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 June 30, 1999
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 or organization) Number)
825 N. 300 West, Salt Lake City, Utah 84103
-------------------------------------------
(Address of principal executive offices)
Registrant's telephone number including area code (801) 521-9300
Check whether the issuer (1) 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 (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 August 1, 1999 was 8,660,899 shares.
1
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
------
As of
June 30,1999
(Unaudited)
-----------
CURRENT ASSETS:
Cash $ 10,809
Prepaid expenses 7,287
-----------
Total current assets 18,096
EQUIPMENT AND FURNITURE,
at cost, less accumulated
depreciation of $251,851 1,138
OTHER ASSETS 2,196
Total assets $ 21,430
============
See notes to condensed consolidated financial statements.
2
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET(CONTINUED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
As of
June 30, 1999
(Unaudited)
-----------
CURRENT LIABILITIES:
Notes payable to related parties $ 156,250
Consulting fee payable to
related party 81,994
Accrued payroll 792
Total current liabilities 239,036
STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value;
20,000,000 shares authorized,
8,660,899 shares issued
and outstanding 8,661
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
outstanding 114,102
Additional paid-in capital 6,835,840
Accumulated deficit (7,176,209)
Total stockholders'
deficit (217,606)
-----------
Total liabilities and
stockholders' deficit $ 21,430
===========
See notes to condensed consolidated financial statements.
3
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
ROYALTY REVENUES $ 27,520 $ 67,360 $ 27,520 $ 67,360
----------- ----------- ----------- -----------
OPERATING EXPENSES:
General and
administrative 37,339 46,168 75,128 117,132
Research and
development 38,160 70,784 40,162 137,142
----------- ----------- ----------- -----------
Total operating expenses 75,499 116,952 115,290 254,274
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (47,979) (49,592) (87,770) (186,914)
----------- ----------- ----------- -----------
OTHER (EXPENSE) INCOME:
Miscellaneous income 3,294 -- 3,294 --
Interest income 68 388 214 983
Interest expense (3,485) (3,207) (6,657) (6,421)
Total other expense, net (123) (2,819) (3,149) (5,438)
----------- ----------- ----------- -----------
NET LOSS (48,102) (52,411) (90,919) (192,352)
PREFERRED STOCK DIVIDENDS (2,282) (2,281) (4,564) (4,563)
----------- ----------- ----------- -----------
NET LOSS APPLICABLE
TO COMMON SHARES $ (50,384) $ (54,692) $ (95,483) $ (196,915)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE
(BASIC AND DILUTED) $ (.01) $ (.01) $ (.01) $ (.02)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 8,660,899 8,550,899 8,660,899 8,550,899
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
4
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
------------------------
1999 1998
--------- ---------
(Unaudited)
DECREASE IN CASH
----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (90,919) $(192,352)
Adjustments to reconcile net
loss to net cash
used in operating activities-
Depreciation 433 432
Expense related to stock options
issued as compensation for services -- 44,500
Changes in assets and liabilities-
Decrease in royalties receivable 45,920 67,200
Decrease in prepaid expenses 9,500 9,999
Increase in consulting fees payable
to related party 29,998 25,998
Decrease in accounts payable (29,098) (428)
Decrease in accrued payroll (276) (6,152)
Decrease in interest payable -- (4,752)
Increase (decrease) in related
party payable 11,250 (25,000)
--------- ---------
Net cash used in
operating activities (23,192) (80,555)
--------- ---------
See notes to condensed consolidated financial statements.
5
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Six Months Ended
June 30,
------------------------
1999 1998
--------- ---------
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividends paid $ (4,564) $ (4,563)
Net cash used in
financing activities (4,564) (4,563)
--------- ---------
NET DECREASE IN CASH (27,756) (85,118)
CASH AT BEGINNING OF THE PERIOD 38,565 138,429
--------- ---------
CASH AT END OF THE PERIOD $ 10,809 $ 53,311
========= =========
See notes to condensed consolidated financial statements.
6
INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1-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 condensed 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 only of normal
recurring adjustments) considered necessary for fair presentation have been
included. Operating results for the three and six month periods ended June 30,
1999 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. For further information, refer to the
consolidated financial statements included in the Company's Form 10-KSB for the
year ended December 31, 1998.
Royalties received from the Johnson and Johnson agreement are presently the
Company's sole source of revenue and the royalty is expected to terminate during
1999. The Company generated a net loss from operations of $48,102 during the
three-month period ended June 30, 1999 and as of June 30, 1999, the Company had
an accumulated deficit of $7,176,209 and negative working capital of $217,606.
These conditions raise substantial doubt as to the Company's ability to continue
as a going concern. The Company's continued existence is dependent upon its
ability to achieve a viable operating plan.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
- --------------------------------------------------------------------------------
OPERATION
- ---------
Liquidity and Capital Resources
For the years ended December 31, 1998 and 1997, liquidity was generated
from royalty income received from Johnson and Johnson Medical, Inc. ("JJMI").
This income is expected to terminate during 1999. InMedica continues to look for
other funding sources but as of the date of this filing, it has no commitments.
During the quarter ended June 30, 1999, the Company borrowed $7,500 from each of
two principal shareholders. The debt is being repaid with interest at a rate of
10% in four quarterly installments, with one fourth of the principal amount due
at the end of each quarter for one year. The debt was reduced by payments
totaling $3,750 prior to the end of the quarter.
The royalty agreement with JJMI has been pledged to secure repayment of the
$145,000 related party note payable. Funds expended to develop other potential
assets of the Company such as a 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. The Company intends to rely upon private
sources for loans, if necessary, to meet its obligations as they come due.
Results of Operations
InMedica has a stockholders' deficit of $217,606 and an accumulated deficit
of $7,176,209 as of June 30, 1999. In order for InMedica to continue research
and development activities, it will require additional financing, for which it
has no commitments.
The net loss of $48,102 for the three months ended June 30, 1999 was
approximately the same as the $52,411 loss for the three months ended June 30,
1998, although revenues declined by approximately $40,000 for the comparable
period in 1999. However, both general and administrative expenses and research
and development expense decreased by a total of approximately $40,000 during the
three months ended June 30, 1999 resulting in approximately the same loss for
the comparable periods.
8
The Company does not expect that its operations will be directly affected
by the Year 2000 computer issue ("Y2K"). However, the Company is unable to
forecast any indirect adverse effect of computer or other device malfunction
related to Y2K on the medical technology industry and the business of potential
strategic partners. The Company has contacted JJMI and Medical Physics and has
been assured that they are acting responsibly to avoid any adverse impact on
their ability to conduct their operations due to the Y2K issue.
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: None
Item 6. Exhibits and reports on Form 8-K:
Exhibits: (1) Financial Data Schedule
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
/s/ Larry E. Clark
--------------------------------
By Larry E. Clark, Principal
Executive Officer
Date: August 13, 1999 /s/ Richard Bruggeman
- ---------------------- --------------------------------
By Richard Bruggeman, Principal
Financial Officer
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