
shall authorize the Company's Board to increase the number of the
Company's authorized shares of Common Stock to at least one
hundred million authorized shares and, as a result the number is
so increased, then conversion is at the option of the holder; (2)
the holders shall have one hundred (100) votes per share held and
shall have the right to vote for any purpose that the holders of
the Company's Common Stock may vote; (3) dividends shall not be
cumulative and shall be distributable out of the aggregate of all
cash dividends declared by the Company in any year, such cash
dividends, if any, shall be calculated in an amount per share of
Series C equal to one hundred (100)times of the amount per share
of dividends distributable to the holders of one share of the
Common Stock; and (4) in the event of any voluntary or involuntary
liquidation, dissolution or other winding up of the affairs of the
Company, the holders of the Series C Preferred Stock shall be
entitled to receive out of the assets and funds of the Company to
be distributed, an amount per share equal to one hundred (100)
times of the amount per share to be distributed to the holders of
one share of the Common Stock.. On January 31, 2002, 60,000 shares
of Series C Preferred Stock was issued on the conversion of
$450,000 of notes payable.
Page 16
On June 10, 1992 pursuant to the authority vested in the Board of
Directors of the Company, a series of Preferred Stock of the
Company was created out of the authorized but unissued shares of
the capital stock of the Company, and was designated Series E
Preferred Stock, to consist of a maximum of 100,000 shares, par
value $.10 per share, of which the preferences and other rights,
and the qualifications, limitations or restrictions thereof,
includes the following: (1) These shares are non-convertible; (2)
The holders of shares shall have the right to vote for any purpose
on the same basis as the holders of the Company's Common Stock;
(3) Series E Dividends shall not be cumulative and shall be
distributable out of the aggregate of all cash dividends declared
by the Company in any year, and shall be calculated as follows:
the aggregate amount of all cash dividends declared and to be
distributed by the Company to all classes of its shareholders in a
fiscal year shall be multiplied by a fraction, the (A) numerator
of which shall be an amount equal to fifty (50%) percent of the
net profits of the Company's subsidiary, Mooney-Edwards
Enterprises, Inc. ("MIS") for the prior fiscal year; and the (B)
denominator of which shall be the sum of the said net profits of
the Company (including those of MIS) for such prior fiscal year;
(4) The Series E Preferred Stock may be redeemed, in whole or in
part, at the option of the Company, at the price of $30.00 per
share, plus all accrued and unpaid dividends thereon. On June 25,
1992, 100,000 shares of Series E Preferred Stock were issued in
conjunction with the acquisition of Mooney-Edwards Enterprises,
Inc. No dividends have ever been declared or paid for the Series
E Preferred Stock. On August 2, 1999, pursuant to the terms of an
Asset Purchase Agreement, Mooney-Edwards Enterprises, Inc was sold
by the Company. During December 2001, the Company converted
67,000 shares of Series E Preferred Stock into 200,000 shares of
the Company's Common Stock.
Page 17
Item 6. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
Fiscal 2005 Compared to Fiscal 2004
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 the Company 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 the Company'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.
The Company has experienced recurring losses from operations and
has relied on the sale of equity interests in the Company and
loans from shareholders to fund its operations. If necessary, the
Company intends to provide additional working capital through the
sale of equity interests in the Company. Although, in the past,
the Company has been able to provide working capital through the
sale of equity interests in the Company and loans , there can be
no assurances that it will succeed in its efforts, which creates a
doubt about its ability to continue as a going concern.
Critical Accounting Policies and Estimates
------------------------------------------
The discussion and analysis of the Company's financial condition
and results of operations following are based upon its
consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles of the
United States of America. The preparation of these financial
statements requires the use of estimates and judgements that
affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. The Company believes that the estimates, assumptions
and judgements involved in the accounting policies described below
have the greatest potential impact on its financial statements, so
the Company considers these to be its critical accounting
policies. Because of the uncertainty inherent in these matters,
actual results could differ from the estimates used in applying
the critical accounting policies. Within the context of these
critical accounting policies, we are not currently aware of any
reasonably likely events or circumstances which would result in
materially different amounts being reported.
Page 18
Capitalized Software Costs
--------------------------
Capitalized software costs are amortized over the estimated useful
life. Changes in circumstances, such as technological advances or
shortfalls in marketing estimates, can result in differences
between the actual and estimated useful life. Periodically, and
when conditions dictate, we reevaluate the recoverability of the
carrying value and useful life of this long-lived asset and make
the necessary adjustments to reflect the asset at its proper
estimated value and amortize it over the remaining estimated
useful life.
The Company had a write off of $65,229 and $387,532 of
capitalized software costs during the years ended June 30, 2005
and June 30, 2004, respectively, in compliance with the Company's
policy relating to reevaluating the value and useful life of this
long-lived asset.
Revenue Recognition
-------------------
The Company has four sources of income: (1) sale of inventoried
merchandise on our Web sites; (2) commissions received from
vendors who link to our Web sites; (3) advertising fees; and (4)
software license fees.
Sale of inventoried merchandise.
-------------------------------
This revenue stream is reported on a "gross" basis in compliance
with EITF 99-19, because the Company purchases the merchandise
from the source it selects; is at risk for the purchaser's credit;
and the Company ships the merchandise. The Company reports the
gross sales price as revenue and expense the cost of the
merchandise and the shipping costs as "cost of sales". The
Company is almost always paid by credit card at the time of
purchase and occasionally by check. Sales are booked when the
merchandise is shipped. The merchandise is not shipped until the
credit is approved.
Page 19
Commissions received from vendors
---------------------------------
The Company acts as a commissioned broker by displaying a vendors
products on the Company's Web sites. When a consumer indicates a
desire to purchase an item, the order is collected through the Web
site and processed by the third party seller. The Company
receives a commission on such sale after it is consummated. When
the Company is paid, it reports the "commissions" on a "net" basis
in compliance with EITF 99-19. The Company reports commissions
this way because: (a) it does not have any direct costs; (b) it
does not purchase the product sold; and (c) it does not have any
credit risk on the sale, and it does not handle or ship the
product when sold. The Company notifies the seller of an
interested buyer and it receives a commission check from the
seller upon the consummation of a sale. At that time the Company
reports the revenue on a "net" basis.
Advertising fees
----------------
The Company receives fees for placing advertisements on its Web
sites. At the end of the month the Company sends an invoice to the
advertiser and enters it on its books as income from advertising
fees.
Software license fees
---------------------
The Company accounts for software license fees in accordance with
SOP 97-2. Revenues are recognized when all of the following
criteria are met: (a) persuasive evidence of an arrangement
exists; (b) delivery has occurred; (c) the vendors fee is fixed or
determinable; and (d) collectiblity is probable.
All licenses are evidenced by a written contract. License fees,
paid for use of the software, are annual fees, generally payable
monthly, or quarterly, in advance, based on the number of patients
of the Healthcare Provider or are based on uses (per patient
visit), which are generally, purchased in advance. The license
fee includes updates to the software during the term of the
license. The software contains considerable medical information
and the Company keeps this medical content reasonably current. The
Company does not sell the software or any updates separately and
therefore, has not established VSOE. The Company will recognize
income ratably over the license term.
Page 20
Results of Operations
---------------------
Total revenues increased to $315,697 for the year ended June 30,
2005 from $299,143 for 2004. The increase in revenues came as the
result of an increase in the sale of merchandise due an increase
of visitors to our Web sites. Cost of sales increased to $167,694
for the year ended June 30, 2005 from $143,226 for the year ended
June 30, 2004. The Company's revenues for the year ended June 30,
2005, consisted of: $299,088 from the sale of merchandise (an
increase of $62,410 for the same period in 2004); $114 from
advertising fees (a decrease of $32,155 for the same period in
2004); and $8,245 from commissions (a decrease of $22,240 over the
same period in 2004).
Marketing, general and administrative expenses decreased
$242,925 for the year ended June 30, 2005, as compared to the same
period for 2004, primarily from the decrease of approximately:
$240,000 in salaries and $30,000 in accounting fees, offset by an
increase in Sales and marketing of approximately $7,000 and a
charge to Bad debts of $142,000. During the year ended June 30,
2004, salaries were charged $251,100 as the result of valuing
warrants issued to two officers in that amount. The charge to bad
debts resulted from the write-off of a subscription receivable and
the accrued interest thereon.
