UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
--------- ---------
Commission file number 0-5186
-------
OCG TECHNOLOGY, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-2643655
------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
56 Harrison Street, New Rochelle, New York 10801
------------------------------------------------
(Address of principal executive offices)
(914) 576- 8457
-------------------------
(Issuer's telephone number)
- ----------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Shares Outstanding at November 6, 2005
----------------------------- --------------------------------------
Common Stock ($.01 par value) 49,901,121 Shares
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION PAGE NUMBER
----------------------------- -----------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
September 30, 2005 and June 30, 2005 1
Consolidated Condensed Statements of
Operations for the Three Months Ended
September 30, 2005 and 2004 2
Consolidated Condensed Statements of
Cash Flow for the Three Months Ended
September 30, 2005 and 2004 3
Notes to Consolidated Condensed
Financial Statements 4
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 6
Item 3. Controls and Procedures 13
PART II - OTHER INFORMATION
Item 2. Changes In Securities 14
Item 6. Exhibits and Reports on Form 8-K 14
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2005 and June 30, 2005
(Unaudited)
2005 2004
------------- --------
ASSETS
Current Assets:
Cash $ 5,515 $ 6,104
Accounts receivable 0 787
Inventory 4,386 14,674
------ ------
Total Current Assets 9,901 21,565
Property and equipment, net of accumulated
depreciation of $96,207 and $94,349 2,960 4,819
Capitalized software costs, net of accumulated
amortization of $101,101 and $33,529 78,192 56,998
Other assets 4,972 4,972
------ ------
TOTAL ASSETS $ 96,025 $ 88,354
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities g
Deferred revenue $ 60,000 $ -
Accounts payable and accrued liabilities 59,679 55,011
Notes payable 193,251 194,352
------- -------
Total Current Liabilities 312,930 249,363
Notes payable, stockholders 190,700 188,700
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 499,011 499,011
Additional paid-in capital 26,696,445 26,696,445
Less: treasury stock, at cost
(12,500 shares) (62,500) (62,500)
Accumulated deficit (27,563,895) (27,505,998)
---------- ----------
Total Stockholders' Deficit (407,606) (349,709)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 96,024 $ 88,354
See the accompanying notes to the financial statements.
1
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the three months ended September 30, 2005 and 2004
(UNAUDITED)
2005 2004
-------- --------
Restated
Revenues $ 47,925 $82,145
Less: Cost of sales 27,843 43,089
------ ------
Gross margin 20,082 39,056
------ ------
Expenses:
Marketing, general and administrative 33,224 27,839
Depreciation 1,858 3,027
Amortization 4,526 3,355
Impairment of capitalized software costs 0 21,878
Product development costs 37,602 46,236
------ ------
Total expenses 77,211 102,336
------ -------
Gain (loss) from continuing operations (57,129) (63,280)
Loss on sale of marketable securities (41,300)
Interest - net (767) 1,196
--------- --------
Net gain (loss) ($ 57,896) ($103,384)
Weighted average number of shares outstanding during
the period 49,901,121 45,762,903
Loss per Common Share - basic and diluted $-* $-*
*Amounts less than ($.005)
See accompanying notes to consolidated condensed financial statements
2
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 2005 and 2004
(UNAUDITED)
2005 2004
------ --------
Restated
Cash flows from operating activities:
Net gain (loss) $ (57,896) $ (103,381)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 1,858 3,026
Amortization 4,526 3,354
Loss from sale of securities 0 41,300
Changes in assets and liabilities
Receivables 787 (8,254)
Inventory 10,288 (21)
Accounts payable and accrued expenses 4,668 14,744
------ ------
Net cash used in operating activities 24,231 (27,354)
Cash flows from investing activities:
Decrease in note receivable 0 0
Capitalized software development costs (25,719) (21,878)
Proceeds from sale of marketable securities 0 5,000
------- ------
Net cash used in investing activities (25,719) (16,878)
Cash flows from financing activities:
Increase in loans payable, shareholders 2,000
Increase in credit line (1,101) 9,883
Proceeds from issuance of common stock 0 11,600
------ ------
Net cash provided by financing 899 21,483
------ ------
Net decrease in cash (589) (22,749)
Cash, beginning of period 6,104 29,257
------ ------
Cash, end of period $5,515 $ 6,508
====== ========
See accompanying notes to consolidated condensed financial statements
3
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of OCG
Technology, Inc. and subsidiaries ("OCG") have been prepared in accordance with
accounting principles generally accepted in the United States of America and
the rules of the Securities and Exchange Commission ("SEC"), and should be read
in conjunction with the audited consolidated financial statements and notes
thereto contained in OCG's Annual Report filed with the SEC on Form 10-KSB. In
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
consolidated financial statements which would substantially duplicate the
disclosure contained in the audited consolidated financial
statements for 2005 as reported in the 10-KSB have been omitted.
