U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10 - QSB Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 1997 Commission File No. 0-12968 INMEDICA DEVELOPMENT CORPORATION (Exact name of small business issuer as specified in its charter) Utah 87-0397815 (State or other jurisdiction of (I.R.S. Employer Identification incorporation of organization) Number) 60 South 600 East, Suite 150 Salt Lake City, Utah 84102 (Address of principal executive offices) Registrant's telephone number: (801) 521-9300 Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act of 1934 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: Yes[X] No[ ] The number of shares outstanding of the registrant's only class of common stock, par value $.001 per share, as of May 12, 1997 was 7,999,232 shares. 1 PART I - FINANCIAL INFORMATION Page 1 of 2 - ------------------------------ Item 1. Financial Statements INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET ASSETS March 31, 1997 (Unaudited) CURRENT ASSETS: Cash $ 238,573 Prepaid expenses 15,043 ---------- Total current assets 253,616 EQUIPMENT AND FURNITURE, at cost, less accumulated depreciation of $254,489 4,437 OTHER ASSETS 2,196 ---------- Total assets $ 260,249 =========== See notes to condensed consolidated financial statements. 2 Page 2 of 2 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET LIABILITIES AND STOCKHOLDERS' DEFICIT March 31, NOTE PAYABLE, less current portion 355,000 ---------- STOCKHOLDERS' DEFICIT: Common stock, $.001 par value; 20,000,000 shares authorized, 7,999,232 issued and outstanding 7,999 Preferred stock, 10,000,000 shares authorized; Series A preferred stock, cumulative and convertible, $4.50 par value, 1,000,000 shares designated, 25,356 shares issued and outstanding 114,102 Additional paid-in capital 6,482,369 Accumulated deficit (6,758,975) ---------- Total stockholders' deficit (154,505) ---------- Total liabilities and stockholders' deficit $ 260,249 ========== See notes to condensed consolidated financial statements. 3 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 1997 1996 (Unaudited) (Unaudited) TOTAL OPERATING REVENUE $ -0- -0- --------- --------- OPERATING EXPENSES: General and administrative 47,840 36,716 Research and development 31,683 22,029 --------- ------ Total operating expenses 79,523 58,745 --------- ------ LOSS FROM OPERATIONS (79,523) (58,745) ---------- ------- OTHER INCOME (EXPENSES): Miscellaneous income 6 - Interest expense (9,503) (14,954) --------- --------- Total other expense (9,497) (14,954) --------- --------- NET LOSS (89,020) (73,699) PREFERRED STOCK DIVIDEND (2,282) (7,550) ------- -------- NET LOSS APPLICABLE TO COMMON SHARES $ (91,302) $ (81,249) ========== ========= Net loss per common share $ (.01) $ (.01) ========== ========= Weighted average number of common shares outstanding 7,997,612 7,485,707 ========== ========= See notes to condensed consolidated financial statements. 4 Page 1 of 2 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH For the Three Months Ended March 31, 1997 1996 (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (89,020) (73,699) Adjustments to reconcile net loss to net cash provided by operating activities- Depreciation 291 223 Change in assets and liabilities- Decrease in royalties receivable 209,280 227,520 Decrease in prepaid expenses 7,297 6,677 Increase (decrease) in accounts payable 1,003 (3,004) Decrease in accrued payroll (7,829) (6,607) (Decrease) increase in interest payable (1,253) 9,202 Decrease in convertible interest payable - (3,909) Decrease in related-party payable (39,000) (25,500) --------- ------- Net cash provided by operating activities 80,769 130,903 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment and furniture - (1,375) --------- ------- Net cash used in investing activities - (1,375) --------- ------- See notes to condensed consolidated financial statements. 5 Page 2 of 2 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH For the Three Months Ended March 31, 1997 1996 (Unaudited) (Unaudited) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on convertible debentures $ - $ (22,768) Preferred stock dividends (2,282) (7,550) Principal payments on note payable (17,500) (12,500) ---------- -------- Net cash used in financing activities (19,782) (42,818) ---------- -------- NET INCREASE IN CASH 60,987 86,710 CASH AT BEGINNING OF PERIOD 177,586 113,732 -------- -------- CASH AT END OF PERIOD $238,573 $200,442 ======== ======== See notes to condensed consolidated financial statements. 