Interest expense increased $199,845for the year ended June 30, 2005,
primarily from a charge to interest in connection with sale of
shares of stock.
Other product costs increased $48,081 for the year ended June 30,
2005, as compared to the same period for 2004. This is an
increase of approximately 22%.
Page 21
Liquidity and Capital Resources
-------------------------------
At June 30, 2005, the Company had a current ratio of .05 to 1
compared to .46 to 1 as of June 30, 2004. The decrease in current
ratio is due to the an increase in notes payable of$175,000.00,
the proceeds of which were used to sustain operations. The net
loss from operations for the year ended June 30, 2005, was
$662,121 compared to $1,022,773 for the prior year. The reduction
in the net loss from operations was primarily due to: the decrease
in "marketing, general and administrative expenses" during the
current year (see "marketing, general and administrative expenses"
above); a write off of $387,532 of capitalized software costs
during the years ended June 30, 2004, compared to $65,229 for the
current year, in compliance with the
Company's policy relating to re-estimating the value and useful
life of this long-lived asset (see "Critical Accounting Policies
and Estimates - Capitalized Software Costs" above) compared to
none for the current year; a decrease in the loss on sale of
marketable securities of $120,000, and a charge to interest
expense of $215,033 in connection with the sale of the Company's
common stock $451,893 or 69% of the net
loss from operations for the year, were non-cash charges
consisting of Depreciation and Amortization in the amount of
$24,697; amortization of Prepaid Expenses in the amount of $33,333
paid through the issuance of shares of common stock; the write-off
of $142,830 for an uncollectible note receivable; a loss in
the amount of $41,000 resulting from the sale of marketable
securities; and a charge to interest expense of $215,033. The
Company 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 the Company, and the exercise of warrants
and loans from shareholders to fund its operations. The Company's
auditors have included an explanatory paragraph regarding the
ability of the Company to continue as a "going concern".
Page 22
Cash on hand, inventory, and receivables were $21,565 at June 30,
2005. During the year ended June 30, 2005, the Company raised
$43,205 through the sale of common stock. Although, in the past,
the Company's principal means of overcoming its cash shortfalls
from operations was from the sale of the Company's stock, loans
and the exercise of warrants, there can be no assurances that the
Company will succeed in its efforts in the future. However, in
September of 2005, the Company entered into a software license
agreement, which granted a license to an Argentinean company to
market PrimeCareTM Version Nine in the Mercosur, a South American
free trade area consisting of Argentina, Brazil, Paraguay,
Uruguay, and Chile. As part of the consideration for granting the
license the Company received $60,000.00 and the licensee paid for
the translation of PrimeCareTM Version Nine into Spanish and will
pay for the translation into Portugese. The Company believes it
will receive significant revenues from license fees during
calendar year 2006, as a result of the license.
Marketable securities
---------------------
The Company had advanced funds totaling $334,500, plus accrued
interest at 7% per annum, pursuant to a grid note, dated February
4, 2002 (the "Note"). In consideration for these advances, the
Company received warrants to purchase common stock of the
borrower, exercisable over a period of three years from the date
of issuance, at a price of $0.25 per share. The Company received
a security interest in accounts receivable of the borrower
anticipated to be generated under certain sales contracts which
provide for borrower to install and maintain the health care
system for certain countries. On October 10, 2003, the Company
agreed to accept 3,709,230 restricted (unregistered) shares of the
borrower's common stock, par value $0.0001 per share, (the
"Stock") in full payment of the Note ($334,500 of principal, plus
$36,423 of accrued interest, for the total amount of $370,923).
The market value on October 10, 2003, of the Stock received was
$704,753. During the year ended June 30, 2004, the Company
realized $162,761 from the sale of 3,260,000 shares, which
resulted in a loss of $163,239.During the six months ending
December 31, 2004, the Company sold the balance of the shares for
$5,000, realizing an additional loss of $41,300.
Page 23
Plan of reorganization and change of control
--------------------------------------------
On March 16, 2005, OCG Technology, Inc. ("OCGT"), entered into an
agreement and plan of reorganization with Centerstaging Musical
Productions, Inc.("CMPI") and its stockholders, which was
terminated by CMPI on August 1, 2005. Pursuant to the terms of the
agreement, OCGT would have acquired all of the issued and
outstanding capital stock of CMPI in exchange for the issuance of
shares of OCGT's Series F Preferred stock. Upon the closing of
the share exchange, CMPI would have become a wholly-owned
subsidiary of OCGT. The transaction will result in a change of
control of OCGT, whereby approximately 96% of OCGT's outstanding
shares will be owned by persons who were previously stockholders
of CMPI.
As a condition of the agreement with CMPI, it was agreed that 100%
of the shares of PrimeCare Systems, Inc., owned by OCG
Technology, Inc., would be distributed to those stockholders of
OCG Technology, Inc., prior to the closing of the agreement.
PrimeCare Systems, Inc. filed a registration statement in order to
facilitate the distribution (spin-off). The registration
statement was withdrawn after CMPI withdrew.
The agreement also provided that CMPI would, and they did,
advance $175,000 to OCG Technology, Inc. which is evidenced by a
promissory note due and payable on December 31, 2005.
Products Overview. See "Products Overview" on page 1.
-----------------
Competition:
-----------
The Company has not identified any competitive patient management
system which embodies all the features of the PrimeCareTM System,
in particular the complaint specific, interactive Questionnaires
completed by the patient and the report generated by the patient's
responses. The Company 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. However, other companies market systems which may
have some of the features of the PrimeCareTM System and some
companies market medical office products which perform different
functions than those performed by the PrimeCareTM System. To
date, market penetration by both the Company and its competitors
has been limited. It is estimated that no more than 2% of U.S.
doctors use diagnostic software for these reasons. (See
"Competition" at page 5)
Page 24
The Market:
----------
The Company's domestic and international markets for: (a) the
PrimeCareTM Version 9 , the PCW, YOH and the YOD Sites are
ambulatory/outpatient medical facilities, such as, primary care
physicians, medical clinics, group practices, health maintenance
organizations, health care insurance companies and in general,
health care 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.
Revenue Sources and Marketing Strategy:
--------------------------------------
Licensing Fees:
--------------
The Company believes that the increased awareness of PrimeCare(TM)
Version 9 will enhance the Company's ability to obtain additional
contracts and annual licensing fees from large fixed population
groups, which includes, but is not limited to, other countries,
labor unions, medical insurance companies, HMOs, military forces
and correctional facilities.
Since the close of the year ending June 30, 2005, the Company has
entered into a ten year license agreement with a company based in
Argentina. The Medical Director of the Licensee, a prominent,
highly regarded physician in Argentina, has been using PrimeCare
Version Nine since November, 2004. As part of the consideration
for becoming the exclusive licensee in the free trade association,
known as Mercosur, whose members are Argentina, Brazil, Chile,
Paraguay and Uruguay, the Licensee has agreed to fund the
translation and internationalization of PrimeCare Version Nine in
both Spanish and Portuguese. The Spanish version was
substantially completed during September 2005. The Licensee will
sub-license PrimeCare Version Nine to health care providers in the
Mercosur. In the event that the gross revenues derived by
Licensee from sub licensing PrimeCare V9, are less than two
million five hundred thousand U.S. dollars (US$2,500,000) for the
third year of the Term of the agreement, or any year thereafter,
the Agreement will become non-exclusive for the balance of the
term. The License provides that the fee to be charged to a
sub-licensee shall be not less than four US dollars (US$4) per
annum, per patient of each sub-licensee, without regard to the
number of patient uses of the software during that year, unless
the Company agrees, in writing, to a lower fee. The Licensee
intends to begin installation of PrimeCare Version Nine in a few
months. Licensee will pay PSI 50%of the license fees it receives
in excess of the first $400,000.00 Licensee receives from
sub-licensees, and 25% of the first $400,000.
Page 25
Advertising Fees:
----------------
Advertising revenues are dependant upon the number of visitors
that use the Company's Web sites. The Company believes that the
use of PrimeCare(TM) Version 9 by licensees will increase
awareness and use of the Company's Web sites and thus result in
increased advertising fees.