Restatement. Restatements of fiscal 2005 were made. See Note 2 for details.
NOTE 2 - GOING CONCERN
The accompanying consolidated 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 doubt
about OCG's ability to continue as a going concern.
NOTE 3 - RESTATEMENT
The consolidated financial statements for the three months ended September 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, "Accounting for the Costs of Computer Software to
Be Sold, Leased, or Otherwise Marketed" ("SFAS 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.
Effects on the consolidated balance sheet as of September 30, 2004:
As Previously
Reported Restated
---------- -----------
Accounts receivable $ 21,046 $ 7,542
Other current assets 35,320 287
Total current assets 81,111 32,574
Capitalized software costs, net 364,450 43,646
Total assets 462,614 93,273
Accumulated deficit (26,577,916) (26,947,257)
Effects on Consolidated statement of operations for the three months
ended September 30, 2004:
As Previously
Reported Restated
---------- -----------
Marketing, general and administrative $ 47,839 $ 27,839
Depreciation and amortization 31,419 6,380
Impairment of capitalized software costs - 21,878
Total expenses 125,493 102,333
Loss from operations (86,437) (63,277)
Net loss (126,542) (103,381)
4
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A SUMMARY OF INCREASES (DECREASES) IN THE ITEMS INCLUDED IN
THE CONSOLIDATED STATEMENTS OF LOSS IS SHOWN BELOW:
General
The following discussion and analysis should be read in
conjunction with the Consolidated Financial Statements and Notes
thereto appearing elsewhere herein. The following discussion
contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and 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.
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. In
accordance with Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed," (SFAS No. 86), we compare the
unamortized capitalized cost of the software to the net realizable
value of the software. The amount, if any, by which the unamortized
capital costs exceed the net realizable value of the software is
written off.
The Company had a write off of $21,878 of capitalized software
costs during the quarter ended September 30, 2004, and no write
off for the quarter ended September 30, 2005, 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.
5
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 expenses 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.
Commissions received from vendors
The Company acts as a commissioned broker by displaying a
vendor's 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 current
through periodic reviews and updates. New updates are
incorporated automatically and at no cost to the customer. 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.
Results of Operations
Total revenues decreased from $82,145 for the three months ended
September 30, 2004 as compared to $47,925 for 2005, a decrease of
$34,221. The Company's revenues for the three months ended
September 30, 2005, consisted of: $47,925 from the sale of
merchandise (a decrease of $25,981 for the same period in 2004);
and no income from commissions (a decrease of $7,610 for the same
period in 2004). The decrease in merchandise sales occurred as a
result of changes made to the Web site on which our shopping cart
resides, making access to our shopping cart more difficult. The
Company received $60,000 for granting a license to use the
Company's software, PrimeCare Version Nine on September 29, 2005,
which was booked to deferred income as of September 30,2005.
Cost of sales decreased from $43,089, for the three months ended
September 30, 2004, to $27,843, for the three months ended September
30, 2005, which resulted from the decrease in the sales of merchandise.
Marketing, general and administrative expenses decreased $5,385
for the three months ended September 30, 2005, as compared to the
same period for 2004, primarily from the decrease of $6,000 in
sales related expenses.
Product development costs decreased $8,634 during the three months
ended September 30, 2005 compared to the same period in 2004 mainly
as a result of a decrease in payroll.
6
Liquidity and Capital Resources
At September 30, 2005, the Company had a current ratio of .032 to 1
compared to .086 to 1 as of September 30, 2004. The net loss for
the three months ended September 30, 2005, was $57,896 compared to
$103,381 for the same quarter of 2004. The calculation of loss for
the three months ended September 30, 2005, did not take into
consideration the receipt of $60,000.00 in license fees for
PrimeCareTM Version Nine, which was booked as deferred income. The
decrease of $45,488 in the loss for the three months ended September
30, 2005, as compared to the same period for 2004, was primarily due
to the write off of capitalized costs of $21,878 as an impairment,
since there were no license fees for said period, and a loss from
the sale of marketable securities of $41,300, which occurred in the
2004 period. 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.
Cash on hand, inventory and receivables were $9,901 at September
30, 2005. 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, especially since 49,890,582 shares of
Common stock of the 50,000,000 authorized have been issued,
therefore the Company only has Preferred shares available for
issue. However, in view of the license agreement recently
entered into, discussed in more detail under "Marketing" below
and other continuing efforts of the Company, the Company believes
that it could obtain sufficient working capital from operations
through marketing PrimeCareTM Version Nine and its Internet
products.