6 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note A--Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310b of Regulation SB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated statements include the accounts of InMedica Development Corporation and its wholly owned subsidiary, MicroCor, Inc. ("MicroCor"). All material intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three-month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements included in the Company's Form 10-KSB for the year ended December 31, 1996. Note B -- Subsequent Event Effective May 9, 1997, InMedica Development Corporation (the "Company") employed Robert Gail Billings to conduct research and development on the Company's hematocrit project. The Company will pay Dr. Billings $8,333.33 per month for his services. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources For the years ended December 31, 1996 and 1995, liquidity was generated from royalty income received from Johnson and Johnson Medical, Inc. ("JJMI"). This income source may not be sufficient to provide liquidity needs over time and may be inadequate to retire bank debt when it comes due in August 1998 and fund continued research and development. InMedica intends to continue to look for other funding sources as to which it has no commitments. For the three months ended March 31, 1997, no operating revenues were recognized due to the revenue recognition policy of the Company which requires sales information to 7 have been received from JJMI and that cash receipts are assured. A principal asset of the Company, the royalty agreement with JJMI, has been pledged to secure repayment of the $405,000 bank debt. Funds invested in other potential assets of the Company such as the hematocrit device have been expensed as incurred as research and development. The ability of the Company to use the hematocrit device as a means of securing funding for the Company is totally dependent upon the success of further research and development efforts in producing a viable device suitable for commercialization. Results of Operations InMedica has achieved profitable operations during the last three years, but has a stockholders' deficit of $154,505 and an accumulated deficit of $6,758,975 as of March 31, 1997. In order for InMedica to continue research and development activities, it may require additional financing, for which it has no commitments. It is impossible to estimate the amount of the JJMI royalties which may be received in the future. See Liquidity and Capital Resources for an explanation of why no revenues were recognized in the first quarter of the current year. The loss from operations of $79,523 for the quarter ended March 31, 1997 compared to $58,745 for the quarter ended March 31, 1996 was generated from general and administrative expenses ($47,840) and research and development ($31,683), which expenses had each increased approximately $10,000 for the first quarter of 1997, compared to the first quarter of 1996, as the Company increased efforts to develop its technology. Interest expense decreased by approximately $5,000 for the quarter ended March 31, 1997 when compared to the quarter ended March 31, 1996 due to the elimination of certain indebtedness during the last year. PART II - OTHER INFORMATION Item 1. Legal Proceedings: None Item 2. Changes in Securities: None Item 3. Defaults Upon Senior Securities: None Item 4. Submission of Matters to a Vote of Security Holders: None Item 5. Other Information: Effective May 9, 1997, InMedica Development Corporation (the "Company") employed Robert Gail Billings, age 63, to conduct research and development on its hemocratic project. See Note B to the Financial Statements for information as to the salary of Mr. Billings. From 1992 until 1997 Dr. Billings was employed as Vice President for Research and Development of Utah Medical Products, Inc. ("Utah Medical"), a Salt Lake City based publicly held company specializing in medical technology. Prior to that time, he was employed as an engineer for Utah Medical in research and development. From 1976 until 1990 he was Vice President of Research and Development for Tenet Information Services of Salt Lake City, which was engaged in the development of computer systems and software for pulmonary function test analysis. During the period 1971-1976 he conducted medical research for Primary Children's Medical Center, Salt Lake City, Utah as a graduate student and later as a post-doctoral fellow. Prior to that time he was employed for 15 years in the aerospace industry. He holds a BS in Electrical Engineering from the University of Utah (1956), an MS in Electrical Engineering from Utah State University (1965) and a PhD in Biophysics from the University of Utah (1975). Item 6. Exhibits and Reports on Form 8-K: Exhibits: None Form 8-K: None 9 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INMEDICA DEVELOPMENT CORPORATION Dated: May 13, 1997 By /s/ Larry E. Clark ------------------------------ Larry E. Clark, CEO By /s/ Richard Bruggeman ------------------------------ Richard Bruggeman, Treasurer 10 EXHIBITS Exhibits filed with the Form 10-QSB of InMedica Development Corporation, SEC File No. 0-12968: Exhibit No. SB Item No. Description - ---------------------------------------------- 1 (27) Financial Data Schedule 11