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, a
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 Company's PCW Site and
YOH Site. The Company's advertising revenues are dependent upon
HUMC's marketing efforts to its Staff Physicians and patients.
Outcomes Research.
-----------------
Potentially, the Company could receive fees or grants for
conducting outcomes research for pharmaceutical companies,
teaching hospitals, governmental agencies and philanthropic
organizations. The Company anonymizes, encrypts and stores the
data from 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.
Page 26
Fitness Web Site:
----------------
The Company has marketing arrangements with www.DeniseAustin.com
("DeniseAustin.com"), currently, the Company's primary source of
revenues. The Company has entered into two agreements with the
manager of the Web site. Under one agreement, the Company provides
and operates the "shopping cart" on the site and the second
agreement retains the Company as the exclusive seller of Denise
Austin videos and DVDs. The manager markets and promotes the
site. The fitness and wellness Web site known as DeniseAustin.com
features Denise Austin, a nationally known fitness expert who has
had a daily fitness show on television for over 15 years. The
Company's shopping cart sells 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 and vitamins and
nutraceuticals (a food or naturally occurring food supplement
thought to have a beneficial effect on human health in the
prevention and treatment of disease), as well as sign up for her
monthly news letter, enjoy fitness tips, exercises, motivation
messages, and some of her favorite healthy recipes.
Competition:
-----------
There are a number of sellers of fitness
videotapes including those of Denise Austin, such as retail stores
and other Web sites. However, the Company is the exclusive seller
of fitness videos and DVDs on Denise Austin's Web site which is
promoted by Denise Austin, the host of Lifetime Television's
"Denise Austin's Fit & Lite" and "Denise Austin's Daily Workout".
She is also a columnist for Prevention magazine and has written
many books, including "Fit and Fabulous After 40," "Lose Those
Last 10 Pounds" and "Shrink Your Female Fat Zones." As a result
of ads and other forms of promotion, people come to the Web site,
and pay to join, and become members of, and participate in, Denise
Austin's Fit Forever, all of which generates visitors to the Web
site and our shopping cart.
The Company believes that it can obtain sufficient working capital
from operations through marketing PrimeCareTM Version 9 and its
other Internet products.
Currently, the Company has no lines of credit and has no material
commitments for capital expenditures outstanding.
Page 27
Fiscal 2004 Compared to Fiscal 2003
-----------------------------------
Results of Operations
---------------------
Total revenues increased to $299,143 for the year ended June 30,
2004 from $224,020 for 2003. The increase in revenues came as the
result of an increase in the sale of merchandise due an increase
of visitors to our Web sites and the Company securing advertising
contracts. Cost of sales increased from $120,540 for the year
ended June 30, 2003 to $143,226 for the year ended June 30, 2004.
The Company's revenues for the year ended June 30, 2004, consisted
of: $236,678 from the sale of merchandise (an increase of $33,479
for the same period in 2003); $32,269 from advertising fees (an
increase of $29,269 for the same period in 2003); and $30,485 from
commissions (an increase of $10,544 over the same period in 2003).
Prior to September, 2002, The Company's income consisted of fees
and commissions. The Company acted as a commissioned broker to
sell various items of merchandise on its Web sites. In those
instances, when a consumer indicated a desire to purchase an item,
the order was collected through the Web site and processed by the
third party seller and the Company received a commission on such
sale after it was consummated. The Company still receives and
reports "commissions" on a "net" basis in compliance with IETF
99-19. Although the Company continued to be a commission broker
for certain merchandise, in September 2002, it also became a
direct seller of one of the category of items it was previously
selling as a commissioned broker. To accomplish this end, the
Company purchased merchandise and maintains an inventory for sale
on one of its Web sites. The Company is almost always paid by
credit card at the time of purchase and ships the item from its
inventory. This type of revenue stream is reported on a "gross"
basis in compliance with IETF 99-19, because the Company purchases
the merchandise from the source it selects; is at risk for the
purchaser's credit; and it ships the merchandise. The Company
reports the gross sales price as revenue and expense the cost of
the merchandise and the shipping costs as "cost of goods sold". As
a result, the major cause for the increase in revenues is that
revenues now reflect the total sales price, not just a commission.
The gross profit from sales (revenues less cost of sales) for the
year ended June 30, 2004, as compared to the same period for 2003,
increased from $103,480 to $155,917. This results from basically
two reasons: (1) the increased profit per sale resulting from the
increased mark-up from selling from inventory rather than
receiving a commission; and (2) an increase in the number of units
sold as a result of an increase in the number of visitors to our
Web site.
Page 28
Marketing, general and administrative expenses decreased
$38,3361for the year ended June 30, 2004, as compared to the same
period for 2003, primarily from the decrease of approximately:
$36,000 in consulting expenditures for financial public relations.
Other product costs increased $17,403 for the year ended June 30,
2004, as compared to the same period for 2003. This is an
increase of approximately 9%.
Item 7. Financial Statements
The following are included and filed under this Item and appear
immediately following the signature page on page 20:
PAGE
Independent Auditors' Report F-1
Consolidated Balance Sheet - June 30, 2004 F-2
Consolidated Statements of Operations -
Years ended June 30, 2004 and 2002 F-3
Consolidated Statements of Shareholders'
Equity - Years ended June 30, 2004 and 2002 F-4
Consolidated Statements of Cash Flows -
Years ended June 30, 2004 and 2002 F-5
Notes to Consolidated Financial Statements F-7
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
A Form 8-K was filed on February 8, relating to the change
in the Company's independent auditors.
Page 29
PART III
Item 9. Directors and Executive Officers of the Registrant.
The directors and executive officers of The Company are:
Name Age Position
Edward C. Levine 78 President and Director
Jarema S. Rakoczy 63 Vice President and Director
Jeffrey P. Nelson 61 Secretary and Director
Directors are elected at the annual stockholder's meeting and
serve until the next annual meeting. Officers are elected by the
Board of Directors.
Edward C. Levine has been the President of The Company since 1976
and a Director of the Company since 1973. Mr. Levine is a member
of the Bar of the State of New York.
Jarema S. Rakoczy, has served as a Director of The Company since
August 1987, and a Vice President since March 1985, and has been
with The Company since January, 1983. Mr. Rakoczy has been
self-employed as a sales and marketing consultant since May of
1989. Mr. Rakoczy devotes all of his professional time to The
Company's affairs. Mr. Rakoczy served as Eastern Manager at
Hittman Medical Systems from September 1980 to December 1982; as
Regional Sales Manager at American Optical Medical Division from
February 1976 to September 1980; and as Vice President at Pratt
Electronics from June 1968 to November 1974.
Jeffrey P. Nelson, has served as a Director of The Company since
November 1991 and as its Secretary since June 1992 and an
Executive Vice President since November 1997. Mr. Nelson served
as Vice President, Asset Based Finance Division, of Marine Midland
Bank, NA from December 1986 through 1990. Mr. Nelson was
self-employed as a real estate financing consultant from January
1991 through November 1991.
Page 30
Item 10. Executive Compensation
Compensation of Directors
There are no standard or other arrangements for
compensating Directors. Directors serve without
compensation.
Compensation of Officers
The following table presents certain specific information
regarding the compensation of the Chairman and President of The
Company who received no other compensation than the compensation
set forth in the following tables. No Officer of The Company had
total salary, bonus or other compensation exceeding $100,000.
Summary Compensation Table
--------------------------
(a) (b) (c)
Long-term Compensation Awards
Fiscal Year Ended Securities Underlying
Name & Principal Position June 30, Options/SARs
------------------------- ----------------- ------------------------------
Edward C. Levine, 2005 - 0 -
President and Chief 2004 - 0 -*
Executive Officer 2003 - 0 -
2002 750,000
Option Grants in Last Fiscal Year
---------------------------------
(a) (b) (c) (d) (e)
Number of Securities % of Total
Underlying Options/SARs Exercise or Base
Options/SARs Granted to Price
Name Granted Employees in Fiscal Year ($/Share) Expiration Date
----- -------------------- ------------------------ ---------------- ---------------
Edward C. Levine None 0% $0.0
J. S. Rakoczy None 0% $0.0
J. P. Nelson None 0% $0.0
----------------------
* During the fiscal year ended June 30, 2004, 1,500,000 warrants
were issued to both Edward C. Levine and J. P. Nelson and 250,000
warrants were issued to J. S. Rakoczy. All of these warrants
without shares reserved for their exercise. Exercise of the
warrants are subject to the occurrence of an increase in the
number of the Company's authorized common shares from fifty
million to one hundred million or more.