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"). 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, 2004, 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, 2004, of the Stock received was
$704,753. The Company realized $167,761 from the sale of all of
the shares, which resulted in a total loss of $203,162, of
which $41,300 occurred during the September 2004 quarter.
Products Overview.
Although prior to the quarter ended September 30, 2005, the
Company's primary source of revenues have been derived from the
operation of the "shopping cart" on the fitness Web site known as
www.DeniseAustin.com, the Company believes that the PrimeCare(TM)
Patient Management System, Version Nine ("PrimeCareTM Version
Nine ) 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".
Competition: PrimeCareTM Version Nine creates an electronic
medical record documenting the patient-physician encounter.
There are more than 200 EHR (electronic health records) on the
market today, according to the Fact Sheet, of the Health
Information Requests for Proposals, in the request for proposals
of 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. To
date, market penetration by both the Company and its competitors
has been very small. The consensus is that no more than 2% of
U.S. doctors use diagnostic software, according 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 points out that use of software can be
cost prohibitive, time-consuming and cumbersome, and that there
are concerns regarding computerized mistakes. Based on this and
other information, we do not believe that any competitor has a
significant share of the market.
7
The article raises the question as to why diagnostic software
has not found more of a market, stating that "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.
However, unlike competitive electronic medical records ("EMR") or
computerized patient records ("CPR"), PrimeCareTM Version Nine
can actually reduce the time needed to collect and organize the
patient-physician encounter documentation. PrimeCareTM Version
Nine achieves this goal in several ways. In particular,
PrimeCareTM Version Nine incorporates an authoritative and
comprehensive knowledge database of approximately 280 symptom and
problem oriented patient questionnaires ("Questionnaires") for
diagnostic and follow-up office visits. During an office visit,
the patient responds to questions from appropriate
Questionnaires, prior to being seen by the physician, and without
requiring physician time or presence. When the patient has
completed his or her Questionnaire(s), a preliminary diagnostic
report is generated for the physician to review prior to the
face-to-face encounter with the patient. This report contains
all the patient's "positive" answers, pertinent "negative"
answers, and lists diagnostic possibilities triggered by the
patient's responses, in alphabetical order, together with those
responses which gave rise to diagnostic consideration.
PrimeCareTM Version Nine does not make any decisions. It
gathers, organizes, and prepares information for the physician
to review as an aid in making the correct diagnosis. As the
patient's responses to interview questions are recorded, there
are incorporated into the patient record, in real time, without
additional effort required on the part of either physician or
medical staff, and without requiring dictation and subsequent
transcription. This characteristic is more fully discussed
below.
Competitive systems, on the other hand, generally require that
the physician personally elicit the clinical information needed
to make the diagnosis directly from the patient, mainly by
verbally by asking the patient questions. A physician may not
ask every patient the same questions for the same symptoms or
problems, nor will different physicians always ask the same
questions for the same problem. Once the information has been
obtained, and frequently, after being recorded in temporary
hand-written notes, the physician then enters the data acquired
during the patient encounter into a system; in some cases, by
typing the data directly into a computer program; and in others
by selecting the physician's diagnosis from a computer program,
which then brings up on the computer, a list of symptoms relating
to that diagnosis, from which the physician checks off the
patient's symptoms, on then entering the data into that patient's
record.
The Company believes that when the time savings and efficiencies
of PrimeCareTM Version Nine become more widely known, PrimeCareTM
Version Nine will make a significant penetration of the potential
market. The Company has not identified any competitive patient
management system which embodies the patient-centric,
self-administered medical interview feature of PrimeCareTM
Version Nine.
When the physician portion of the patient encounter commences,
the physician reviews the PrimeCareTM Version Nine preliminary
report, examines the patient, determines a diagnosis, treatment,
and follow-up plan. The physician records his examination
findings and the results of his medical decision-making by using
PrimeCareTM Version Nine, which contains problem-appropriate
selections of both abnormal and normal findings, relevant
diagnoses, medications and other treatment options, as well as
test, education, and follow-up selections. The physician 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.
Because the PrimeCareTM Version Nine encounter reports the
diagnostic possibilities, the physician is less apt to overlook
or forget an uncommon or unusual diagnostic possibility.
PrimeCareTM Version Nine makes a more complete record since it
contains every question asked, every answer, and the list of
associated diagnostic possibilities. While competitive systems
increase the physicians' workload, PrimeCareTM Version Nine
reduces the paperwork burden imposed on the physician. The
patient can answer the PrimeCareTM Version Nine Questionnaires in
the physicians office, or via the Internet from work or home,
prior to arriving at his or her appointment.