Page 31
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
------------------------------------------------
The following table sets forth certain information regarding the
exercise of stock options during the fiscal year ended June 30,
2004 and the fiscal year ended value of unexercised options for
The Company's named executive officers.
Number of Unexercised Value of Unexercised
Shares Value Options at Fiscal Year-End In-the-money Options at
Acquired Realized (1) Fiscal Year End (2)
Name on Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- -------------------------- -------------------------
E. C. Levine -0- $0 1,250,000 / 1,250,000 none
J. S. Rakoczy -0- $0 190,000 / 190,000 none
J. P. Nelson -0- $0 1,000,000 / 1,000,000 none
_____________________
Notes: (1) These Warrants could not be exercised because
the exercise of these Warrants is conditioned upon the
Company having increased the authorized number of its shares
of Common Stock to one hundred million shares.
Notes: (2) Calculated based on the excess of the closing
market price of The Company's common stock as reported on
the OTC Bulletin Board on June 30, 2005 over the option
exercise price.
Page 32
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of September 11, 2005
certain information with respect to Common Stock ownership
of (I) each person known by The Company to own beneficially
more than 5% of the shares of The Company's Common Stock,
(ii) all directors, and (iii) all Officers and Directors as
a group.
Name and Address of Amount & Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
----- ------------------- -------------------- -------
Common Edward C. Levine 538,826 - direct 1.08%
56 Harrison Street
New Rochelle, NY 10801
Common Jarema S. Rakoczy 359,600 - direct .72%
56 Harrison Street
New Rochelle, NY 10801
Common Jeffrey P. Nelson 578,800 - direct 1.16%
56 Harrison Street
New Rochelle, NY 10801
Common All directors and 1,477,226 - direct 2.96%
officers as a group
(3 Persons)
Page 33
Item 12. Certain Relationships and Related Transactions
On June 1, 2004, The Company authorized the issuance of, and
thereafter issued, warrants to purchase shares of its Common
Stock as follows: Edward C. Levine 1,500,000 warrants;
Jeffrey P. Nelson 1,500,000 warrants; and Jarema S. Rakoczy
250,000 warrants; all at $.05 per share. Shares of the
Company's common shares were not reserved for the exercise
of these Warrants. Exercise is conditioned upon the Company
having increased the authorized number of its shares of
Common Stock to one hundred million shares.
On December 5, 2001, The Company authorized the issuance of,
and thereafter issued, warrants to purchase shares of its
Common Stock as follows: Edward C. Levine 750,000 warrants;
Jeffrey P. Nelson 700,000 warrants; and Jarema S. Rakoczy
100,000 warrants; all at $.15 per share. The exercise of
these New Warrants is conditioned upon the Company having
increased the authorized number of its shares of Common
Stock to one hundred million shares.
On December 28, 2001, The Company authorized an aggregate of
2,698,056 Warrants, previously issued with shares reserved
for exercise to be modified, with the Warrant holders'
consent, eliminating the requirement to reserve shares of
Common Stock for exercise of their Warrants. The exercise
of these Warrants is conditioned upon The Company having
increased its authorized number of shares of Common Stock to
one hundred million shares. In consideration for agreeing
to these terms, The Company extended the period of exercise
to the latter of ,one additional year, or one year after The
Company increased its authorized number of shares of Common
Stock to one hundred million shares. A reduction of the
exercise to $0.25 was also authorized. Edward C. Levine
holds 500,000 of these warrants; Jeffrey P. Nelson holds
300,000 of these warrants; and Jarema S. Rakoczy holds
90,000 of these warrants
Page 34
Item 13. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of
this report.
(1) Exhibits
3(I).1 Certificate of Incorporation of Registrant
filed July 3, 1969 (incorporated by
reference to Exhibit 3.1(a) to the Annual
Report on Form 10-K for the Year ended June
30, 1985).
3(I).2 Certificate of Amendment of Certificate of
Incorporation filed March 28, 1973
(incorporated by reference to Exhibit 3.1(b)
to the Annual Report on Form 10-K for the
Year ended June 30, 1985).
3(I).3 Certificate of Ownership and Merger filed
June 21, 1974 (incorporated by reference to
Exhibit 3.1(c) to the Annual Report on Form
10-K for the Year ended June 30, 1985).
3(I).4 Certificate of Change of Agent and location,
designated in the Certificate of
Incorporation of Registrant, filed December
16, 1976 (incorporated by reference to
Exhibit 3.1(d) to the Annual Report on Form
10-K for the Year ended June 30, 1985).
* 3(I).5 Certificate of Amendment of Certificate of
Incorporation filed December 26, 1985.
* 3(I).6 Certificate of Correction filed to Correct A
Certain Error in the Certificate of
Amendment of Certificate of Incorporation
filed March 26, 1986.
* 3(I).7 Certificate of Amendment of Certificate of
Incorporation filed August 18, 1987.
3(I).8 Certificate of Change of Agent and location
of Registrant filed April 9, 1991
(incorporated by reference to Exhibit 3.1(j)
to the Annual Report on Form 10-K for the
Year ended June 30, 1991).
Page 35
3(I).9 Certificate of Correction filed to Correct
Certain Errors in the Certificate of
Amendment of the Certificate of
Incorporation filed June 19, 1992
(incorporated by reference to Exhibit 3.1(l)
to the Annual Report on Form 10-K for the
Year ended June 30, 1992).
** 3(I).10 Certificate of Amendment of Certificate of
Incorporation filed June 7, 1996.
3.(ii).1 By-laws of Registrant (incorporated by
reference to Exhibit 3.2 to the Annual
Report on Form 10-K for the Year ended June
30, 1985).
* 4.1 Certificate of Resolutions Creating
Series A Convertible Preferred
Stock, filed January 23, 1986.
* 4.2 Certificate of Correction filed to
Correct Certain Errors in the
Certificate of Stock Designation
filed March 26, 1986.
4.3 Certificate of Resolutions Creating
Series E Convertible Preferred
Stock, filed June 19, 1992.
(incorporated by reference to
Exhibit II to the Current Report on
Form 8-K filed June 26, 1992)
4.4 Certificate of Resolutions Creating
Series B Convertible Preferred
Stock, filed May 3, 1994
(incorporated by reference to
Exhibit 4 to the Current Report on
Form 8-K filed June 1, 1994)
** 4.5 Certificate of Amendment No. 1 Filed
to Modify the Certificate of
Designation Creating Series B
Preferred Stock, filed August 30,
1996.
**** 4.6 Certificate of Resolutions Creating
Series C Preferred Stock, filed
November 12, 2001 (incorporated by
reference to Exhibit 4 to the
Current Report on Form 8-K filed
June 1, 1994)
Page 36
4.7 Certificate of Amendment No. 1 Filed
to Modify the Certificate of
Designation Creating Series C
Preferred Stock, filed June 25, 2003.
10.1 Technology Assignment Agreement
dated as of December 19, 1983 by and
between Biocard Partners and OCG
Technology, Inc. (incorporated by
reference to Exhibit 10.1 to the
Annual Report on Form 10-K for the
Year ended June 30, 1985).
10.2 License Agreement dated as of
December 19, 1983 by and between
Biocard Partners and OCG Technology,
Inc. (incorporated by reference to
Exhibit 10.1 to the Annual Report on
Form 10-K for the Year ended June
30, 1985).
10.3 Stock Purchase and Exchange
Agreement, dated as of June 12,
1992, between the Registrant and
Mooney-Edwards Enterprises, Inc.,
D/B/A Medical Information Systems
(incorporated by reference to
Exhibit I to the Current Report on
Form 8-K filed June 26, 1992).
10.4 Stock Purchase and Exchange
Agreement, dated as of May 16, 1994,
between the Registrant and PrimeCare
Systems, Inc. (incorporated by
reference to Exhibit 2 to the
Current Report on Form 8-K filed
June 1, 1994)
10.5 Asset Purchase Agreement, dated as of
July 28, 1999, between Medical
Manager Southeast, Inc.;
Mooney-Edwards Enterprises, Inc.; and
the Registrant (incorporated by
reference to Exhibit 2 to the Current
Report on Form 8-K filed August 16,
1999)
Page 37
21 Subsidiaries of Registrant. Optronic
Labs, Inc., a New York corporation;
Mooney-Edwards Enterprises, Inc., a
Florida corporation; and, PrimeCare
Systems, Inc., a Delaware corporation.
31.1 Certification pursuant to Rule
13a-14 AND 15d-14 of the Securities
Exchange act of 1934, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley act of 2002
31.2 Certification pursuant to Rule
13a-14 AND 15d-14 of the Securities
Exchange act of 1934, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley act of 2002
32.1 Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley
act of 2002
(b) Reports on Form 8-K
A Form 8-K was filed on October 20, 2003,
and a Form 8-K was filed on November 12,
2003, both relating to the change in the
Company's independent auditors.
A Form 8-K was filed on February 8, 2005,
relating to the change in the Company's
independent auditors.
A Form 8-K was filed on March 16, 2005,
relating to the entry into a Material
Definitive Agreement.
A Form 8-K was filed on April 12, 2005,
amending an 8-K relating to the entry into a
Material Definitive Agreement.
A Form 8-K was filed on August 23, 2005,
relating to the termination of a Material
Definitive Agreement.
A Form 8-K was filed on October 3, 2005,
relating to the entry into a Material
Definitive Agreement.
* Incorporated by reference to the Form 10-KSB for the
Year ended June 30, 1987.
** Incorporated by reference to the Form 10-KSB for the
Year ended June 30, 1996.
*** Incorporated by reference to Form S-3 on Form SB -2
filed January 31, 2002
Page 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OCG TECHNOLOGY, INC.
By: /s/ Edward C. Levine
--------------------
Dated: October 13, 2005
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
/s/ Edward C. Levine President and Director October 13,2005
--------------------
Edward C. Levine (Principal Executive, Financial
and Accounting Officer)
/s/ Jeffrey P. Nelson Secretary and Director October 13, 2004
---------------------
Jeffrey P. Nelson
/s/ Jarema S. Rakoczy Vice President and Director October 13, 2004
Jarema S. Rakoczy
Page 39
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14 AND 15d-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT
TO SECTION 302 OF THE SARBANES-0XLEY ACT OF 2002
I, Edward C. Levine, President of the Registrant, OCG
Technology, Inc. certify that:
1. I have reviewed this Form 10-KSB of OCG Technology, Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the Registrant as
of, and for, the periods presented in this report;
4. I am solely responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for the Registrant and we have:
(a) designed such disclosure controls and procedures
to ensure that material information relating to the
Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this report
is being prepared;
(b) evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within 90
days of the filing date of this Form 10SB (the "Evaluation
Date"); and
(c) presented in this report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation of the Evaluation
Date;
Page 40
5. I have disclosed, based on my most recent evaluation, to
the Registrant's auditors and the audit committee of the
Registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the Registrant's ability to record, process,
summarize and report financial data and have
identified for the Registrant's auditors any
material weaknesses in internal controls; and
(b) any fraud, whether or not material, that
involves management or other employees who have a
significant role in the Registrant's internal
controls; and
6. I have indicated in this Form whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Dated: October 13, 2005 /s/ Edward C. Levine
--------------------
Edward C. Levine, President
Page 41
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14 AND 15d-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT
TO SECTION 302 OF THE SARBANES-0XLEY ACT OF 2002
I, Edward C. Levine, Chief Financial Officer of the
Registrant, OCG Technology, Inc. certify that:
1. I have reviewed this Form 10-KSB of OCG Technology, Inc.;
2. Based on my knowledge, this Form does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this Form, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as
of, and for, the periods presented in this Form;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial
reporting for the registrant and we have:
(a) Designed such disclosure controls and
procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
(b) Designed such internal controls over financial
reporting, or caused such internal controls over
financial reporting to be f designed under our
supervision, to provide reasonable assurance
regarding the reliability of financial reporting and
the preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions g about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this Form any change in the
registrant's internal controls over financial
reporting that occurred during the registrant's most
recent fiscal quarter that has materially effected,
or is reasonably likely to materially effect, the
registrant's internal controls over financial
reporting;
Page 42
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
controls over financial reporting, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
(a) All significant deficiencies and material
weaknesses in the design or operation of internal
controls over financial reporting, which are
reasonably likely to adversely affect the
registrant's ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Dated: October 13, 2005 /s/Edward C.Levine
------------------
Edward C. Levine,
Chief Financial Officer
Page 43
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Form 10-KSB of OCG Technology, Inc.,
(the "Company") for the period ending June 30, 2005, as
filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Edward C. Levine, President
and Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C.Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Form 10SB fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Form 10SB fairly
presents, in all material respects, the financial condition
and result of operations of the Company.
Dated: October 13, 2005 /s/Edward C.Levine
------------------
Edward C. Levine,
President/Chief Financial
Officer
Page 44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
OCG Technology, Inc.
New Rochelle, New York
We have audited the accompanying balance sheet of OCG Technology, Inc. and
subsidiaries (AOCG@) as of June 30, 2005 and 2004, and the related
consolidated statements of operations, comprehensive loss, and stockholders=
deficit and of cash flows for each of the two years then ended. These
financial statements are the responsibility of the management of OCG
Technology, Inc. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of OCG
Technology, Inc. as of June 30, 2005, and the results of its operations and
its cash flows for each of the two years then ended in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 9 to the financial statements, errors resulting in an
understatement of expenses and an overstatement of capitalized software
costs were discovered by management in fiscal 2005. Accordingly,
adjustments have been made as of June 30, 2004, to correct the error.
The accompanying consolidated financial statements have been prepared
assuming that OCG will continue as a going concern. As shown in the
financial statements, OCG has suffered recurring losses from operations and
has a deficiency in equity at June 30, 2005. These factors and others raise
substantial doubt about OCG=s ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 2 to the
financial statements. The consolidated financial statements do not include
any adjustments relating to the recoverability and classification of
recorded assets, or to the amounts and classification of liabilities that
might be necessary in the event OCG cannot continue in existence.
MALONE & BAILEY, PC
www.malone-bailey.com
Houston, Texas
October 12, 2005
F-1
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2005 and 2004
June 30, June 30,
2005 2004
---------- -----------
ASSETS Restated
Current Assets
Cash $ 6,104 $ 29,257
Accounts receivable 787 570
Inventory 14,674 9,232
Marketable securities - 13,477
Interest receivable - 7,702
Other current assets - 287
---------- -----------
Total Current Assets 21,565 60,525
Property and equipment, net of accumulated
depreciation of $94,349 and $83,073 4,819 15,108
Capitalized software costs, net of accumulated
amortization of $33,529 and $20,647 56,998 47,000
Other assets 4,972 4,972
---------- -----------
TOTAL ASSETS $ 88,354 $ 127,605
========== ===========
LIABILITIES AND STOCKHOLDERS= DEFICIT
Current Liabilities
Accounts payable and accrued liabilities $ 55,011 $ 83,176
Note payable, stockholders - 158,700
Notes payable 194,352 6,792
----------- -----------
Total Current Liabilities 249,363 248,668
---------- -----------
Notes payable, stockholders 188,700 -
Stockholders= Deficit
Series C Preferred stock, $0.10 par value; 200,000
shares authorized, issued and outstanding 20,000 20,000
Series E Preferred stock, $0.10 par value; 100,000
shares authorized, 33,333 shares issued
and outstanding 3,333 3,333
Series F Preferred stock, $0.10 par value, 400,000
Shares authorized, zero issued and outstanding - -
Common stock, $0.01 par value; 50,000,000 shares
authorized, 49,901,120 issued and outstanding 499,011 455,806
Additional paid-in capital 26,696,445 26,468,998
Less: treasury stock, at cost (12,500 shares) (62,500) (62,500)
Accumulated deficit (27,505,998) (26,843,877)
Unrealized loss on marketable securities - (32,823)
Stock subscription receivable - (130,000)
---------- -----------
Total Stockholders= Deficit (349,709) (121,063)
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS= DEFICIT $ 88,354 $ 127,605
========== ===========
See the accompanying notes to the financial statements.