8
PrimeCare(TM) Version Nine
PrimeCareTM Version Nine is a complete, ground-up redesign and
re-write of the Company's initial electronic medical record
("EMR"). The overall system architecture has been changed to
simplify deployment and increase security; 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; user installation has been greatly simplified; and
end-user hardware costs dramatically reduced.
PrimeCareTM Version Nine's overall system architecture
incorporates a robust three-tier client-provider-relational
database management system ("RDBMS") design, structured to
support geographically separated tiers. The client (end-user)
tier of PrimeCareTM Version Nine connects with the middle or
provider tier via secure Internet communications. The provider
tier, in turn, connects with the data base tier, thereby
isolating and protecting the data base and protecting the
patients' medical data from uncontrolled exposure on the
internet. 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).
The supporting databases have been redesigned to remove
unnecessary redundancies, including a major redesign of the
patient/physician encounter Questionnaires. Provisions have been
added for support of an unlimited number of alternative
languages. Currently, language support is offered in English and
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.
The addition of both French, and Simplified Chinese have been
started, but will not be completed in the near future. Italian,
German, Korean, Japanese have been identified as candidates for
translation as well.
PrimeCare(TM) Version Nine is 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 is hosted
on redundant Windows 2000 or Windows XP servers with appropriate
backup, and standby support.
As a three-tier application, PrimeCareTM Version Nine requires
only the client tier application to be installed at the end-user
location. Although the client (end-user) tier uses the Internet
to communicate with the provider tier, 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 three-tier architecture of PrimeCareTM Version Nine provides
many advantages, including easy client installation; reduced
on-site hardware and 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.
The PrimeCareTM Version Nine system can 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.
9
Beyond simply being a user friendly, patient management system
that is patient, physician and staff, interactive, the
PrimeCareTM Version Nine system: (i) is Health Insurance
Portability Accountability Act ("HIPAA") compliant; (ii)
collectively contains over 100,000 complaint and disease state
questions, over 2,000 diagnoses, over 675 physician reference
articles, over 300 patient education articles; (iii) does not
require the patient to have computer or typing skills; (iv)
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 presence; (v)
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; (vi) provides automatic (real
time) calculation of the Centers for Medicare & Medicaid Services
(formerly, Health Care Financing Administration) mandated
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 payers for the office
visit; (vii) creates significant clinical and patient databases
for outcomes research.
When the patient arrives at, or telephones, the doctor's office,
a staff member selects an appropriate Questionnaire or
questionnaries, 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 the patient. No typing
or computer skills are required. When the patient completes his
or her Questionnaire(s), PrimeCareTM Version Nine prepares a
Preliminary Report (the "Report") for the physician to review
before examining the patient.
This report contains any nursing notes, and patient's vital
signs, along with, most importantly, the patient's detailed HPI,
that includes all of the positive and significant negative
responses to the questions contained in the completed
Questionnaire(s), plus an alphabetical list of diagnostic
possibilities with the triggering patient responses annotated.
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 used by the
patient allows the physician or appropriate staff member to
select and document physical findings (normal and abnormal),
assessments, tests, and treatment plan; to prescribe medications;
to select patient education handout materials; and to specify
follow-up instructions.
By automatically collecting and electronically storing the
patient's encounter documentation, a permanent, unalterable
electronic record is of the visit is generated, and the need for
dictation and transcription, with their associated costs, is
virtually eliminated. The physician or appropriate staff member
can also enter additional comments that expands upon any 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. A copy of the documentation can be printed for
the patient to keep in his or her own personal medical record, a
practice that has been shown to reduce the number of callbacks
from patients asking for clarification or repetition of the
physician's instructions to them, further reducing the time and
cost burden of both physician and medical staff.
CodeComplierTM:
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 Centers for
Medicare & Medicaid Services' (CMS, formerly, HCFA) Documentation
Guidelines, automatically calculates the Evaluation and
Management ('E&M") 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.
10
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, and the CodeComplierTM for
real time calculation of E&M code; (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 (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.
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 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.
Revenue Sources and 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 to
organizations that will sub-license the software to Healthcare
Providers.
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.
11
Licensing Fees:
Currently, the Company's license revenues from PrimeCareTM
Version Nine have not been substantial and no assurances can be
given that the marketing plan will succeed. However, during the
quarter ending September 30, 2005, the Company 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 PrimeCareTM Version Nine
since November, 2004. As part of the consideration for becoming
the exclusive licensee within the free trade association known as
Mercosur, whose members are Argentina, Brazil, Chile, Paraguay
and Uruguay, the Licensee paid the Company $60,000 and has agreed
to fund the translation and internationalization of PrimeCareTM
Version Nine in both Spanish and Portuguese. The Spanish version
was substantially completed during September 2005. The Licensee
will sub-license PrimeCareTM Version Nine to health care
providers in the Mercosur and train them in its use. 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 and training of PrimeCareTM Version Nine in January
of 2006, and anticipates that by the third quarter of 2006, there
will be a significant stream of revenues.