F-2
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
2005 2004
---------- -----------
Restated
Revenue $ 315,697 $ 299,143
Cost of goods sold 167,694 143,226
---------- -----------
Gross profit 148,003 155,917
---------- -----------
Operating expenses
Marketing, general and administrative 114,065 484,186
Depreciation 11,275 13,438
Amortization 13,422 10,696
Impairment of capitalized software costs 65,229 387,532
Write-off stock subscription receivable and
related interest receivable 142,830 -
Research and development 208,605 186,486
---------- -----------
Total expenses 555,426 1,082,338
---------- -----------
Net loss from operations (407,423) (926,421)
Loss on sale of marketable securities (41,300) (163,239)
Interest income (expense), net (213,398) 13,553
---------- ----------
Net loss $ (662,121) $(1,076,107)
========== ===========
Weighted average number of shares outstanding 48,789,629 42,866,734
Loss per common share, basic and diluted $( 0.01) $( 0.03)
See the accompanying notes to the financial statements.
F-3
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS= DEFICIT
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
Preferred Stock Preferred Stock
Series C Series E Common Stock
------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
Balance, July 1, 2003 163,330 $ 16,333 33,333 $ 3,333 41,273,614 $ 412,736
Issuance of preferred
shares - Series C 36,670 3,667 - - - -
Issuance of common shares - - - - 4,306,968 43,070
Net loss (restated) - - - - - -
Issuance of warrants - - - - - -
Unrealized holding loss
on investments
arising during the year - - - - - -
---------- ---------- ----------- ----------- ----------- -----------
Balance, June 30, 2004
(restated) 200,000 20,000 33,333 3,333 45,580,582 455,806
Issuance of common shares - - - - 4,320,538 43,205
Net loss - - - - - -
Forgiveness of interest
payable on related-
party note - - - - - -
Write-off uncollectible
stock subscription
receivable - - - - - -
Sale of investments - - - - - -
---------- ---------- ----------- ----------- ----------- -----------
Balance, June 30, 2005 200,000 $ 20,000 33,000 $ 3,333 49,901,120 $ 499,011
========== ========== =========== =========== =========== ===========
See the accompanying notes to the financial statements.
F-4
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS= DEFICIT
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
(CONTINUED)
Accumulated
Additional Unrealized
Paid-in Treasury Loss on Accumulated Subscription
Capital Stock Investments Deficit Receivable Total
----------- ----------- ----------- ----------- ----------- -----------
Balance, July 1, 2003 $ 25,999,426 $ (62,500) $ - $(25,767,770) $(130,000) $ 471,558
Issuance of preferred
shares - Series C 106,333 - - - - 110,000
Issuance of common shares 106,139 - - - - 149,209
Net loss (restated) - - - (1,076,107) - (1,076,107)
Issuance of warrants 257,100 - - - - 257,100
Unrealized holding loss
on investments
arising during the year - - (32,823) - - (32,823)
---------- ---------- ----------- ----------- ----------- -----------
Balance, June 30, 2004
(restated) 26,468,998 (62,500) (32,823) (26,843,877) (130,000) (121,063)
Issuance of common shares 215,033 - - - - 258,238
Net loss - - - (662,121) - (662,121)
Forgiveness of interest
payable on related-
party note 12,414 - - - - 12,414
Write-off uncollectible
stock subscription
receivable - - - - 130,000 130,000
Sale of investments - - 32,823 - - 32,823
---------- ---------- ----------- ----------- ----------- -----------
Balance, June 30, 2005 $26,696,445 $ (62,500) $ - $(27,505,998) $ - $ (349,709)
=========== ========== =========== =========== =========== ===========
See the accompanying notes to the financial statements.
F-5
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
2005 2004
---------- ----------
Restated
Cash Flows From Operating Activities
Net loss $ (662,121) $(1,076,107)
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 24,158 24,134
Impairment of software costs 65,229 387,532
Issuance of stock and warrants for service 215,033 337,100
Write-off of stock subscription receivable
and related interest receivable 142,830 -
Loss on sale of marketable securities 41,300 163,239
Changes in working capital:
Accounts receivable (217) (570)
Inventory (5,442) 3,028
Interest receivable (5,128) (11,520)
Other assets 287 4,756
Accounts payable and accrued liabilities (15,752) 12,52
---------- ----------
Net cash used by operating activities (199,823) (155,888)
---------- ----------
Cash Flows From Investing Activities
Purchase of property and equipment (986) (11,055)
Proceeds from sale of marketable securities 5,000 162,761
Additions to capitalized software costs (88,109) (159,503)
---------- ----------
Net cash used by investing activities ( 84,095) (7,797)
---------- ---------
Cash Flows From Financing Activities
Proceeds from notes payable, stockholders 30,000 -
Net proceeds from notes payable 187,560 2,901
Proceeds from sale of common stock 43,205 69,209
Proceeds from sale of preferred stock B series C - 110,00
---------- ----------
Net cash provided by financing activities 260,765 182,11
---------- ---------
Net change in cash (23,153) 18,425
Cash at beginning of year 29,257 10,832
---------- ----------
Cash at end of year $ 6,014 $ 29,257
========== ==========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for interest $ 1,456 $ 754
Supplemental Noncash Investing and Financing Information
Exchange of note receivable and related accrued interest
for marketable securities $ - $372,300
Forgiveness of accrued interest payable on related
party note 12,414 -
See the accompanying notes to the financial statements.
F-6
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
2005 2004
---------- ----------
Restated
Net loss $(662,121) $(1,076,107)
Unrealized gain (loss) on investments 32,823 (32,823)
---------- ----------
Comprehensive loss $(629,298) $(1,108,930)
========== ==========
See the accompanying notes to the financial statements.
F-7
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business. OCG Technology, Inc. (AOCG@),
through its wholly-owned subsidiary, PrimeCare Systems
Inc., sells Denise Austin health and fitness video
products on its website known as DeniseAustin.com. In
addition, OCG has developed and is marketing software
and diagnostic products for the healthcare industry.
Restatement. Restatements of fiscal 2004 were made. See Note 9 for details.
Basis of Presentation. The accompanying consolidated financial statements
include the accounts of OCG and all of its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.
Use of Estimates. In preparing financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities in the balance sheet and revenues and expenses in the statements
of operations, and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Cash and Cash Equivalents. For purposes of the statement of cash flows, OCG
considers all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
Revenue Recognition. Revenue is recognized when the earning process is
complete and the risks and rewards of ownership have transferred to the
customer, which is generally considered to have occurred upon shipment of
the product. Sales of inventoried products are recorded on a gross revenue
basis and sales of non-inventoried products are recorded on a net revenue
basis.
Accounts receivable. Accounts receivable are stated at the amount
management expects to collect. An allowance for doubtful accounts is
recorded based on a combination of historical experience, aging analysis and
information on specific accounts. Management has determined that no
allowance is necessary at June 30, 2005.
Inventory. Inventory consists of Denise Austin health and fitness video
products that are stated at the lower of cost (first-in, first-out) or market.
Investment in Available-for-Sale Securities. Investments, consisting of
marketable equity securities, are classified as available-for-sale
securities and are carried at fair value. Unrealized gains and losses are
reported as a separate component of stockholders' equity, net of applicable
income taxes. OCG calculates its gains (losses) on the sale of marketable
securities on a first-in, first-out basis. Net unrealized losses at June 30,
2005 and 2004 were $0 and $32,823, respectively. These unrealized gains and
losses are presented as other comprehensive income (loss) and as a component
of stockholders' deficit.
Property and Equipment. Property and Equipment is valued at cost. Additions
are capitalized and maintenance and repairs are charged to expense as
incurred. Gains and losses on dispositions of equipment are reflected in
F-8
operations. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets. Property and equipment at June 30,
2005 consisted of the following:
Machinery and equipment $ 99,168
Less B accumulated depreciation (94,349)
---------
$4,819
=========
Capitalized Software Costs. OCG accounts for the development cost of
software intended for sale in accordance with SFAS 86. SFAS 86 requires
product development costs to be charged to expense as incurred until
technological feasibility is attained. Technological feasibility is attained
when OCG's software has completed system testing and has been determined
viable for its intended use. Software assets are reviewed for impairment
when events or circumstances indicate that the carrying value may not be
recoverable. OCG wrote off net capitalized software costs aggregating
$65,229 in 2005 and $387,532 in 2004.
Capitalized software is amortized using the straight-line method over the
estimated five year economic life of the asset. OCG recorded capitalized
software amortization of $13,422 and $10,696 during the years ended June 30,
2005 and 2004, respectively.
Impairment of Long-Lived Assets. OCG accounts for the impairment and
disposal of long-lived assets utilizing Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 requires that long-lived assets, such as
property and equipment, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The recoverability of an asset is measured by a
comparison of the carrying amount of an asset to its estimated undiscounted
future cash flows expected to be generated. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset exceeds
the fair value of the asset.
Income Taxes. OCG applies the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using the enacted tax rates in
effect for the year in which those temporary differences are expected to be
settled or recovered.
Share-based Compensation. OCG Technology, Inc. has issued warrants to
directors, employees, and nonemployees for services rendered. The fair value
of warrants issued to nonemployees is recognized as expenses at the grant
date. Except for the warrants issued to full-time, nonsalaried officers, OCG
Technology, Inc. applies
F-9
the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", which permits entities to continue to apply the provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees", in measuring compensation expense for directors and
employees. Under this provision, pro forma net income and pro forma
earnings per share disclosures for warrants are made as if the
fair-value-based method defined in SFAS No. 123 had been applied. OCG
Technology, Inc. has elected to continue to apply the provisions of APB No.
25 in accounting for its warrants issued to the remaining director and
employees and accordingly, no compensation cost has been recognized in the
financial statements in connection with those warrants.
The compensation expense related to warrants issued to the full-time,
nonsalaried officers totaled $251,100 during the year ended June 30, 2004.
During the year ended June 30, 2005, no warrants were issued to full-time,
nonsalaried officers.
If OCG Technology, Inc. had elected to recognize compensation cost based on
the fair value of the awards at the grant date, net loss would have been the
pro forma amounts shown below.
Year Ended June 30,
2005 2004
Net loss - as reported $ (662,121) $(1,022,774)
Stock-based employee compensation expense
included in reported net loss - 251,100
Stock-based employee compensation expense
determined under fair value based method (114,144) (458,025)
Net loss - pro forma $ (776,265) $(1,229,699)
Basic and diluted income (loss) per share
As reported $ (0.01) $ (0.02)
Pro forma (0.02) (0.03)
Per Share Data. Basic loss per share is computed by dividing the net loss by
the weighted average number of shares of common stock outstanding during the
year. Diluted loss per share is the same as basic loss per share because
there are no financial instruments whose effect would have been anti-dilutive.
Recently issued accounting pronouncements. OCG does not expect the adoption
of recently issued accounting pronouncements to have a significant impact on
OCG=s results of operations, financial position or cash flow.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that OCG
will continue as a going concern. As shown in the accompanying financial
statements, OCG has suffered recurring losses from operations. These
conditions raise substantial doubt as to OCG=s ability to continue as a
going concern. The financial statements do not include any adjustments that
might be necessary if OCG is unable to continue as a going concern.
Management's plans in regard to these matters are described below.
OCG has experienced recurring losses from operations and has relied on the
sale of its common and preferred stock and borrowings to fund its
operations. If necessary, OCG intends to provide additional working capital
through the sale of its equity securities. Although in the past OCG has been
able to provide working capital through the sale of its equity securities
and borrowings, there can be no assurances that it will succeed in its
efforts, which creates a doubt about OCG=s ability to continue as a going
concern.
F-10
NOTE 3 - MARKETABLE SECURITIES
OCG had advanced funds totaling $334,500, plus accrued interest at 7% per
annum, pursuant to a note receivable, dated February 4, 2002 (the "Note").
In consideration for these advances, OCG received warrants to purchase
common stock of the borrower, exercisable over a period of three years from
the date of issuance, at a price of $0.25 per share. OCG received a security
interest in accounts receivable of the borrower anticipated to be generated
under certain sales contracts which provide for the borrower to install and
maintain OCG=s software products in the health care systems of certain
countries.
On October 10, 2003, OCG agreed to accept 3,709,230 shares of the borrower's
common stock, in full payment of the note and accrued interest. These equity
securities are classified as available-for-sale securities and are carried
at fair value. Unrealized gains and losses are reported as a separate
component of stockholders' equity, net of applicable income taxes. Realized
gains and losses and declines in value deemed to be other than temporary on
available-for-sale securities are included in other income. During the year
ended June 30, 2004, OCG sold 3,260,000 shares of the stock for a net sales
price of $162,761 and realized a loss of $163,239 on the sale. OCG sold all
the remaining shares during the year ended June 30, 2005 for $5,000 in cash
and recorded a loss on the sale totaling $41,300.
NOTE 4 - NOTES PAYABLE
OCG has a revolving line of credit that provides for a maximum borrowing
amount of $20,000. Interest is paid monthly on the average daily loan
balance at the variable interest rate equal to the prime rate plus 3% (8.75%
at June 30, 2005). The loan is secured by the personal guaranty of one of
OCG=s officers.
In connection with a share exchange agreement, OCG issued a promissory note
to a third party in March 2005. The note does not accrue interest, is
unsecured, and matures at the earlier of a) the effective date of the
registration statement filed with the SEC, or b) December 31, 2005. At June
30, 2005, the balance of the note payable totaled $175,000.
OCG issued a note payable to a stockholder for advances totaling $30,000 in
2005. The note bears interest in the form of warrants to purchase 40,000
shares, on or before July 8, 2008. The note matures on July 8, 2007.
OCG issued a demand note payable to a stockholder for advances totaling
$8,700 in 2005. The note bears interest in the form of warrants to purchase
11,600 shares, on or before July 8, 2008.
A note payable to a stockholder in the amount of $100,000 is unsecured and
bears interest in the form of warrants to purchase 100,000 shares, on or
before February 4, 2004, of OCG's common stock at the purchase price of
$0.10 per share. The warrants expired and were not exercised. The date for
payment of the note has been extended through June 2007.
A note payable to a stockholder of $50,000 is unsecured, bears interest at
4% per annum and is convertible into 5,000 shares of Series C Preferred
Stock at the rate of $10 per share. The date for payment of the note has
been extended through June 2007.
In 2005, certain stockholders forgave $12,414 in interest owing to them
under notes payable. OCG recorded the forgiveness of the interest payable
to stockholders as a component of stockholders= equity.
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NOTE 5 - INCOME TAXES
The results of operations of OCG are included in the consolidated tax
returns of OCGT prior to the change in ownership described in Note 2. At
June 30, 2004, OCG had a net operating loss carry forward of approximately
$15,300,000 available to reduce its future Federal taxable income, if any,
through 2025. OCG recorded a valuation allowance for the entire net
operating loss carry forward due to the uncertainty of realizing any related
tax benefits.
NOTE 6 B STOCKHOLDERS= EQUITY
Preferred Stock
On July 12, 1984, the stockholders of OCG approved the creation of a class
of 1,000,000 shares of preferred stock, and authorized the Board of
Directors to establish and designate the number of shares and relative
rights, preferences and limitations of such preferred stock.
Series C Preferred Stock
Series C Preferred Stock (i) is convertible into one hundred shares of
common stock for each share of Series C Preferred Stock converted, unless
there is an increase in the number of OCG=s authorized shares of common
stock; (ii) provides the holders with one hundred votes per share held and
the right to vote for any purpose that the holders of OCG's common stock may
vote; (iii) provides dividends that are not cumulative and are equal, on a
per share basis, to one hundred times the amount per share distributable to
the holders of one share of the common stock, and (iv) in the event of any
voluntary or involuntary liquidation, entitles the holders to receive out of
the assets of OCG an amount per share equal to one hundred times the amount
per share to be distributed to the holders of one share of the common stock.
Series E Preferred Stock
Series E Preferred Stock (i) is non-convertible with the right to vote on
the same basis as the holders of OCG's common stock, (ii) may be redeemed in
whole or in part at the option of OCG at a price of $30 per share plus all
accrued and unpaid dividends thereon, and (iii) has the right to dividends
which are not cumulative and are limited to a fraction, as defined, of all
cash dividends declared.