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 Nine 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
which to date has been minimal.
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.
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 on the site. The Manager markets
and promotes the site. The fitness and wellness Web site known
as www.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.
12
Competition: There are a large 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 DeniseAustin.com
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 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.
The Company believes that it can obtain sufficient working
capital from operations through marketing PrimeCareTM Version
Nine and its other Internet products.
Currently, the Company has lines of credit with RBC Centura Bank
for a maximum of borrowing of $20,000 and has no material
commitments for capital expenditures outstanding.
Item 3. Controls and Procedures
An evaluation was carried out under the supervision and with the
participation of the Company's management, including the
President/Chief Financial Officer ("CFO"), of the effectiveness
of the Company's disclosure controls and procedures. Based on
that evaluation, the President/CFO has concluded that as of the
end of the period covered by this report, the Company's
disclosure controls and procedures are effective to provide
reasonable assurance that information required to be disclosed by
the Company in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and timely reported as provided in the Securities and
Exchange Commission rules and forms. The Company periodically
reviews the design and effectiveness of our internal controls
over financial reporting, including compliance with various laws
and regulations that apply to the Company's operations. The
Company makes modifications to improve the design and
effectiveness of its internal control structure, and may take
other corrective action, if the Company's reviews identify
deficiencies or weaknesses in its controls. No changes occurred
during the quarter ended September 30, 2005 in the Company's
internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
13
PART II - OTHER INFORMATION
Item 2. Changes In Securities
During the three months ended September 30, 2005, no shares of
the Company's Stock were sold and no warrants to purchase shares
were issued.
Item 6. Exhibits and Reports on Form 8-K
(a) 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
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
No Report on Form 8-K was filed during
the quarter ended September 30, 2005.
14
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) the
Securities and 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
EDWARD C. LEVINE,
PRESIDENT
CHIEF FINANCIAL OFFICER)
DATED: November 11, 2005
15
Exhibit 31.1
302 CERTIFICATION SMALL BUSINESS CERTIFICATION OF PRESIDENT
I, Edward C. Levine, President of the Registrant, OCG Technology,
Inc. hereby certify that:
I have reviewed this quarterly Form 10-QSB
for the periods ending September 30, 2005
and 2004 of OCG Technology, Inc.;
2) Based on my knowledge, this
quarterly 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 quarterly 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 quarterly report;
4) I am solely 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 (as defined in
Exchange Act Rules 13a - 15(f) and 15d-
15(f)) for the Registrant and I have:
designed such disclosure controls
and procedures or caused such
disclosure controls and
procedures to be designed under
my 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;
designed such internal control
over financial reporting, or
caused such internal control over
financial reporting to be
designed under my 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 procedures;
evaluated the effectiveness of
the Registrant's disclosure
controls and procedures and
presented in this report our
conclusions about the
effectiveness of the disclosure
controls and procedures as of the
end of the period covered by this
quarterly report based on such
evaluation; and
disclosed in this quarterly
report any change in the
Registrant's internal control
over financial reporting that
occurred during the period ending
September 30, 2005 that has
materially affected, or is
reasonably likely to materially
affect, the Registrant's internal
control over financial reporting;
and
5) I have disclosed, based on my
most recent evaluation of internal control
over financial reporting, 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 and material
weaknesses in the design or
operation of internal control
over financial reporting which
are reasonably likely to
adversely affect the Registrant's
ability to record, process,
summarize and report financial
information; and
b) 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.
Date: November 11, 2005
By: /s/ Edward C. Levine
Edward C. Levine, President/Chief
Financial Officer
16
Exhibit 32.1
CERTIFICATION OF PRESIDENT/CHIEF EXECUTIVE OFFICER
Pursuant to section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. ss. 1350), the undersigned, Edward C.
Levine, President and Chief Executive Officer, of OCG
Technology, Inc., a Delaware corporation, (the
"Company"), does hereby certify, to his knowledge,
that :
The Quarterly Report on Form 10-QSB for the period
ended September 30, 2005 of the Company (the "Report")
fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the report fairly
presents, in all material respects, the financial
condition and result of operations of the Company.
By: /s/ Edward C. Levine
Edward C. Levine,
President/Chief Financial Officer
November 11, 2005
17