F-12
Series F Preferred Stock
On March 21, 2005 OCG created Series F Preferred Stock, to consist of a
maximum of 400,000 shares, par value $.10 per share, of which (1) the shares
are convertible into ten thousand (10,000) shares of Common Stock for each
share of Series F Preferred Stock converted, provided that there is an
increase in the number of the Company's authorized shares of Common Stock to
enable conversion; (2) the holders shall have ten thousand (10,000) votes
per share held and shall have the right to vote for any purpose that the
holders of the Company's Common Stock may vote; (3) dividends shall not be
cumulative and shall be distributable out of the aggregate of all cash
dividends declared by the Company in any year, such cash dividends, if any,
shall be calculated in an amount per share of Series F equal to ten thousand
(10,000) times of the amount per share of dividends distributable to the
holders of one share of the Common Stock; and (4) in the event of any
voluntary or involuntary liquidation, dissolution or other winding up of the
affairs of the Company, the holders of the Series F Preferred Stock shall be
entitled to receive out of the assets and funds of the Company to be
distributed, an amount per share equal to ten thousand (10,000) times of the
amount per share to be distributed to the holders of one share of the Common
Stock. No shares of Series F Preferred Stock have been issued.
Common Stock
During fiscal 2005, 4,320,538 shares of OCG's common stock were sold for
$43,205 or $0.01 per share plus warrants to purchase 4,320,538 shares at
$0.02 per share. The financial statements include recognition of an
additional $215,033 related to these stock transactions, characterized as
paid in capital and interest expense. No shares of common stock are reserved
for the exercise of the warrants. Exercise of the warrants is contingent
upon the stockholders approving an increase in the authorized common stock
to at least 100,000,000 shares.
During fiscal 2005, OCG wrote-off a stock subscription receivable from a
stockholder totaling $130,000 because it was determined to be uncollectible.
In connection with the write-off, OCG canceled 4,000,000 warrants
previously issued to the stockholder.
During fiscal 2004, OCG sold 2,306,968 shares of common stock for $69,209,
or $0.03 per share. These shares were not registered and bear a restrictive
legend.
During fiscal 2004, OCG issued 2,000,000 shares of common stock in payment
for a one-year contract for services to be performed. OCG recorded expense
of $80,000 upon the issuance of the shares.
During fiscal 2004, OCG issued warrants to purchase a total of 15,000 shares
of OCG's common stock at the exercise price of $0.15 per share for services
rendered in accordance with the terms of a consulting agreement. The
warrants will expire between September 1, 2005 and December 1, 2005. OCG
recorded the warrants at their fair value of $6,000 during fiscal 2004.
During the fiscal year ended 2004, OCG sold 36,670 shares of OCG's Series C
Preferred Stock for $110,000, or $3.00 per share.
F-13
Warrants
The Black-Scholes model was used to estimate the fair value of the warrants
at grant date based on the following assumptions:
Year Ended June 30,
2005 2004
Dividend yield 0% 0%
Volatility 184.35% 213.80%
Weighted-average risk-free interest rate 2.53% 1.89%
Weighted-average expected life of options 2.0 2.2
Estimated fair value per warrant $0.03 $0.03
Warrant activity for the years ended June 30, 2005 and 2004 is summarized as
follows:
June 30, 2005 June 30, 2004
Weighted Weighted
Average Average
Exercise Exercise
Warrants Price Warrants Price
Beginning Balance a) 14,549,056 $ 0.11 5,943,056 $ 0.19
Warrants granted b) 4,327,206 $ 0.02 8,940,000 $ 0.05
Warrants exercised - - - -
Warrants expired (60,000) $ 0.15 (334,000) $ 0.13
Warrants canceled (4,000,000) $ 0.5 - -
Outstanding at end of year c) 14,816,262 $ 0.10 14,549,056 $ 0.11
(a) At July 1, 2004, 14,474,056 of the 14,549,056 warrants outstanding
were issued without common stock reserved for their potential exercise.
At July 1, 2003, 5,749,056 of the 5,943,056 warrants outstanding were
issued without common stock reserved for their potential exercise.
Exercise of these warrants is conditioned upon the stockholders approving
an increase of the authorized common stock to at least 100,000,000 shares.
(b) During the year ended June 30, 2005, 4,327,206 warrants were
granted without common stock reserved for their potential exercise.
During the year ended June 30, 2004, 8,940,000 warrants were granted of
which 15,000 had common stock reserved for their potential exercise.
Exercise of these warrants is conditioned upon the stockholders approving
an increase of the authorized common stock to at least 100,000,000 shares.
(c) At June 30, 2005, 14,801,262 of the 14,816,262 warrants outstanding
were issued without common stock reserved for their potential exercise.
The 14,801,262 warrants will be exercisable for a period of one year after
the date on which the stockholders approve an increase in the number of
authorized common stock to at least 100,000,000 shares.
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OCG Technology, Inc. intends to ask the stockholders to increase the number of
authorized shares for various reasons, one of which is to have enough reserves
of common stock to enable all outstanding warrants to be exercised.
The range of exercise prices of the outstanding exercisable options are as
follows at June 30, 2005.
Weighted
Number of Number of Average
Exercise Exercisable Outstanding Remaining
Price Shares Shares Life in Years
$0.25 2,673,056 2,673,056 1.6
$0.15 2,791,000 2,791,000 1.6
$0.10 100,000 100,000 1.6
$0.05 4,925,000 4,925,000 1.6
$0.02 4,327,206 4,327,206 1.2
---------- ----------
14,816,262 14,816,262
NOTE 7 - COMMITMENTS
OCG leases office space under non-cancelable operating leases that expire at
various dates in fiscal 2006. The leases include provisions requiring OCG to pay
a proportionate share of the increase in real estate taxes and operating
expenses over base period amounts. Minimum future annual rental payments are as
follows:
Year Ending
June 30
-----------
2006 $ 68,264
Rent expense was approximately $66,600 in each the years presented in the
accompanying statements of operations.
NOTE 8 B INCOME TAXES
At June 30, 2005, OCG had a net operating loss carry forward of approximately
$15,300,000 available to reduce its future Federal taxable income, if any,
through 2025. OCG recorded a valuation allowance for the entire net operating
loss carry forward due to the uncertainty of realizing any related tax benefits.
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NOTE 9 B RESTATEMENT
The consolidated financial statements as of and for the fiscal year ended June
30, 2004 were restated as a result of the determination by management that 1)
certain capitalized software development costs under Statement of Financial
Accounting Standards No. 86, AAccounting for the Costs of Computer Software to
Be Sold, Leased, or Otherwise Marketed@ (ASFAS 86@) were not realizable, 2) that
certain accounts receivable were uncollectible, and 3) that shares issued to
non-employees for services should have been expensed in full upon issuance.
The accounting errors resulted in a misstatement in accounts receivable,
prepaid expenses and other current assets, total current assets, capitalized
software costs, total assets, accumulated deficit, total stockholders' equity,
marketing, general and administrative expense, amortization expense, impairment
of capitalized software costs, total expenses, net loss from operations, net
loss, and net loss per share. There were also related adjustments to OCG's
consolidated statement of cash flows and consolidated statement of stockholders'
deficit.
Effects on Consolidated Balance Sheet as of June 30, 2004:
As Previously
Reported Restated
------------ -------------
Accounts receivable $ 14,074 $ 570
Prepaid expenses and other current assets 55,320 287
Total current assets 129,062 60,525
Capitalized software costs, net 370,965 47,000
Total assets 520,107 127,605
Accumulated deficit (26,451,375) (26,843,877)
Total stockholders= equity (deficit) 271,439 (121,063)
Effects on Consolidated Statements of Operations for the year ended June 30,
2004:
As Previously
Reported Restated
------------ -------------
Marketing, general and administrative $ 415,649 $ 484,186
Amortization 74,263 10,696
Impairment of capitalized software costs - 387,532
Total expenses 689,836 1,082,338
Net loss from operations (533,919) (926,421)
Net loss (683,605) (1,076,107)
Loss per common share (0.02) (0.03)
F-16